The recently concluded NatWest series at Lords has made lefthander Yuvraj Singh a hero in the cricketing world. Back home, identified as a stylish and trendy guy, he has been signed on to epitomise the Westside brand as an ambassador for all the men's collection. A year ago this Tata lifestyle chain of stores got Fleur Xavier, the Tetley and Telco model, to endorse its women's wear.

Together with getting a cricketing figure, undoubtedly the most recognised one anywhere in the country, to promote its clothes, Trent Limited (TL), which runs the seven (Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, Pune, and Delhi) stores has added one more location in Delhi at Alankar, Lajpat Nagar. "Out of the 75 stores we plan to roll out, the eighth marks our breakeven point," calculates Noel Naval Tata, managing director of Trent.

This 45-year-old Tata operates as a street-smart, single-focused manager who is involved right from selection of location, infrastructure, interiors, staffing, to range reviews at the store. Having identified retailing as a major growth area, the Trent team has set out to establish Trent as a leading national retailer. 

But what does break even mean? "As we open more stores the losses come down. That is, corporate expenses (everything except the shop expenses) as a ratio to revenue drop. This year they will be 5 per cent of sales, down from 10 per cent last year. Eventually they will be a mere 
1 per cent," he explains. As more stores open it's pure economies of scale that comes into play and basically, the common overheads like human resources, finance, marketing, and projects departments, among others, get defrayed. "From now on, every new store that opens will contribute directly to the bottomline," adds Noel. 

Tata's entry into retail business makes interesting reading. It was with the opening up of the economy, when Trent chairperson Simone Naval Tata, who then headed Lakme, saw the writing on the wall for Lakme's cosmetic business. "Foreign brands were hitting the shelves and to compete we needed a strong R&D to launch new products. Foreign companies' R&D budgets were 10 times Lakme's. This sparked off the joint venture with Hindustan Lever called Lakme Lever," says Simone, the businesswoman whose name was once synonymous with Indian cosmetics. "I realised there was no organised retailing and that it would be the industry of the future. That's how we got into the business."

Nowadays well-entrenched in the retail business, she takes the 40-minute ride up to Vile Parle in the western suburbs of Mumbai for meetings or discussions with the Trent staff thrice a week on an average. In 1997 Lakme's cosmetic business fit well within the Lever fold, and the latter bought the Tatas out lock, stock, and barrel, leaving Lakme with Rs 200 crore in cash. Its name was promptly changed to Trent Limited. Around the same time, the Tatas were looking at diversification and new projects. The group had appointed a consultant to identify business opportunities for 2000 and beyond. One of the suggestions was retailing. On the other hand, another consulting firm was moving around with a mandate from Littlewoods International, UK. That firm wanted an exit from India and was looking for a buyer for its Bangalore store. "We saw this as an opportunity to make our foray into retailing. By acquiring Littlewoods for Rs5 crore we gained a couple of years. In April 1998 we took over the store, the warehouse, and the entire management infrastructure that was in place. Five months later we changed the name to Westside," says Noel. 

Although Simone also says she just dived into retailing with the purchase of Littlewoods, a former Lakme employee says, "She realised her retailing skills when she opened the Lakme outlet in Moscow. She did a wonderful job with it."

And there's been no looking back. Over a span of four years Westside has added seven stores. In terms of sales and number of stores it is the fastest-growing retail chain in India. Most of the other leading retail chains have taken many more years to add as many stores. Today Westside has spacious stores, each ranging between 10,000 and 20,000 sq.ft.

Compared to the competition, the Westside business model was different. Most other chains have gone for the multi-label format, but the Tatas decided on its own labels. Ninety per cent of the product mix at Westside consisting of apparels and furnishing are sold under the Westside brand name; the other 10 per cent comprises lingerie, toys, and cosmetics. This was hard work as until then the only brands available were in the menswear section and there were no brands available for women. 

But the private label route helped it score over the competition, says Himanshu Chakrawarty, general manager (marketing) of Trent Corporation. "At the end of the day you are selling your own product, which is difficult for anyone else to replicate, and you can develop your unique positioning," he says. "Because you have knocked out the middleman, you have control over the merchandise and pricing, which means your margins are significantly higher." Chakrawarty won't reveal what the margins are, but says they are "significantly higher" than the 25 per cent that other stores earn. The economies of scale Westside has built help keep prices well within the reach of the middle and upper-middle classes, which account for 25 per cent of the population.

Taking a plunge into retailing using the private label, as against the time-tested external brand retailing, was a challenging task for the Tatas. When they bought Littlewoods business in India, the Trent management inherited a 100 per cent own label business. However, initially the business plan was to go with 50 per cent of own brands and 50 per cent others. Then looking at the economics of selling other brands and the margins they offered they realise they would be better off with own brands. Barring menswear there was no established national brands for ladies and kids in the market. This gave Trent the opportunity to establish a national brand and the best way of offering value for money.

