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Business News/ Industry / Retail/  Mahindra to shut more than 25 Mom & Me stores, replace staff
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Mahindra to shut more than 25 Mom & Me stores, replace staff

Mahindra Retail expects to generate a revenue of Rs250 crore in the year ending March 2016

Like other retailers, Mahindra Retail is trying to increase online sales and find synergies between its online business and stores.Premium
Like other retailers, Mahindra Retail is trying to increase online sales and find synergies between its online business and stores.

Bengaluru: Mahindra Retail Pvt. Ltd, which runs the Mom & Me chain of kidswear stores, will shut nearly one-fourth of its stores by the end of the month, replace senior executives with younger talent and relocate to cheaper office premises to slash costs.

Mahindra Retail, controlled by Mahindra and Mahindra Ltd, changed its chief executive officer (CEO) in September after its expansion spree across years led to losses worth hundreds of crores of rupees. Prakash Wakankar was brought in from Mahindra’s private equity arm, Mahindra Partners, to replace K. Venkataraman as CEO.

“Beside the store closures, there’s a significant overhead correction happening," Wakankar said in an interview. “We’re starting to move the cost structure from a larger fixed piece to a more variable structure. We’re getting revenue share rental agreements in many stores and we are increasing incentive-based compensation for people. Four members of my leadership team are leaving. Wherever logical, we’re bringing in younger people to replace them."

After coming in as CEO, Wakankar has taken steps to cut costs and shut stores; Mahindra Retail will expand its store presence next year.

Mahindra Retail, which has 115 Mom & Me stores across the country, will open most of its new stores through franchises. Mahindra plans to shut more than 25 stores by the end of the month and then open 35-45 stores in the next fiscal year to boost revenue. Currently, 104 of its stores are company-owned.

The jury’s out on whether the firm can successfully change its business model and generate profits after years of large losses, analysts said.

Mahindra Retail expects to generate a revenue of 250 crore in the year ending March 2016, Wakankar said. It reported a loss of 114 crore on a revenue of 206 crore for the year ended March 2014, according to documents available with the Registrar of Companies.

Like other retailers, Mahindra Retail, which bought online kids wear retailer BabyOye last month, is trying to increase online sales and find synergies between its online business and stores.

The firm is working with other Mahindra companies, including Mahindra’s logistics arm, for product deliveries.

“We want to be able to offer as much choice to the consumer, both in terms of where he or she wants to shop, how he or she wants to shop, and how he or she would like to take delivery of the product. The omni-channel approach for us includes not just MRPL (Mahindra Retail), MICPL (Mahindra Internet, which comprises BabyOye), but also the larger Mahindra ecosystem. We’ve already started engaging with Mahindra Logistics and there’ll be more of that," Wakankar said.

After buying BabyOye, Mahindra Retail shifted its small online business to the BabyOye portal, which has brands such as Snuggles, Oye and Little Posh.

BabyOye co-founder Sanjay Nadkarni said the firm would increasingly use the Mahindra brand to help grow its business.

“The big challenge is scale. Our ability to source and build out merchandise has improved drastically. As we have grown beyond the early adopters, having the Mahindra name and the large store network helps us in bringing down cost of acquisition of customers," he said.

Though kidswear is a large business—more than $12 billion in India, according to some analysts—many retailers have failed to build a viable model in this category. Companies like Lilliput Kidswear and Gini and Jony were forced to shut most of their stores over the past few years after raking up huge losses with too many stores.

Currently, Mom & Me and rival FirstCry—which has more than 100 stores and a large online business—are the two big survivors. FirstCry received $26 million in February in a fourth round of funding from Valiant Capital, IDG Ventures India, Ventex Venture Holdings and SAIF Partners.

“Kidswear is a massive opportunity and it is still a largely unorganized market," said Gaurav Gupta, senior director, retail, at Deloitte, a consultancy. “Increasingly, it’s becoming clear that you need to have an omni-channel approach in this business. Especially for standardized products such as diapers and trolleys, the online medium is most suitable."

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Published: 26 Mar 2015, 12:54 AM IST
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