- COMPETITION:
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. 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.
Himanshu Chakrawarti, declared: "There is an almost limitless capacity in the Indian retail segment. I have not found a big competitor in India yet “
- EIGHT WAYS OF WINNING MODEL:
- PLACE:
Store size:
A 23,000 sq feet store will commence operations in Indore on 10th September and a 30,000 sq ft store will commence operations at Andheri Link Road in Mumbai in October. The company would be identifying another location for one more store. Total capex during the year is estimated at Rs200-250mn.
Expansion Plans
Trent has set up 13 Westside stores spread over 220,000 square feet of retail space. Close to 80,000 square feet (4 outlets) of retail space has been added over the last six months alone. The average size of a Westside store ranges from 15000-20000 square feet. The company is now also looking at opening larger stores (30-35000 square feet each), so that it could widen the product offering to its customers.
Setting up of a single outlet of 20,000 sq. ft. entails an investment of about Rs45- 55mn (Furnishing + stocks). Most outlets are leased outright on rent or have a twin Rent + Revenue sharing arrangement. We estimate a capital investment of Rs200- 225mn pa would be required during the next two years to fund the proposed expansion. Working capital requirement would also rise as the numbers of outlets expand.
Store Location:
The company has already established eleven Westside departmental stores measuring 20,000 square feet each, in Mumbai, Bangalore, Hyderabad, Chennai, Pune New Delhi, Kolkata, Nagpur and Ahmedabad. The company hopes to expand rapidly with similar format stores that offer a fine balance between style and price retailing. Future plans include establishing the Westside brand in all large towns with a population of over one lakh.
Trent opened 5 Westside stores in FY04 (2 in Mumbai and 1 each in Noida, Ahmedabad and Bangalore) taking the total number of Westside stores to 14. The company plans to open 5 new Westside stores during 2004-05. Two more stores are being set up in Bangalore and Gurgaon, which will commence operations in Q1 2005.
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. By December 2004 Westside will have 20 stores.
Westside store locations:
Ahmedabad; Mumbai – Mulund, Kala Ghoda, Hughes Road; Bangalore; Chennai; Delhi - Karol Bagh, Lajpat Nagar, Noida; Hyderabad; Kolkata; Nagpur; Pune.
Westside stores are positioned on three key platforms: Style, Quality and Value-for money. The stores offer high quality, contemporary designed apparel at reasonable prices, while providing an international shopping experience to the customer.
Talking about global expansion Himanshu says - Westside considers it wiser to explore the potential that exists in our homeland, as the retail market is saturated in other parts of the globe.
Atmospherics, Store Layout And Visual Merchandising:
At the store level, the company has made sure that it does the layout and creates visual appeal based on regional preferences and the type of market. Small steps are taken on the allocation front to ensure that it conveys the right message to the customers. Thus say in Kolkata, the company has given extensive areas to ladies traditional wear and Salwar Kameez as the market demand for this merchandise is high.
The visual merchandising team of retailers has also become a prime element of the entire showcasing business. They ensure that the private brands are displayed in a manner guaranteed to attract the customer’s attention.
- PRODUCT:
Trent has focused on building in-store brands (own labels) rather than stock established brands. Apparel brands include Westport, SRC, Gia and Street Blues. The company ensures a strict quality control over raw material sourcing, designing as well as manufacturing. The product range is constantly updated to meet customer’s preferences and encourage higher frequency of visits. While quality matches those of premium brands, the apparel is priced at a discount to leading brands.
Westside sell their own apparel labels exclusively as an integral element of their distinctiveness. Though this does give them a good bottomline, it has its drawbacks, one of them being that they are restricted to keeping their own brand only, which better be consistently good, if they are to stay competitive.
Successful private label empowers retailers in three ways:
- Since customers today are very demanding and have lots of buying options, a successful private label attracts customers to the store and its exclusivity helps build customer loyalty.
- It helps build the store's image, differentiating it from other competing retailers.
- The private label, if developed well, competes with the manufacturer brands. It also allows the store better negotiating power with its suppliers.
At Westside only the own store brands. This means that all the stuff available is made or sourced by Westside itself and therefore the store label ‘Westside’ acts as a product label. Only in a few categories such as cosmetics and toys are brands other than Westside present. Those are categories that complement the Westside range.
The stores are divided into many departments -- menswear, womenswear, kidswear, household accessories, gifts, cosmetics, perfumes and other accessories.
For women, there are casuals, formals and chic Indian wear. The range has great depth spanning from basic clothing to very trendy wear. Unlike a lot of stores, the range at Westside caters to a wide age group and takes into account differing tastes and requirements. Women’s Western wear, the chain has three brands: Westside for “working women”, SRC for “young” and college-going women, and Gia for “larger” women
It offers accessories as well, such as handbags, jewellery, scarves and hair accessories.
