Tatas stick to measured growth in retail business, plan expansion

Last week, Tata Sons Chairman N Chandrasekaran took steps to get over 1,000 subsidiaries within the group to synergise and to scale up key verticals. This was part of the holding company’s broader plan to simplify business operations and focus on high-growth areas such as consumer and retail. 

Retail, in particular, has been one segment where the group has been measured in terms of its outlook. In two decades since its start, Trent’s flagship apparel chain Westside, for instance, has only 125 stores according to its 2017-18 (FY18) annual report. Latest Westside store count is not available.

Croma, the group’s electronics chain, which began operations 13 years ago, has around 121 stores, according to industry estimates. And, Tata Starbucks, which began six-and-a-half years ago, has 136 outlets, with plans to touch 144 stores by the end of the current financial year. 

While Tata’s retail strategy, experts said, is unlikely to change overnight, the group is still looking to grow its footprint, albeit carefully.

A glimpse into the group’s plans with regard to its retail businesses was provided by Tata Starbucks’ Chief Executive Officer Navin Gurnaney in a conversation with Business Standard last week. He said the joint venture company, which runs the Seattle-based coffee chain in India, was looking at “thoughtful aggression”, an expression, say experts, that applies to the group’s other retail ventures as well. 

Mails sent to Croma and Trent on their growth strategy elicited no response till the time of going to press. But on Tata Starbucks, Gurnaney said: “Our endeavour is to select locations carefully where we can derive maximum mileage and sales throughput.” He also said focus was on “unit economics” as the company seeks to widen operating profit. 

According to documents filed with the Registrar of Companies (RoC), Tata Starbucks, an unlisted company, reported its first operating profit at Rs 1.26 crore in FY18. Trent, a listed company, on the other hand, maintained its profitability (in FY18) despite challenges in joint ventures such as Massimo Dutti and Trent-Hypermarket.

Trent’s joint ventures in India include Trent-Hypermarket, a 50:50 venture with Tesco that runs the Star brand of supermarts and hypermarts, Inditex Trent, a 49:51 venture that runs the Zara brand of stores, and Massimo Dutti, a 49:51 venture that runs a chain of luxury fashion stores of the same name. Zara and Massimo Dutti are part of Spain’s Inditex group.

Infiniti Retail, which houses the Croma business, also reported its first net profit in FY18 at Rs 16.7 crore, RoC data shows. Sources said Croma has plans to add 8-10 stores in the coming months, taking its total store additions for FY19 to around 20 — double the number it did in previous years.

Infiniti Retail is also experimenting with smaller-format electronics stores (of 1,500-2,000 sq ft) called ‘Gadgets of Desire’, aimed at crunching timelines (in terms of store launches) and boosting convenience (for consumers). Flagship Croma stores are typically 10,000 sq ft in size, experts said, implying it takes longer to set up these outlets. Hence, the focus on smaller outlets. The company is also pushing omni-channel retail with a curated range at competitive prices, analysts said, covering exclusive products, gaming devices, smartphones, and durables. 

Arvind Singhal, chairman, Technopak, a Gurugram-based retail consultancy, said Croma was among the few national-level players in electronics retail, the other being Reliance Digital, giving it a natural advantage in a market dominated mainly by local and regional chains. “Striking exclusive deals becomes easier for a national player because its offline reach is better than that of local chains. Plus Croma has also been pushing hard on the omni-channel front since e-tailers are big in this space. So gaps in terms of online presence have also been addressed in recent years,” he said. 

As far as Westside is concerned, Abneesh Roy, senior vice-president, research (institutional equities), Edelweiss, said the chain may add a total of 20 stores in FY19, higher than the number it did in previous years. “Store expansion run-rate could increase to 30 per annum as the company looks to scale up operations. The management has also guided for this,” Roy said. 

Parent Trent is expected to close FY19 with a top line growth of 15 per cent, analysts said, led by sales traction in its value clothing chain Zudio (launched in 2016), continued private-label push in Westside, and brand equity of Zara, a profitable business. 

Zudio already has 40 stores in India, experts said, and is expected to keep the momentum going.