Noel Tata puts Trent growth on fast track5 min read . Updated: 21 Aug 2018, 10:36 AM IST
Trent's revenue should treble to 15,000 crore in 10 years, says chairman NoelTata in an interview
Jamshedpur: Noel Tata, the half-brother of Ratan Tata, is the chairman of Tata group’s retail arm Trent Ltd that operates stores under brands Westside, Zudio, Star Bazaar, Landmark and Zara. Though known for his reclusive nature, he’s an engaging conversationalist and spoke to Mint just before opening the 131st Westside outlet at Jamshedpur, the site of India’s first steel plant, and a city founded by Jamsetji Tata, the founder of India’s biggest conglomerate Tata group. Tata spoke on Trent’s focus on profitability, debunking the common theory of fast-track expansion in modern retail, and aim of trebling the company’s revenue to ₹ 15,000 crore in 10 years. Edited excerpts from an interview:
Despite being an early starter, Trent has kept the pace of expansion slow in the last 20 years. In the past few years, especially with e-commerce, India’s modern retail market is fast changing. Do we get to see Trent in a new avatar?
It took us 10 years (since 1998) to open 40 Westside stores. And, this year, we are opening 40 new Westside stores. So, what we did in 10 years, we are doing it in one year now. At present, we have 131 Westside stores. We are opening about one store every week. We are also opening 40 Zudio stores, which is our new brand and new small-format stores. There will be 40 Star Bazaar outlets this year. Currently, we have 175 stores, and we are adding 120 new outlets this year only. We have substantially increased the pace. We are planning to try and see if we can keep the pace going forward as well, or if we can increase the pace of growth. We are trying to see whether the engine is working well for us. When the engine is working well, it is easy to grow. That’s going to be our strategy going forward.
What propelled the sudden change in strategy?
We realize that the market is there, and 96% is yet to be tapped by modern retail. Look at the total retail market in India. It’s a ₹ 47 lakh crore ( ₹ 47 trillion) market, and modern retail and e-commerce together is less than ₹ 2 lakh crore, or just around 4%. The market is growing at 7%, or ₹ 3.5 lakh crore a year. There’s a lot of time, and lot of space in the market. And there’s space for every body. Realizing this, we have speeded up our expansion. But, yes, we could have grown faster. It is the one thing that we could have done better.
What target have you set for Trent?
Our total revenue, all businesses put together, is close to ₹ 5,000 crore at present. Over the next 10 years, it should certainly be three times, and we’ll maintain the profitability.
What kind of capex will it require to reach the target?
We are calculating about ₹ 150 crore of capex a year, between food, apparel and others under Trent.
For the quarter ended 30 June, Trent’s net margin was highest in the past nine years. How will you maintain profitability in the fast-paced expansion?
We always wanted to grow profitably. Everything we do at Trent, we ensure that the company stays profitable. It goes back to 1998 when we started. That time, we had a choice of whether we go multi-brand, or we go with our own brands. It was then we decided to stick to having private labels, and grow that way. I looked at the market and I looked at what’s happening internationally. Even at that time, people with own brands were doing much better than the ones doing business with others’ brands. So, we took the decision to grow with our own brands, which was a much more difficult journey. We had to design our own brands, market them, and so on. Growth was slower than others with multi-brand concept.
But, if you look back today, that is perhaps the best decision that we ever took. Given the growth of e-commerce, where brands are being sold at a discount, I think for a retailer to compete with e-commerce, it’s necessary to have a substantial brand portfolio of its own. That is today paying the dividend for ensuring that we continue to grow profitably.
The second area that we concentrated on is an extremely efficient machine behind the stores. Whether you look at our supply chain or distribution of products, where we have one warehouse for the entire country, all our stores receive daily deliveries from our warehouse. Look at our shrinkage, 0.12%, which is world class, our speed to market from design to coming to the store, these all helped us to stay profitable the way we are.
Also, the choice of stores, the choice of locations. We have never hesitated to back off from a store that is at a wrong location, or that is too expensive or one that does not have an appeal. So, discipline in our operations also helped.
Don’t you want to leverage e-commerce marketplaces, going beyond your own platform Tata CLiQ?
We have our own e-commerce plans. We have Tata CLiQ. That grew by 400% last year, and this year, we see that to be between 300-400%. Besides, we are completely omni-channel. Over 60% of our orders that we deliver on Tata CLiQ come through omni-channel process and products are picked from our stores and delivered to our customers. Between food, apparel and footwear and home, we have enough of a market to concentrate and expand.
What’s your take on the proposed e-commerce policy?
We have always felt that the government should free both brick-and-mortar and e-commerce retail for FDI (foreign direct investment) for anyone who wants to have foreign participation. I have not looked at the proposals. So, can’t comment on specifics.
While your own brand stores play in the mass segment, your joint venture with Inditex operates in the mass-premium segment with Zara. Are you looking at the segments above mass-premium up to luxury?
We are very happy with our portfolio with Inditex JV. We won’t get into the super-premium segment.