Initially, with one store, the format appeared to be a flop. But as others opened one by one, the model has begun to look profitable. Westside's success at a time when other retailers like Shoppers' Stop and Piramyd are still going through teething troubles is more than a result of the confidence the consumer has in the Tata name. It has a lot to do with the cautious manner in which the Tatas have developed this chain. "They have done a lot of homework and their systems and processes are in place," says Hemendra Mathur, a senior consultant with KSA Technopak. 

The homework included choosing the right operational strategy for the outlets. Unlike Shoppers' Stop or Piramyd, which have targeted the upper 5 per cent of the population with expensive brands, Westside has looked at the larger base of middle-and upper-middle class consumers. With most of the other chains fighting for a piece of the high-price pie, Trent has the field open for itself. 

Pantaloons and its sister concern Big Bazaar also target the middle-class, but here is where the Westside philosophy comes into play. "We have three main points — styling, affordability, and quality," says Simone. "We have to meet those three parameters and those will directly relate to customer service."

And customer service is where the company is way ahead of the other retailers. The "no-questions-asked-not-even-a-bill" return and exchange policy, for example. Research has shown that a customer is more likely to take a risk and purchase something when he has the assurance that he can return it easily. More often than not such buyers don''t change their minds. On the other hand, this trust in the customer shows the retailer has confidence in his own product and helps develop customer loyalty. 

This fits right in with Simone's theory: "I believe if one person out of 100 exploits it, you still make 99 happy — as long as it doesn't go beyond our budgets and beyond what we think is normal. You must know the customer, you must look at what the customer wants and what makes him happy." 

Even the competition can't complain about the Westside model. "They focused themselves on doing only their private label, and it took them some time to develop it," says K.N. Iyer, director of Piramyd. "I really like their home section and their children's section. Their women's section is good, but the menswear line is disappointing," he says. 

The small menswear section hasn't stopped people from coming in. Today the footfalls differ from store to store, ranging from 800 to 3,000 a day. This sounds small when compared to a mall or a multibrand outlet, where footfalls are regularly 3,000 a day, but the conversion rate from browser into buyer is much higher in a single-brand outlet. "The person is already coming in with a decision to try and buy something from the store. If the others' (conversion rates) are x, we would be at least 10-15 per cent more," says Chakrawarty. West-side rewards its Club West's 30,000 regular shoppers with invitations to special sales and wonderful rebates at Taj restaurants and on holiday packages.

The key to a successful private label is merchandise sourcing. This tough task needs the skills of highly qualified merchandisers and buyers who know the style and keep up with the latest trends. Westside invested in trained buyers and fixed a vendor base across the country to produce the superior quality and mix it they wanted to retail at its family store. Once in place, the sourcing gave it control over the suppliers and vendors. Chakrawarty says, "Your own sourcing makes your business more robust and predictable." It also gave Westside another unique selling point — its products are not available anywhere else, unlike those in multi-brand stores. 

One of the issues the buyers had to keep in mind was regional differences and sizes. "For instance, in the Club-wear merchandise in ladies' wear, there is a drastic difference in the demand for ladies' Western wear between a cosmopolitan centre like Mumbai and a more conservative centre like Chennai. Sizing patterns are also very varied; Bangalore needs smaller sizes, while Delhi and Mumbai need larger ones." And while Western wear and salwar kurtas sell well everywhere, sarees are more popular in Kolkata. 

Along with daily wear, Westside launched a special section with clothing from Anita Dongre and Wendell Rodricks a few years ago. Here the retailer chose to target the woman who wants designer wear but at affordable prices on the rack. Rodricks et al developed a specific range that is exclusive for Westside in terms of range and price, with a Rodricks starting at Rs699, a price not available anywhere else.

Building the Westside brand was not an overnight assignment, but fortunately it started with a small store. Trent had done it before very successfully with Lakme, and the experience helped, but this was a whole new venture and there was established competition in the form of Shoppers' Stop. Heavy advertising through radio spots and advertorials in English and vernacular magazines helped create brand awareness during launches and category advertising keeps up the momentum along with seasonal promotions. "The Westside style" is displayed visually on bus shelters and billboards, totalling adspend to 8 per cent of its budget.

One of the biggest challenges any retailer faces globally is pilferage. Most stores tend to lose around 6 per cent each year from shoplifting and sales manipulation. While the company won't reveal figures, Chakrawarty insists it is far lower than even 1 per cent. Westside has a sophisticated electronic system in place, but he says it is the staff management policies that have kept the staff clean. "One of the important things in the retailing business is you must motivate your people, and similarly with the customers, you must be really nice to them," he says.

