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In 24 years the Tata Group's retail operation has grown into the second biggest in the industry

In the first flush of liberalisation, foreign direct investment (FDI) in multi-brand retail was allowed in India, a tempting proposition that had led one of Britain’s oldest retailer, Littlewoods, to set up shop here. But the Liverpool company soon cashed out, failing to grasp the consumption story of a billion plus market, and Trent — which was still taking baby steps towards becoming the group’s premier retailing company — saw a bargain that was simply irresistible.

Trent thus began with a buyout. Its initial lifestyle and fashion retailing template came as part of the package deal. “It was a perfect opportunistic pick for Trent. We back calculated and got the price right for it. So Trent had one running store right from the day of acquisition and was also profitable from the first day itself,” remembers Raju Bhinge, chief executive of Tata Strategic Management Group (TSMB), the group’s consulting and advisory wing.

IN SUM
Total number of stores	2,144
Total sq ft (in million)	4.96
Revenues (FY 2011; in Rs  crore)	9,544#
No. of formats*	14
*Formats include World of Titan, Fastrack, Helios, Tanishq, Goldplus, Zoya, Eye+ in Titan; Westside, Star Bazaar, Landmark, Fashion Yatra in Trent, Croma in Infinity; Tata Kisan Sansar in Tata Chemicals; and Tata Teleservices’ retail outlets #Does not include Tata Teleservices

So what you see of Trent today with all its many formats was built on that one store in Bangalore. That’s when in the spring of 1998, the Tata Group looked at big-format fashion and lifestyle retail for the first time. “You need to understand how to stock things, merchandising, store formatting and optimise that learning,” Bhinge time travels fondly, sitting inside his new glass and steel office in Central Mumbai’s Lower Parel, oblivious of the cacophony of cars and blaring horns outside.

Now, 2,144 store rollouts later, the various pieces of the retail puzzle seem to have fallen well into place with the Tata Group emerging as the second biggest retailer — both in revenues and scale of operations — in India. “It seems scattered but when you look at it, you’ll see we’ve built a reasonably nice looking business without making much fuss,” quips RG Gopalakrishnan, director, Tata Sons.

Spanning 14 different formats and over 4.96 million sq feet, the combined sales in 2011 from the many hypermarkets, fashion and lifestyle, electronics, watches, jewellery, books and music stores that the group companies run will also narrow the gap between them and the maharaja of Indian retail Kishore Biyani.
 

BIG PICTURE
Group/company	Total stores	Area covered (million sq ft)	Revenue  FY 2010-11 (Rs  crore)
Tata Retail	2,144	4.95	9,544
Future Group	1,000	15	12,000*
Reliance Retail	1,000#	NA	5,834
Aditya Birla Retail	571#	2	1,750
Spencer’s Retail	220	1.1	1,083*
# Reliance Retail stores don’t include RIL oil outlets and Vimal stores; Aditya Birla Retail stores don’t include outlets run by Madura Garments, Idea Cellular and UltraTech Cement                            *estimates

Biyani’s Future Group — the country’s largest retailer — is expected to post revenues of Rs 11,000 crore-Rs 12,000 crore in 2011 when it comes out with its annual numbers end of the month.

Scale is just half the story. Where the Tata Group stood out is in its ability to spawn a profitable operation. That’s the core of its retailing blueprint.

Barring Pantaloon, Future Group’s flagship company, Titan and Trent are the only listed retailers that have been profitable in the last five to six years. Titan made combined profits of Rs 1,084 crore from 2006-07 to 2010-11 while Trent posted profits of Rs 158 crore from 2005-06 to 2010-11.

Croma, Tata Group’s electronic megastores, has broken even operationally at the consolidated store level and is expected to do so at the corporate level also by 2011-12, says its confident chief executive Ajit Joshi. This when some of the big boys in retail have been staring at even bigger trouble — with inefficient operations, high leverage, losses, and then the pangs of a slowdown which eventually triggered massive restructuring of operations and downsizing.

So while Pantaloon posted profits of Rs 630.26 crore between 2005-06 and 2009-10, on a consolidated basis, the Future Group booked losses of Rs 1,835 crore in 2009-10. Analysts say its home décor businesses and electronics stores have been drags on the bottom line. On its part, K Raheja Corp Group’s Shoppers Stop was in the red in 2009. Vishal Retail and Subhiksha went belly up, and the former was sold off by its lenders after posting losses for its last three years. RPG’s Spencer’s Retail is still bleeding, though losses are coming down from a staggering Rs 520 crore (2008-09) to Rs 130 crore (2010-11). Late entrants Reliance and Birla Retail, both of whom started operations in 2006-07, are hoping to break-even by 2012-13.

In retrospect, it can also be argued that Trent has been able to endure the sales slump during the recession because of the relative profitability of Westside and Landmark models. When customers chose value or downtraded, it stepped up its promotions. And by picking up the warning signals of a slowdown faster than many, the inventory levels were kept extremely tight.

“Tatas had been the most under-covered and least appreciated retail groups despite being one of most successful and profitable retailers in the last five years,” points out Arvind Singhal, chairman of retail consultancy Technopak Advisors.

“Retail is both an art and a science and they are conscious of both,” says an executive from a rival chain on condition of anonymity.

All about profitability
Retail is a tough business to crack, leave alone make money, but the group seems to have got the hang of the module. And it goes about it in a clinical fashion — spreadsheet by spreadsheet, store by store. “We observe a brand or an SKU for six to eight weeks. If it sells, it stays. If not, we are ruthless about it. Our private labels compete with the best of brands. After that the manufacturers meet our new lines committee and we share the data. We are transparent and that’s why they respect our decision,” adds Joshi to underscore the degree of micro management.

It’s not that the group always gets it right. Steel retailing flopped as did Tata Motor’s efforts in passenger car retailing via the dealership network of Concorde Motors. Even product planning and displays throw up occasional lemons like when Croma got it wrong with children’s electronic toys.

“We are building the retail piece brick by brick unlike our other manufacturing businesses like steel or auto where we think of the totality first. In retail, you have to get a number of micro things right. You aggregate the micros and only then you get the macro right,” Gopalakrishnan decodes it for us.

Even though the group has entered most of the high growth segments of retail — namely, apparel, food and grocery, consumer durables and electronics, jewellery and footwear — and continues to evaluate new segments, most competitors scoff at the group’s trade-off between pace of growth and profitability. Trent took 15 years to open 54 Westside departmental stores and after 2004, took almost four years to open its second hypermarket Star Bazaar in Mumbai.
 

BRICK BY BRICK
	31-Mar-11		2010-11
Retail format	Stores	Area in sq ft (in million)	Sales in Rs  crore	Sales/sq ft   (Rs )
WATCHES
World of Titan	311	0.32	650	20,537
Fastrack#	47	0.02	41	20,568
Helios	6	0.01	8	5,958
JEWELLERY
Tanishq	120	0.29	4,787	167,661
Goldplus	29	0.05	533	105,247
Zoya	2	0.01	31	46,771
EYEWEAR
Eye +