Westside speeds up, targets value shoppers
The multi-brand retail store gets aggressive with customer retention as it looks to beat back the clout of single-brand labels such as H&M, Zara
Over the past one year, Westside, the brand of stores owned by Trent, the retail arm of the Tata group, has moved at an uncharacteristic pace. It has set up 20 stores in a year, taking the total to 122, become more open to discounts and deals and expanded the range of products at its outlets. What is behind the speedy turn at Westside?
One obvious reason is competition. Global players Zara, H&M have navigated their way swiftly into the quality-premium segment and are going all out to woo young shoppers. And the other, point out analysts, could be the brand’s increasing focus towards the value-shopper.
Inside one of the stores in Mumbai, an executive in charge of affairs says, “Today, there is a huge competition from the likes of Zara, H&M and new players. We cannot afford to keep prices high,” he said. With a large chain of stores now in its fold, Trent is also able to negotiate better deals with suppliers.
The strategy seems to be paying off. While an email to Westside remained unanswered, Abneesh Roy, senior vice president at Edelweiss Securities, in a report said: “The flagship Westside format is estimated to sustain 12 per cent year-on-year same stores sales growth (SSSG) each in FY18 and FY19, followed by 10 per cent in FY20 aided by focus on high return on capital employed for exclusive private labels; and improved throughput via higher inventory turns (four fashion cycles compared to two earlier).”
SSSG stands for growth from stores in the business for a year or more and is an important yardstick to determine the performance of the business. For Westside it was 14 per cent and 12 per cent in Q1FY18 and Q2FY18, respectively. Compare this with Shoppers Stop: 19 per cent and -5.5 per cent in Q1FY18 and Q2FY18, respectively.
Pricing it right
Westside is today the largest department store chain in the country. And that has given it the heft to drive down strong deals with suppliers. “When you buy more, you can bargain more with vendors and pass on the discount to buyers,” says an executive with one of the Westside stores on assurance of anonymity. The store also seems to have picked up a few lessons from competitors when it comes to combination deals, something that many chains deploy quite successfully in the Indian market.
The value shopper holds significant clout, say several studies on Indian customer behaviour, especially today, given the big influence that online marketplaces wield on all categories of shoppers. Westside has trained its sights on the category of such shoppers. Besides the flagship Westside, Trent has also launched a new format Zudio with value pricing that also operates as a shop in shop in its Star branded hypermarkets.
Baqar Naqvi, a director with Wazir Advisors says that Westside is slugging it out for a bigger share of value/economy pie and hence is increasing its reach and expanding into newer cities. “The chain continues to focus on the underlying opportunities in tier-II and III markets. Simultaneously, strategic properties in tier-I cities which fit into its overall growth plan are also being pursued,” Naqvi says. Currently the value segment is dominated by Max of Landmark group, Reliance Trends of Reliance Retail and the Future group led Fbb.
Focusing on private labels
Roy of Edelweiss said that Westside had also refined its private labels’ policy to the extent that it “prudently focuses on exclusive private labels which yield superior return on capital employed, enable active control across the value chain and enhance customer stickiness, in turn leading to higher wallet share.” Exclusive brands contribute 93 per cent to overall revenue and the format, in turn, accounts for 97 per cent of Trent’s standalone revenue.
Stickiness has been an issue of some concern, especially at multi-brand retail outlets. The rise of stores such as H&M, Zara has meant that customers prefer to scour the multi-brand outlets for deals while reserving a larger portion of the wallet for single-store brands where they expect to see the latest styles more frequently.
Private labels play a big role in keeping customers in the house and allowing the retailer more control over margins. According to the report by Edelweiss, private labels coupled with a few other innovations
have enabled Westside “to report high margins in FY17; and high single digit SSSG over the past four years.” Westside is also shifting, like many global counterparts, towards a four-season-style calendar, hoping to keep footfalls heavy through the year.
“Westside has dramatically improved on its products (design, quality etc.) and on displays and visual merchandising, thereby attracting more consumers. Their business model involves an active control of the complete value chain including branding, sourcing, logistics, distribution, pricing, display and promotion of almost 90 per cent of the product range retailed,” Naqvi says. The challenge will be to keep the same control over every aspect of the brand, as it chases growth and a larger brand footprint.