Keeping the staff content means they are given incentives and, like everyone else in the organised retail industry, the sales associates (the salesmen on the shopfloor) get higher paychecks starting from Rs 3,000-5,000, depending on the city. 

"To take Westside to the national level and thus make the business profitable, the other important aspect is the opening up of more stores for which managers have been visiting sites across the country," says Noel. By the end of this year (March 2003) he hopes to open three more stores in Nagpur, Ahmedabad, and Borivli, Mumbai, besides a one-third expansion of the Kolkata floor space.

Opening a store in a particular city is a major job and is taken very seriously. "We have an in-house team of five senior managers that conduct the survey and research," explains Noel, w ho is personally involved and takes rounds at the site. The team analyses the population, the demand potential of the city, the buying patterns, purchasing potential, car ownership, and lifestyles in a potential location. "There is a lot of legwork in the data identification process. The biggest bottleneck is getting large properties of 30,000-40,000 sq.ft. It is not readily available at the right location. For instance, at Borivli, we've started with a piece of land. Hence the gestation period is longer. The positive side is that we get a tailor-made store, but the negative is that it takes two or three years to get it going," says Noel, whose ultimate aim is to have 75 stores with a representation in the top 50 cities in India. By December 2004 Westside will have 20 stores. "We are comfortable with that," he adds. 

Perhaps the biggest expense and deterrent to the retail sector has been the real estate issue. The demand for spaces ranging from 10,000 to 20,000 sq.ft. can eat into capital very fast, but the Tatas are very clear about their role — they are not in the business of retailing and not real estate, and so leasing makes sense to them. But the expensive real estate has affected their plans. Simone admits, "I think we would have grown faster if the real estate problem did not exist. What we need really are premises that are affordable. That has been our biggest handicap to growth." 

Trent's retail business has benefited by the adoption of the Tata Business Excellence model which is used by most Tata companies and the results are beginning to show. This model is based on the wellknown Malcolm Baldridge award. Overall, Trent has been consistently making profits but the composition of the profits has been the question. In the early days, with less than eight stores, the retail side was making losses, but the income from treasury operations saved the day. This allowed the company to declared dividends as high as 60 per cent (when the share price was below Rs60, it worked out to a 10 per cent tax-free yield) to the 44,000-odd erstwhile shareholders of Lakme who came to Trent. Almost 80 per cent of the earnings were distributed. 

As the retail business grew, it has started contributing to the bottom-line. For the year ended March 2002, while the total income of the company stood at Rs90.6 crore, an increase of 37 per cent, the retail income was Rs73.92 crore, up 73 per cent. Income from treasury was a mere 
Rs9.63 crore. Retail for the first time contributed Rsl7 lakh to the net profit. The stock-market has recognised the fact that Trent, which four years ago looked like any non-bank finance company (NBFC), has turned itself into a positive retailing company. This transition called for a rerating of the company. 

On the bourse Trent was quoted at Rs61 in August 2001. Since then it has been moving up and currently changes hands around Rsl47. While much of the broker community was indifferent to the growing business, US-based mutual fund Alliance Capital woke up early and thought it was good enough to pick up a stake of over 5 per cent in anticipation of growth in the retail business. 

Just looking at the balance-sheet numbers Sanjay Kothari, a financial consultant, says Trent is a fantastic investment. "The market capitalisation of the company minus the liquid assets equals zero. So there is nothing to lose," he points out. 

Meanwhile, periodical reminders in the press, teasers for the company's future plans in the grocery business, have sent the stock up from Rsl22 to Rsl8l. Rishi Biyani, senior analyst at Span Capital Markets, says: "This the stockmarket fancies. They have been talking about it for the last two years and are trying to do something. In between there were rumours that they had acquired a company called Subhiksha, but nothing has materialised so far." 

There appears to have been a slight delay in the launch of the grocery plans mainly due to a change in strategy at Trent. Initially, the plan was to have 100 stores with floor space of 100-200 sq ft. Now there has been a change of strategy to 1,000-plus sq ft. "We plan to sell all brands but have a strong own brand. To start with we will launch in the western region and then move across the country," says Noel. But there's no telling the exact date when the first store will open. The hub-and-spoke model should be able to stock shelves with large volumes of fresh and well-sourced perishables.

But the Tatas won't divulge any more details of their new venture. "It's all under wraps. Sorry!" Simone laughs, "But it's very much on. We want to get it right. We made an announcement a bit early, maybe. We are looking at several models, and we want to get it right at the start. We don't want to go back — we want to get it right the first time."