Trent looks for a larger brand footprint

Talk to retailers across the world and the common mantra for success, they will tell you, is build foot traffic to build brand footprint. In other words create more and more spaces for people to sample the brands on offer and to experience the retail format; sales will follow. That is why analysts and industry experts have been sceptical of the rather slow expansion strategy adopted by Tata group's Trent thus far. Compared to Future group's 1,300 stores for instance, Trent's three retail formats have cobbled together just 151. But the company is changing gears and adapting to the age of online marketplaces by creating a bouquet of private labels to cater to niches that most large stores ignored in the past.

Trent is looking to add 25 stores a year under Westside, a store that stocks clothes, furnishings and footwear against 15 that has been its annual target until now. It is also looking to add 25-30 stores of Star as against the eight it used to do earlier, said an executive with the company who preferred to remain anonymous.

Why did it take Trent so long to step on the gas? Profitability, not number of stores, was the group's concern he says. He says that this is the reason the company took almost four years to set up its second Star Bazaar store after the first one opened in 2004 in Ahmedabad.

Building store power

The first step towards establishing retail brands, offline or online, is building loyalty. Customers must trust the products on offer and seek out the familiarity of store's format. To achieve that, the executive explains, "The group focused on getting supply chain, logistics and merchandising right. Now, since everything is in place, we are going full steam." The company has said that it will also take the Westside brand into international markets (West Asia) through a franchise partner.

Moving at a slow pace has helped the company keep down the number of store closures. Retailers such as Future group and Aditya Birla Fashion Retail expanded aggressively, but they have also shut down more stores post 2008. Trent tread cautiously and the executive says, profits grew 53 per cent at compounded annual growth rate (CAGR) in the last five years while sales grew nine per cent CAGR.

Analysts endorse his views. "The stated intent to add 25 stores in FY17 is a reflection of the company's conviction in reinvesting in the high RoCE Westside store. The scope to add stores is high in existing 58 cities as well as new cities given the pricing of the format (30-40 per cent discount on national brands). This improves growth visibility for Westside," said Abhishek Ranganathan, an analyst with Ambit Capital in a recent report.

Ranganathan further added that the company's Star brand of stores, a joint venture with Tesco, was also ready for the next phase of expansion. He believes it will break even by FY19. "Increasing visibility on Star format store additions conveys the company's growing conviction in the supermarket business after having hardly added stores from FY12-15. Losses in the JV fell by 18 per cent in FY16 to Rs 60 crore," he said.

Expanding private labels

Westside was slow to open stores in the past also because of its stocking policy. "About 80 per cent of our merchandise is own brands while others have 20 per cent. It's not easy to have 100 stores with this," the executive said. Over the years, Westside has built a portfolio of 22 private labels which is now helping the chain stock its stores in a more targeted manner and present customers with an array of choices - both key ingredients for success in the age of online marketplaces.

According to a recent report by FICCI and PwC (Shaping Consumer Trends), consumers are spoilt for choice and that has made them more fickle and more difficult to please. A large selection of brands helps and that is what Westside is aiming for with its renewed focus on private labels.

For instance, it is confident about the potential of mass-market brands and is investing in the category. Despite the failure of its earlier venture Fashion Yatra, it has launched a new in-store format for Zudio (mass market brand) recently and wants to scale it up.

Interestingly the store is also learning from its online avatar. Zudio was first piloted on the Tata marketplace Tata Cliq and then as a shop-in-shop in Star stores. "Supply chain efficiencies (low prices and high inventory turns) remain the key to success in the value fashion space, which has low gross margins (37 per cent vs 50 per cent for a conventional value fashion format). We highlight that the company is entering this space after building strong supply capabilities for Westside," said an analyst.

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