The Bombay Store, after decades of snail-paced growth, wants to get on the fast track
How would you like a snazzy Shammi Kapoor tie to spice up your suit? Or a North-East inspired design on your flip-flops? If you’re not a fan of the far-out, how about just some soothing Darjeeling tea? Home to the quirky and the classic, The Bombay Store, the 106 year-old home décor-and-gifting retailer, has an eclectic range — from furnishings, artefacts, wellness products to fashion accessories and stationery.
The shop’s windows are a head-turner, and they bring in intrigued passers-by and regulars alike. Shekhar Mani and James Lingwood, Los Angeles-based filmmakers, stop by at The Bombay Store each time they visit Mumbai. “I’m always asked ‘where did you buy that?’ by my friends back home,” says Lingwood as he searches for some silk cushion covers.
The Bombay Store’s history goes back to 1906 when, during the peak of the Swadeshi Movement, its chief architect Bal Gangadhar Tilak and businessman Munmohandas Ramji, opened a co-operative store to sell khadi, called the Bombay Swadeshi Store. Till the mid-’90s, the store remained an old-worldly place to buy khadi, handloom and handicrafts.
The pace picked up after the Bhupen Dalal family, which owed much of its wealth to stockbroking, invested ₹75 lakh in 1991. In 1995, Asim Dalal, the second son of Bhupen Dalal, rechristened the retailer to make it relevant to the times. From just one store in Mumbai, they had two more in Pune and Bengaluru respectively by 1997.
Things warmed up in 2001 when competition, in the form of multi-brand retailers like Lifestyle and Shopper’s Stop, began expanding owing to their deep pockets. “Not being a part of a large group was a big limitation as we could not afford to make large investments or take losses,” says Asim Dalal, managing director. He says the store has been conservative about growth from the start as it had to factor in real estate and manpower costs before expanding. He adds, “Being in a niche segment, we had to test waters before plunging in with more stores.”
Scale came only in the past three years, as the brand added 13 stores. The development of malls somewhat fixed the problem of finding the right location for a store. Currently, of the 16 stores in three states, seven are in malls. “I don’t think they have been late to the party,” says Devangshu Dutta, CEO of retail consultancy Third Eyesight. “Unlike other big retail players, they did not have to please investors who were in the business for short-term gains.” The Bombay Store has mostly used internal accruals for expansion but, in 2008, it raised ₹20 crore from Fidelity Multitrade, a private investor, in exchange for a near 15% stake in the company. The promoter’s stake could be further diluted if the management resorts to private equity (PE) funding for expansion.
Keeping up
The Bombay Store which is likely to achieve sales of ₹32 crore in FY12 has also been increasing its brand appeal through marketing initiatives (spends about 3-4% of sales) like loyalty programs, social media initiatives and print advertising.
With 16,000 stock keeping units, The Bombay Store’s products, priced between ₹500 and ₹1.5 lakh, are under four categories — home décor, home furnishings, fashion accessories, and wellness range. Most of the products are proprietary designs based on Indian motifs, which is the store’s unique selling proposition. “We change designs thrice a year to keep it fresh,” says Anaggh Desai, CEO. The company’s 180 vendors supply products that are designed by five in-store designers. While 75% of the vendors are exclusive suppliers, it’s a constant battle with competition to retain them. Along with big retailers like Fab India, Good Earth, Lifestyle and Shoppers Stop, other unorganised players are competition too. Good manpower is another persistent need. To retain its 190 employees, the company pays more than the industry norm. A 12th pass candidate at the store, is paid ₹8,500 per month versus the industry standard of ₹6,800.
Of the 16 stores, 13 are now profitable. “Usually we expect stores to break-even in the first nine months,” says Desai. Moreover, “As most of the products are impulse purchases, volumes may not be as high as that of the apparel or groceries business,” says Dutta, but some parts of the business are definitely high margin. Home décor is the best selling segment, accounting for 40% of sales and a net margin of 9%. The wellness segment,however is a drag generating only up to 10% of sales, and about 2.5% in net margin. “We have contemplated removing the segment, but customers want them,” says Desai.
Over time, what used to be an expat haunt, has now managed to reach out to urban middle-class Indians. “Earlier, 70% of our customers were non-resident Indians but now, it is local buyers who constitute 70%,” points out Desai.
Gearing to grow
Revamping the brand and evolving with customer demand has been the company’s agenda over the past few years. For instance, brand Elephant Company was introduced last year, for the ‘young at heart.’ It has products such as t-shirts, laptop covers, and mugs mostly at price points between ₹200 and ₹2,000. “People remember The Bombay Store for its classics but with The Elephant Company, the young are also showing interest in the store,” says Desai.
The Elephant Company is currently present in 10 Bombay Stores and two Crossword outlets. The plan is to have more of these small outlets of 350 sq ft each, leading to a wide presence. More shop-in-shop outlets are planned at Crossword, WL Smith and superstores like Hypercity. “The Elephant Company contributes 5-6% to sales so far, but we want to hive it off as a separate entity in the next six months,” says Dalal. This will give The Elephant Company a separate identity, making it an independent brand that can grow on its own.
To drive more buyers to the store, the company has launched a new property called India Haat recently, to showcase arts and crafts from all over India. In its first season, it presented traditional handicrafts from Rajasthan such as footwear, paper jewellery and puppets for 12 days, bringing in sales of ₹29 lakh (average daily sales at its stores total ₹8.5 lakh to ₹11 lakh).
In FY13 the company has identified six locations to open stores — two in Mumbai, one each in Indore, Goa, Bengaluru and Hyderabad. “While we can fund half of this through internal accruals, we would require at least ₹15 crore in PE funding to scale up further.” feels Desai.
Finding the right location for stores plays a big role in ensuring profitability. The management is well aware of that — its Aurangabad and Pune stores are currently not profitable as the malls they are located in, are not attracting enough walk-ins.
The Bombay Store aims to be a 50-store chain clocking a turnover of ₹300 crore in five years. Achieving this elephantine ambition of 10-fold growth can be a tall task, given that it made a profit of less than a crore last year. But for now, the company has its faith in the unfolding Indian retail story.