In menswear, the range goes from formal to casual and sporty. And, price wise, it extends from the value to the premium segment.
Kids wear at Westside is designed to follow international trends; it is uniquely styled, whether you opt for the dressy, smart or casual.
The household section is extremely contemporary. Westside is open on all days of the week
The products at Westside are not just of high quality and reasonably priced but are contemporary and stylish as well.
- VALUE:
As Westside opens 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. 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. Every new store that opens will contribute directly to the bottom line.
Loyalty programmes:
The loyalty programme is slightly different. Here the aim is to provide more value to the loyal customers. Hence there are extended shopping hours during sale, instant redemption of points at the counter and external tie-ups with restaurants and other service providers. For example, the company has a tie-up with 60-70 restaurants and hotels, where its members can avail discounts.
Another winning Westside idea is Club West, a customer loyalty programme launched in May 2001. The 30,000-plus members of this club get rebates at restaurants and on holiday packages from the Taj Group of Hotels, home delivery of alterations, and best of all, special shopping hours on the first day of any discount sales event organized by the chain
Customer service:
Customer service is where the company is way ahead of the other retailers. The "no-questions-asked-not-even-a-bill" returns 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.
Trained professionals are being employed by retailers to study consumer behavior and what they pick from the racks — all this for improved rack management. This is no invasion of privacy. The tracking system is believed to have been pioneered by Wal-Mart. Now, the Indian retail sector is using skills of professionals to track racks and customize shelves based on inputs provided by them. Following tis study, Westside, has re-arranged its home product section, besides its kids’ section.
“We noticed that people buying children’s products also buy home products like linen. Consequently, we are now encouraging our field force to promote home products to consumers buying kid products,” said Himanshu Chakrawarti, GM (marketing), of Westside.
The key shift we achieved in the past two years was in the style of functioning - zeroing on customer focus,” says Himanshu Chakrawarti, general manager, Marketing, Trent. The company realized well in advance that if it wanted to succeed in its model, it had to have an enhanced focus on the customer. This meant that the company had to undertake a lot more customer research than its competitors - after all, customers had to come to Westside just for Westside label. Thereafter, research methods were developed and tie-ups made with external agencies for regular inputs on customers. Hence, the company came far closer to its customers than its competitors. “We have reduced our response time substantially to a change in trend or customer response and the results are already visible in our performance”, says Chakrawarti.
- PEOPLE:
One of the important things in the retailing business is that the people must be motivated and similarly with the customers, they must be dealt with, nicely.
Keeping the staff content means they are given incentives and, like everyone else in the organized retail industry, the sales associates (the salesmen on the shop floor) get higher paychecks starting from Rs 3,000-5,000, depending on the city.
- COMMUNICATION:
As a corollary, even the communication process is geared to meet this demand of increasing integration. The company has realized that out of the four pillars of its model, affordability and style are the two pillars through which it can impact its customers.
In most cases when there is a sale, retailers just do up shop windows and do not actually convey the message of the sale. Through customer research it was found that the customers got to know about the sale through newspapers and hoardings and not when they were passing by the store. International examples were studied and found that most retailers abroad just communicate the sale message through windows. Last time Westside did that, it really worked. This problem has now been sorted out. Even in the case of promotions, the company focuses on instant gratification. Efforts have been made to select the gifts and see to it that the customers are rewarded at every level of shopping. Thus the focus of promotions is to give a greater value proposition, besides offering an enjoyable shopping experience.
While Westside does its regular brand building through advertisements in the media, more important are its in-house promotions, which peak during the three main festive seasons: summer, Diwali and Christmas. The promotions are mostly theme based, with decorations to match, live bands and other attractions. So last year’s Westside show had a Hawaiian theme and this year the chain has gone the ‘Wild West’ way.
An advantage that Westside possesses is that the Tata group has decided to aggregate its media spend and leverage benefits out of consolidated media buying deals. Recently, the group hired The Media Edge as its agency of record (AOR) to handle its entire media buying activities. We realized that we can negotiate better and the money can be either be saved or ploughed back for more marketing activities by individual companies, " said Mr Romit Chaterji, Vice-President (Corporate Affairs), Tata Services.
That this combined effort has resulted in greater efficiencies of scale at the process level. He also said that by coming together, certain common values are being shared among the Tata companies. This association has given Westside the opportunity to talk to its own target group. Promotions and contests built around the various events of the Tata Companies have attracted greater footfalls into the store
- SYSTEMS:
The other aspect where Trent has made a major distinction is IT. IT is considered to be an enabler. As and when required investments in the IT sector was made. This helped the company to recover the investments much faster.
