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The ₹12,000 Crore TATA Company You NEVER Heard Of | Trent Business Case Study — Transcript

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0:00see last week I needed some clothes so I
0:02went for shopping I went to multiple
0:04stores including Zara zudio and Westside
0:07I bought clothes from each of these
0:08stores and it was only after when I came
0:11back home I realized that I paid the
0:13money to the same company this starta
0:15company makes more than 12,000 in
0:17revenue and might become the biggest
0:19fashion company of country very soon a
0:22company that is not famous by its own
0:24name but is behind running three of the
0:25biggest fashion brands of country zudio
0:28Westside and Zara the company I'm
0:30talking about is Trent limited a retail
0:32Master Stroke by Tata group that has
0:34given its investors almost 2,000 person
0:37return in The Last 5 Years in this
0:39episode we'll dive into the Three core
0:41insights that Trend limited has cracked
0:43to become the ultimate Fashion retail
0:45king of India but if you're new to the
0:47channel then hello you've landed at
0:49growthx an invite only community of over
0:523,000 members for product marketing
0:54Business Leaders and also Founders from
0:57the startup ecosystem coming back to
0:59Trend let's let's get some context first
1:01right Trent has got many investors
1:03excited about investing into the company
1:05recently but this is a 25-year-old
1:07company that we talking about so when
1:09you compare Trend with giants like
1:11Reliance retail ad builda fashion or
1:13shoer stop Trend stands apart in terms
1:15of everything be in terms of brand
1:17impact scales or even margins it has an
1:20entire universe of companies in itself
1:22so if you split this universe open you
1:24can find two types of companies one is
1:26cell phone and other are the joint
1:28ventures in cell phone stores or brand
1:29Brands they have Westside zudio s exite
1:33which is a cosmetic brand by the way and
1:35JVS they have Zara star stores a store
1:39that does grocery retailing and Booker
1:41that does groceries for hotels
1:43restaurants and small businesses but in
1:45this video I want to talk about the
1:47fashion Master Str only why well because
1:49zudio Westside and Zara together make
1:52more than 90% of the companies's Avenue
1:54and this is what we will talk about
1:56today Trent open Westside in 1998 formed
1:59a joint w with Zara in 2010 and it
2:01eventually started studio in 2016 these
2:04three main pieces are part of a master
2:06plan but the cion is why three brands by
2:09the same company together as this could
2:11have done more harm than good right by
2:13destroying each Brand's market share
2:15well this is exactly the first Insight
2:17that I'll be talking about which is the
2:18house of Brands Insight tataa realized
2:21one thing very clearly India is divided
2:23into multiple layers and segments one is
2:25Poland one is Singapore and one is
2:27Mexico and now all of these are
2:30different from each other these three
2:31indias have different per capita incomes
2:33different wants and even different
2:35aspirations so basically different users
2:38in India Love different brands so while
2:40the Westside revenue for Trend was
2:42increasing constantly as they expanded
2:45they understood one quot thing that they
2:47can never make Westside the maruti
2:48Suzuki of fashion or the big Bazaar of
2:51retail why well because the average
2:53selling price of Westside which is about
2:551,500 to 2,000 Rupees is not through
2:58which they can capture the deer to and
3:00tier 3 cities and is also not something
3:02through which they can capture the most
3:04premium segment of society West Side was
3:06always somewhere in the middle of the
3:08customers value aspiration pyramid so to
3:10penetrate into the upper pyramid of the
3:12market they did a joint venture with
3:14index a Spain company to help the Zara
3:17brand scale in India and to penetrate
3:19the lower pyramid of the market they
3:20launched studio now all of these brands
3:22have different average selling prices by
3:24the way like Zara has an average selling
3:26price of
3:272250 zudio has everything and then 999
3:30and Westside as we've already discussed
3:32has an asp of 1,500 but the most
3:35interesting thing is that the biggest
3:37success is coming from the most lowest
3:39margin brand that they have which is
3:40zodio zudio went from contributing 2.8%
3:44to company's Revenue to more than 56%
3:47right now they make around 7,000 crores
3:49which is more than Westside itself the
3:51company launch zudio as a separate brand
3:53because a one simple reason positioning
3:56because if they would have offered the
3:57similar zudio like products in Westside
3:59they would have confused the consumer of
4:01the aspiration level that they have for
4:03the brand because zudio products a
4:04little lesser on quality and this
4:06eventually would have destroyed the
4:08brand reputation that Westside had
4:09created in the last few decades but
4:12Trent realized one thing very clearly
4:14that India's 50 billion fashion Market
4:17is so big that it would have just been
4:19foolish move to not go after the bigger
4:21piece of Pike which for your information
4:23will only grow as India's middle class
4:26is rising and people have started
