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Crossword to push non-book business for higher margins

Crossword to push non-book business for higher margins
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First Published: Thu, Jan 24 2008. 11 22 PM IST
Updated: Thu, Jan 24 2008. 11 22 PM IST
Mumbai: Crossword, the 46-store strong bookstore chain that is part of Shoppers’ Stop Ltd, plans to start its own private label business in March. In a move aimed at increasing margins, the store will start its own stationery line and could extend this to music, toys and other categories.
Non-book categories such as pens, stationery, toys and music currently account for 40-42% of all sales at Crossword.
“There is a limited potential for private labels in books,” said C.B. Navalkar, Shoppers’ Stop’s chief financial officer. “Not all books do well and those, such as Harry Potter or John Grisham’s novels, that do well are not open to smaller publishing houses. The non-book business is a less organized business and that is where we will look to create our private labels,” Navalkar added.
Organized retailing of books, music and gifts is likely to grow at 32.7% a year, according to a report by Man Financial, a Mumbai-based brokerage.
Crossword’s move will help it increase margins to around 8% from the current 4% for stationery. “Companies with a retail presence can earn not just distributor margins but also manufacturer margins. So, clearly margins are a big part of the deal,” said Anand Halve, co-founder of Chlorophyll Brand and Communications Consultancy Pvt. Ltd. Halve has consulted on projects for Shoppers’ Stop earlier.
Other experts say even if it works, the stationery business will not impact Crosswords’ balance sheet much. “The main business is centred on books and music. A private label, which does not address those two categories, will not add to top line or bottom line,” said Nabankur Gupta, CEO of Nobby Brand Architect and Strategic Marketing Consultants, a Mumbai-based brand consulting company.
Crossword says it will look to add other categories that fit into its brand later, such as lounge music. It is looking to tie up with a music company for this. It is also in the process of finalizing a name for its private label.
A recent report by Merrill Lynch, while putting a sell rating on the Shoppers’ Stop stock, said that the company’s strategy of concentrating on higher margin, niche products and speciality stores is starting to yield results. Shoppers’ Stop recently started a women’s accessories store chain, called Arcilia, apart from being the Indian partner to Canadian cosmetics company MAC and British maternity and baby brand, Mothercare.
“Shoppers’ Stop’s gross margins are improving, led by rising share of higher margins accessories,”’ the report said.
saumya.r@livemint.com
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First Published: Thu, Jan 24 2008. 11 22 PM IST