Expecting India to be the biggest growth engine globally, Noel Tata, Chairman, Trent Ltd., has put in place an aggressive expansion plan for Trent, including an accelerated store expansion programme across Westside, Zudio, and Star Markets. In an interview with BusinessLine, he shares his thoughts on the future of the company: Excerpts
What is your assessment of the overall economic situation? Will rising inflation impact growth this year?
The Indian economy continues to remain robust. Importantly, we expect India to continue to be the biggest growth engine globally, at least for the next year or two.
Current inflationary pressures are, to an extent, a result of the world getting back to normalcy after Covid and should start to subside over the next 18 months. Customers are definitely feeling the pressure of this inflation, and we are therefore holding our prices as best as we can by driving efficiencies in our supply chain to reduce the impact on our customers.
Has the retail segment reached pre-pandemic levels? What are the key changes that you have had to make as a result of the pandemic?
The retail segment has certainly reached its pre-pandemic levels. In fact, we are seeing higher customer walk-ins and higher bill values as customers come back after a long gap.
During the pandemic, we realigned our priorities and focussed on future growth drivers of the business.
We did not want Covid to affect the long-term growth prospects of Trent. We continued to aggressively sign properties during these two years, the results of which will become increasingly evident. Consequently, our reach has increased significantly, as we have opened 125+ stores across all our formats in FY22.
In the online space, we have also increased 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 are your thoughts on online channels? What will your strategy be in this space?
During the two years of the pandemic, there was a huge shift to online, thanks to its convenience. However, we are now seeing customers returning to the stores. At Trent, we believe we need to meet the shopping needs of our customers and be 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 in-house brands but are open to evaluating designer brands as and when any interesting opportunity presents itself.
Private labels have emerged as the rising stars of retail and e-commerce. What percentage of your revenues in the fashion and lifestyle business will come from private labels?
I think, in today’s retail context, private labels are actually “retail brands”.
When we started Westside back in 1998, we made a conscious call to be a retail brand-driven business. At the time, there were many who questioned this strategy, but the evidence over the last twenty years has shown that it was the correct decision. While we have managed to grow profitably through our retail brands, multi-brand retailers have struggled.
Currently, 100 per cent of our sales in both Westside and Zudio are through our retail brands.
You currently have 200 Westside stores and 233 Zudio stores. Could you share the expansion plans for these brands? Do you plan to target tier-2 and tier-3 cities with more Zudio stores?
It is difficult to give you a number as there are multiple moving parts to our property portfolio expansion, but as I have indicated earlier, we have used the two years of covid to begin an aggressive expansion plan and we intend to continue the same going forward.
Given that there is a lot of potential in the grocery segment in India, what is the company’s game plan to strengthen its grocery play?
Grocery is indeed a large part of the modern retail business in India, accounting for more than 60 per cent of the total market. Our food retailing business operating under the Star banner offers a curated assortment of products including FMCG, staples, hardlines, apparel and a comprehensive fresh offering. This year, we have taken an aggressive price position on our range of exclusive retail brands, which has resonated well with our customers during this inflationary period and has led to growing sales densities and repeat customers month on month.
Completing its first year of launch, West Style Club has over 1.4 million subscriptions in FY22. What are your targets for FY 23?
We added 1.4 million members to West Style Club in FY22 alone, and we now have a total of over 7 million members. We have seen much traction and our customers have welcomed this initiative, increasing their spend with us by over 25 per cent versus pre-pandemic levels. We expect this membership to continue to grow.
There are a lot of D2C start-ups coming up in the fashion and beauty product segments. They are agile and tech-driven. Do you see any disruption in this space? Do you plan to acquire any of these brands, or do you plan to grow your own brands?
If you look at our retail formats closely, they have been D2C businesses since inception. Going forward, we will focus on rapidly growing our online presence in response to our customers’ demand.
Whether or not we acquire these brands will depend on the kind of opportunities that are presented to us and the terms.
What is the overall investment you plan to make in FY23 and in which areas?
We plan to continue our accelerated store expansion programme across Westside, Zudio, and Star Markets, which we began last year, prioritising high-quality and beautiful properties.
Our expansion will be supported by substantial investments in our supply chain, distribution, IT, and design capabilities.
What is the roll out plan for Star in FY23? Will there be more focus on Star Hypers to target tier 2 and 3 cities?
The Star business has evolved to expand on a clustered approach where the Star Markets format provides us a retail footprint closer to the customer in the catchment.
We continue to believe in this format and its ability to drive growth for the business in the foreseeable future.
We took a 9-month break in store expansions for the team to concentrate on optimising certain aspects of our business model that were needed to enable us to grow profitably, and we will start our store expansion once again shortly.
What is your overall vision for Trent in the current competitive landscape?
Trent must continue its rapid expansion through its existing formats as well as through newer formats that address different segments of the market.
I hope that Trent will play a leading role amongst retailers in India, a market that will one day be one of the largest retail markets in the world, and be seen by its customers and other stakeholders as one of the best retailers in India.
The company’s profitability saw a substantial rise during the first quarter, in line with the strategy. Do you think this will continue for the remaining quarters?
The increase in profitability we have seen in Q1 23 has been due to a COVID uninterrupted quarter, an aggressive store expansion programme over the last 2 years along with wonderful products in the stores.
I hope that our focus on our fundamental growth drivers will continue to help us in the remaining quarters as well.