4:28spending more part of their incomes on
4:29how they look that's why tata's Master
4:31Str was to have different brands selling
4:33different quality products at different
4:35margins each having different marketing
4:38communication and there's a lot more to
4:40this house of brand Insight but before
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5:47learning coming back to the house of
5:49brand Insight see tatas have used
5:51positioning very smartly and that is the
5:53reason why you would never find either
5:54Zara Westside or zudio in the exact same
5:58location in fact even if they in the
5:59same Mall you would find them in the
6:01different corners of the mall Zara would
6:03be in a section where other premium
6:05brands are located and same would be for
6:07zudu and wbsite all of them have
6:08different campaigns and all of them talk
6:10different to the customers for example
6:12in zudio you would never get a discount
6:14because the margins of the brand are
6:16already laser thin and the main play is
6:18of the volumes similarly in Westside and
6:20Zara both of the brands have an online
6:22presence and they want to serve the
6:24customers via online Channel 2o which
6:27again is something that they're not at
6:28all doing at zudio in fact 5% of the
6:31westside's revenue is coming from the
6:33online Channel which is literally zero
6:35in case of zudio but now that I just
6:37talked about stores I need to share some
6:39interesting nuances on how the company
6:41is scaling which brings me to the next
6:43Insight the Insight of scale see scale
6:46is one of the most brutal parts for any
6:48Indian business it is a decision which
6:50involves big investment and also
6:52involves right operation in fact one of
6:54the biggest rise and falls in the
6:56country has also been in this sector we
6:58all know this it's big baz and Trent has
7:00cracked two things really well in
7:02scaling themselves and I'll be only
7:04talking about zodia and Westside here
7:06because Trent has often said themselves
7:08that Zara is only a financial
7:10partnership and not a strategic
7:12partnership so coming back to the two
7:14factors see one of them has been the
7:16location focus and second has been the
7:18retail model and we'll discuss both for
7:20context in 2019 they had 150 Westside
7:24stores and 44 rudio stores now you'll be
7:27shocked to know that this number has
7:28increased to 232 stores for Westside and
7:31a massive 545 stores for zudio this is
7:34insane but deliberate why well because
7:37they have understood that Tier 1 India
7:39is only like 10 to 20% of India and you
7:42need to penetrate tier 2 and tier 3
7:45cities if you really want to capture the
7:47bhat opportunity and it's obvious right
7:49since the audience for something like
7:50zudio is way bigger they went bullish in
7:52that and if you look at the latest store
7:54Edition data you would see something
7:56surprising that the growth of both zud
7:58and Westside are also happening in
8:00different parts of country they both are
8:02going bullish but on different states as
8:04for the chart that you can see here now
8:06this is a super smart pan India
8:08expansion strategies by tatas that many
8:11big retail Giants should take a note of
8:14plus if you compare zudio with another
8:16tier 2 and tier 3 focused retail
8:18companies like weart for example who are
8:20making more than 2,000 crores by tapping
8:23into this Market by the way zudio is
8:25still yet to open stores in many of
8:27these cities which just show us the
8:29runway that this brand has by the way
8:31for Zara you would be shocked to know
8:32that they are only operating roughly 25
8:35to 30 stores with Trent in India which
8:37is negligible compared to zudio and
8:39Westside coming back to the second part
8:41of the scale puzzle which is retail
8:42models see there are number of retail
8:44models that you can use as a brand to
8:46expand your business this is on the
8:49basis of one party owning the store and
8:51paying the lease another party running
8:53the operations of the business I there
8:55are four models the Coco model the kofo
8:58model the FCO model and also the F model
9:01and as you can see on the screen that
9:03each model is different and has its own
9:05advantages and disadvantages so
9:07different companies take choices based
9:09on what suits their brand and balance
9:11sheet mode now Trent has very smartly
9:13gone for the FCO model for zodio here
9:16the franchise partner who could even be
9:18you and me by the way if we meet certain
9:20requirements pays the lease owns the
9:23store and take a revenue share of 16%
9:26from the total store revenue and Trent
9:28on the other hand only does the
9:29operations of the store and ensures that
9:31stores are being run properly and the
9:34turnover per store does not get affected
9:36a great way to scale because company
9:38does not have to spend extensively on
9:40paying the expensive leases and taking a
9:43hit on the balance sheet by the way
9:45different Indian companies have gone for
9:47different models like Fab India and AD
9:49builda a company which own Brands like
9:51rebok Peter England Etc both of them
9:54have gone for Coco model which is a
9:56company owned and Company operated model
9:58while a like manuver has gone for even
10:01more delegation and has gone for the F4