The company has implemented Retail Pro at the POS (Points Of Sale) and has linked the backend through in-house developed solutions. Westside is still evolving and thus it prefers to have a virtual, gradual implementation of ERP. It is an on-going process and IT helps to manage the functions properly
- SUPPLIERS:
Trent has a total supplier base of 150. A large part of the products are sourced from about 20 suppliers inherited from Littlewoods stores. The company ensures a strict quality control over raw material sourcing, designing as well as manufacturing. While quality matches those of premium brands, the apparel is priced at a discount to leading brands.
They may also be looking at sourcing from Hongkong or China in the near future. Himanshu Chakravarti says about the possibility - we are definitely looking at sourcing apparel, but these would not be from the stock lots that may be available with garment factories [on the Chinese mainland] or wholesalers in Hong Kong. "It would need to be more customized to our requirements, as we want to use this option as a means of adding value to our merchandise, and not just for getting lower-priced clothing,"
- MERCHANDISE MANAGEMENT:
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 men’s wear section and there were no brands available for women.
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.
Westside, that claims to have pioneered the concept of private label retailing in India, is looking at this model for creating a long-term relationship with customers by offering the products at a relevant price point of the identified target customers.
While the established brands has a margin of 25-30 % for each unit sale, the private labels will have a margin anywhere close to 40-55 % for the retailers.
The manager in charge of purchase and stocking has to identify the right items and suppliers, and negotiate profitable deals with them, and also price products appropriately. He is instrumental in stocking up new and innovative items to attract and retain customers, and has to maintain a well-oiled supply chain management system. Small-scale manufacturers, designers, artists, and craftspeople with saleable wares can build a good vendor relationship with the merchandise manager to exhibit their products.
Trent has positioned Westside on the ‘fashion at affordable pricing’ plank. By retailing their own Westside brand they are able to eliminate intermediaries and therefore offer better prices. Westside is unique with its own brand of merchandise, which is trendy and individualistic. It caters to the shopper who values not just the product but also the total shopping experience.
To cater to this need, Westside has its team of in-house designers who design exclusively for the store. All merchandise passes the stringent quality standards that befit everything that carries the Tata name
- CONSUMER SHOPPING BEHAVIOR
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 center like Mumbai and a more conservative center 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.
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- MEASUREMENT OF RETAIL PERFORMANCE – MERCHANDISE, SPACE AND PEOPLE
- KEY ISSUES OF CONCERN/INTEREST:
The greatest challenge for Westside in its quest for a place in the retail sun is not the competition from similar organized players, but from the unorganized sector (98 per cent of India’s retail garment industry operates in the unorganized sector). According to Mr. Chakrawarti, the task at hand is to get people who usually shop with unorganized players to visit organized stores such as Westside.
The general perception in India is that organized retailers are far more expensive than unorganized ones. Organised retailing also has to cope with the peculiar Indian middle class psychology that the bigger and brighter a sales outlet is, the more expensive it will be.
There is also the problem of coping with high costs. High costs for the organised sector arises from: higher labour costs, social security to employees, high quality real estate, much bigger premises, comfort facilities such as air-conditioning, back-up power supply, taxes etc.
The other challenge for Westside is that the retail fashion business in the country is becoming increasingly crowded with new players, Indian and foreign. Among the new entrants have been Wills Sport, Raymond’s (Be), Globus, Nike, Crocodile, Mango and, the latest, Marks & Spencer. But this does not perturb Mr. Chakrawarti, who says it’s ironic that while Marks & Spencer is actually a value-for-money brand abroad, it has positioned itself in India as a high-style clothier, selling at prices way above that of its competitors.
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, the GM 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..
- FUTURE:
Apparel Retailing is the country’s second largest opportunity for the organized retailers. The clothing market is highly fragmented, with numerous players operating across a wide variety of formats. Branded apparel accounts for only 20% of the total apparel market. . Men’s clothing currently accounts for 70% of all branded apparel sales as compared to 22% of children’s wear and 8% of women’s wear. The structure of apparel retail has changed dramatically in the recent past with the growth of large multi-brand apparel outlets and manufacturer brand-led chains. Like in the west, specialty stores that have begun to grab market share in India.
Expansion is high on the Westside agenda. The chain is planning to open more outlets in cities where it is already present — Mumbai and New Delhi will have a second store soon — and in some of the mini metros. The big handicap here is the lack of readily available retail spreads. To find space for a large-format store is becoming increasingly difficult. Either the rates are too high or space is just not available.