Tata shutting down Tashi retail chain2 min read . Updated: 14 Aug 2013, 09:04 PM IST
Tata International plans to move out of retail to focus on manufacturing, distribution and trading
Bangalore/Mumbai:Tata International Ltd is exiting its footwear retail business Tashi and shutting down the six stores of the chain that remain, joining a growing list of companies that have failed to find the right formula to succeed in the retail business in India.
The company will now shift to a branding and distribution model, managing director Noel Tata said in the July issue of Tata Review, an in-house publication of the Tata Group that is distributed to select executives and government officials.
The exit is part of a larger change in the company. With businesses in steel trading, agricultural trading, auto distribution and leather product manufacturing, Tata International is moving out of retail to focus on manufacturing, distribution and trading.
Tashi was launched in 2010 by Noel Tata, who used to run the Tata Group-owned Trent Ltd, the operator of Westside retail stores and Star Bazaar hypermarkets. It rolled back expansion plans last year and replaced its management team led by former Bata India Ltd executive Deepak Deshpande.
“One of the assumptions made when Tashi was launched was that a large portion of its offerings would be sourced from our own factories. In reality, less than 10% comes from our factories; 90% is being sourced from others," Noel Tata said in Tata Review.
Tata International, which makes leather products at its factories in India and China, “continues to explore ways of addressing the Indian domestic footwear market," a company spokesperson said by email.
“At the moment, we are evaluating the ‘branding and distribution’ model over retailing. Should Tata International pursue this route, our footwear brands earlier retailed from Tashi stores would then be distributed through multi-brand outlets."
The spokesperson said workers in the domestic footwear retail business will be offered alternative opportunities based on location and skills.
Rating agency Crisil Ltd said in June that growth in retail slowed sharply to 10% in 2012-13 from 20% in 2011-12. It forecast an increase of 14-15% this year. According to Boston Consulting Group, the Indian retail market is worth $500 billion, of which modern retail accounts for just $45 billion.
Retailers in India reported a drop in growth last year as a weak economy and high inflation slowed demand, while rising rental costs and wages dented margins. Last week Mint reported that Mahindra Retail Pvt. Ltd, which sells specialty children and maternity products including apparel, toys and wellness items at the Mom & Me and Beanstalk chains, plans to shut more than 10% of its stores and cut costs after an ambitious expansion drive led to rapid cash burn and losses.
Though growth for apparel and footwear retailers improved this year because of stable product prices and increased demand during the annual discount sales in July-August, most macro-economic data point to a prolonged slowdown.
“I don’t think anyone will miss Tashi—they were just not able to make any kind of a mark on the market. And this despite the fact that shoe retailers have done pretty well," said Harminder Sahni, managing director at consultancy firm Wazir Advisors.
“The problem for Tashi wasn’t on the product side. They didn’t get their branding right," he added.