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Though last quarter saw Vishal Retail taking a huge hit in profitability, it’s still not ready to bow down to the slowdown heat. But then, how? The Group President answers...
4Ps B&M: Have you scrapped the expansion plans of Vishal Retail given that the company’s profitability has been badly hit?
AK: We haven’t scrapped the plans, but have paused them for the time being. Our main concern at present is to improve our same store sales growth and also the company’s financial health. We have been growing at 100% y-o-y. In fact in 2008, Vishal Retail achieved a turnover of Rs.10 billion and we hope to take that number to Rs.14 billion this fiscal. However, we are facing a little problem on the personnel front. We had increased our hiring in the last quarter, because of which our employee cost had gone up tremendously. But, as of now, we are in the process of rationalising our employee strength and shedding off the excess flab.
4Ps B&M: What were the main reasons behind the whopping 86% fall in December profits?
AK: Our main sales in winters come from North India. But this year, the weather conditions were such that there was no winter. Moreover, we do not anticipate good results in the coming quarter too. We have a huge inventory pile up for the season and we’re determined to sell it off, even if it means selling at low prices to avoid handling and maintenance costs.
4Ps B&M: What’s the rationale behind centralising your warehouses?
AK: In our endeavour to consolidate our back-end operations, we have brought all our 22 warehouses across north, east, west and south under one zone. At one time, we had warehouses covering 1.2 million sq. ft., but now we have consolidated our operations under 4-5 warehouses spread over just 0.4 million sq. ft. This step will not only help in consolidating our supply chain management, increasing our operating efficiency and reducing costs, but also keep an eye on pilferage. In the bargain, we are even resorting to reverse logistics and have converted our cost-centres to revenue-centres.
4Ps B&M: What strategies are you adopting to induce the customer to buy from your stores?
AK: We are rationalising our SKUs and revising our price points. The prices at which we offer our products are the lowest in the industry and yet our quality is no less than any branded product. We are aggressively pricing our products to attract customers to our showrooms. When customers will come to our stores, we will introduce them to our private labels. Once a certain amount of confidence is generated among customers for our private labels, our sales will touch the sky and give a much required boost to our bottomlines. Moreover, as the awareness about our products increases, it will be easy for us to sell through distributors.
4Ps B&M: Any plans to tie up with local kirana stores?
AK: There is no such plan as of now. Currently our focus is on improving the same store sales growth. Rumours of our tie-up with kirana stores are doing the rounds in the market, but there is nothing in the pipeline as of now.
4Ps B&M: Are you in talks with banks to lower the interest rate on your debt?
AK: Vishal Retail has currently Rs.7.5 billion debt at 13-13.5% interest rate. We are in talks with banks to reduce the rate of interest and they’ve been quite positive so far. In fact, few banks have even assured us that they would drastically slash the interest rate.
4Ps B&M: Efforts by you are on to re-size and relocate your retail stores. Why such re-organising?
AK: There is nothing wrong in re-organising our retail set-up. Most of the other retailers are also doing the same. If by re-sizing or relocating the stores, we can improve our per sq. ft. return, then I would say it is a very wise decision. Mistakes are made by all and the need of the hour is to correct those mistakes. And we’re just doing that.
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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