Going forward, we will focus on rapidly growing our online presence: Noel Tata
Expecting India to be the biggest engine of growth in the world, Noel Tata, Chairman of Trent Ltd., has put in place an aggressive expansion plan for Trent, including an accelerated expansion program for stores in Westside, Zudio and Star Markets. In an interview with Activity areahe shares his thoughts on the future of the company: Excerpts
What is your assessment of the overall economic situation? Will rising inflation have an impact on growth this year?
The Indian economy remains robust. Importantly, we expect India to continue to be the main engine of growth globally, at least for the next year or two.
Current inflationary pressures are, to some extent, the result of the world returning to normal post-Covid and should start to ease over the next 18 months. Customers are definitely feeling the pressure of this inflation, and so we are maintaining our prices as best we can by improving the efficiency of our supply chain to reduce the impact on our customers.
Has the retail segment reached pre-pandemic levels? What are the main changes you had to make as a result of the pandemic?
The retail segment has certainly reached its pre-pandemic levels. In fact, we are seeing an increase in customer visits and higher billing values as customers return after a long gap.
During the pandemic, we realigned our priorities and focused on future business growth drivers.
We didn’t want Covid to affect Trent’s long-term growth prospects. We have continued to aggressively sign properties over these two years, the results of which will become increasingly evident. As a result, our reach has increased significantly, as we opened over 125 stores across all of our formats in FY22.
In the online space, we have also strengthened Westside’s presence through Westside.com and TataNeu, in addition to our presence on TataCliq.
There seems to be a big shift towards online retail. What do you think of online channels? What will be your strategy in this space?
In the two years of the pandemic, there has been a huge shift to online, thanks to its convenience. However, we are now seeing customers returning to stores. At Trent, we believe in meeting our customers’ shopping needs and being available both online and in-store.
In the fashion and lifestyle retail segment, there seems to be a battle between Reliance and Aditya Birla Fashion to acquire designer brands. How do you see Trent playing in this market?
We continue to focus on house brands, but are open to evaluating designer brands as an interesting opportunity arises.
Private labels have become the rising stars of retail and e-commerce. What percentage of your fashion and lifestyle revenue will come from private label?
I think in today’s retail environment, house brands are really “retail brands”.
When we launched Westside in 1998, we made a conscious decision to be a retail brand focused company. At the time, many questioned this strategy, but the evidence of the past twenty years has shown that it was the right decision. While we have managed to grow profitably through our private labels, multi-brand retailers have struggled.
Currently, 100% of our sales in Westside and Zudio are through our retail brands.
You currently have 200 Westside stores and 233 Zudio stores. Could you share the expansion plans of these brands? Do you plan to target Tier 2 and Tier 3 cities with more Zudio stores?
It’s hard to give you a number as there are several moving parts in the expansion of our property portfolio, but as I indicated earlier we have used the two years of covid to begin an aggressive expansion plan and we intend to continue the same in the future.
Given that there is a lot of potential in the grocery segment in India, what is the company’s game plan to up its grocery game?
Grocery is indeed a big part of modern retail in India, accounting for over 60% of the total market. Our food retail business operating under the Star banner offers a select assortment of products including FMCG, staples, necessities, apparel and a full fresh produce offering. This year we have taken an aggressive pricing stance on our range of exclusive retail brands, which has resonated well with our customers during this period of inflation and has led to increasing sales densities and repeat customers months after month.
Completing its first year of launch, West Style Club has over 1.4 million subscriptions in FY22. What are your goals for FY 23?
We added 1.4 million members to West Style Club in FY22 alone, and now have a total of over 7 million members. We have seen great success and our customers have welcomed this initiative, increasing their spending with us by more than 25% from pre-pandemic levels. We expect this number to continue to grow.
Many D2C start-ups are emerging in the fashion and beauty segments. They are nimble and technology driven. Do you see disturbances in this space? Do you plan to acquire any of these brands or do you plan to develop your own brands?
If you look closely at our retail formats, they’ve been D2C businesses since their inception. Going forward, we will focus on rapidly growing our online presence in response to customer demand.
Whether or not we acquire these brands will depend on the type of opportunities that come our way and the conditions.
What is the overall investment you plan to make in FY23 and in which areas?
We plan to continue our accelerated store expansion program across Westside, Zudio and Star Markets, which we began last year, with a focus on beautiful, high-quality properties.
Our expansion will be supported by substantial investments in our supply chain, distribution, IT and design capabilities.
What is Star’s deployment plan for Exercise 23? Will there be more emphasis on Star Hypers to target tier 2 and 3 cities?
The Star business has evolved to grow on a bundled approach where the Star Markets format gives us a retail footprint closer to the customer in the catchment area.
We continue to believe in this format and its ability to drive business growth for the foreseeable future.
We have taken a 9 month break from store expansions for the team to focus on optimizing certain aspects of our business model that were necessary for us to grow profitably, and we will be resuming the expansion of our stores shortly.
What is your overall vision for Trent in today’s competitive landscape?
Trent should continue its rapid expansion through its existing formats as well as through new formats that cater to different market segments.
I hope Trent will play a leading role among retailers in India, a market that will one day be one of the largest retail markets in the world and will be considered by its customers and other stakeholders as one of the best retailers in India.
The company’s profitability increased substantially during the first quarter, in line with strategy. Do you think this will continue for the remaining quarters?
The increase in profitability we saw in Q1 23 is due to an uninterrupted COVID quarter, an aggressive store expansion program over the past 2 years as well as wonderful products in stores.
I hope our focus on our fundamental growth drivers will continue to help us in the remaining quarters as well.