10:03model which is a franchise owned and a
10:05franchise operated model but Trend
10:07strategy of using a FCO model is a great
10:09mix for being acid light but also not
10:12compromising the quality also after
10:15doing a little bit of digging we found
10:16that Westside is doing a mix of both
10:19Koko and FCO models this is a great
10:21balance that they're trying to go after
10:23but why am I talking about this see by
10:25going for a FCO model and by opening
10:28zudio in non premium locations they have
10:31been able to save a really good amount
10:33of money and have improved their margins
10:35so the reida which is a profitability
10:37matric and can be calculated with this
10:39formula has almost doubled in The Last 5
10:42Years so while other companies had to
10:44take debt for the store expenses and for
10:47operations they have been able to do it
10:49very smartly but now that we've talked
10:51all about this what is actually
10:53happening at the store level what are
10:55they cracking in the Operation game
10:56which is the next Insight which is
10:58cracking store level execution see both
11:01zudio and Westside are extremely highly
11:04efficient stores by the way to judge a
11:06performance of very retail store you
11:08only need two parameters one is the same
11:11store sales growth which is to judge
11:13whether the sales are growing from the
11:15same store or not and second is revenue
11:17per square fet which judges the sales
11:20from a particular area of store and
11:22judges how efficient your store is and
11:24if you look at the metrics their same
11:26store sales growth has significantly
11:28improved over the years they are making
11:30more money from the same stores every
11:32year and if you talk about the second
11:33metric Revenue per square ft they are
11:35doing 18,000 rup per square ft for zudio
11:39and 12,000 rupees per sare ft for
11:41Westside which is way above the average
11:43of 10,000 rupees per square feet for the
11:45industry but how are they doing it the
11:48answer lies in their private label and
11:51fast fashion approach in fact this is
11:53where the Zara partnership has been most
11:55helpful for them Trent has learned smart
11:58fashion from one of the biggest
11:59retailers of the world see Zara is one
12:02company that brought the concept of fast
12:04fashion to the world and it is very
12:06simple to understand it it is a way to
12:08get trendy throughout the year by not
12:10putting out clothes in front of the
12:12customers on monthly basis but putting
12:14out collections in front of the
12:15customers on bi-weekly or weekly basis
12:18and this method basically involves
12:20producing more clothes at higher speed
12:22basis on the basis of quick trends that
12:25are happening on the social media and
12:26putting out different varieties in front
12:28of the customer so let's say Zara
12:30launches a t-shirt on basis of a new
12:32trend that's happening on Instagram and
12:34that t-shirt starts selling more Zara
12:36would push more quantity of that T-shirt
12:38into the store and this is exactly how
12:40this works but the downside is that it
12:42leads to more cloth wastage and we've
12:45talk about it some other day but in a
12:46nutshell they have learned how to
12:48execute the concept of fast fashion very
12:51well to make sure that they stay
12:53relevant for their customers also they
12:55have taken the approach of private
12:57labeling where you would not see them
12:59selling other brand products at their
13:01own Outlets it's pretty different to the
13:03approach that other retailers like
13:05pantaloons and Shopper stop have taken
13:07and the idea is simple make more people
13:09come to Westside and zudio not for other
13:12brands but for the trust of Westside and
13:14zudio itself also for context private
13:17labeling does not necessarily mean that
13:19you manufacture your own stuff too you
13:21can get it manufactured from third
13:22parties and smash your own labels over
13:24there it just leads to better margin and
13:26also possibility to create bigger
13:28inhouse house Brands like Westside now
13:31has more than five plus in-house brands
13:33for them which is pretty amazing as
13:35people have now started recognizing the
13:37brands of WTI separately as well but
13:40there's more to this as they are
13:41successfully cracking another lever tool
13:43which very few people are talking about
13:45right now which is cracking the magic of
13:47upselling see when you go to a Westside
13:49store you go there to buy clothes right
13:52but you are later upsold perfumes
13:54wallets near the counters shoes in the
13:56end and many more stuff too in fact they
13:59even upsell you the Westside membership
14:01which you would probably hardly ever use
14:03but you still might end up buying and
14:04the reason for customers buying these
14:06wallets perfumes or even membership is
14:08simple see customers are lazy you and me
14:11both are lazy if we are shopping at a
14:13particular space and we have spent some
14:15money we think that why not spend some
14:17more and get done with everything at the
14:19same time and this is where they're
14:20doing a great job in fact they now have
14:22more than one CR customers who have
14:24bought their West life membership and
14:26are confident on the brand so these were
14:29the three insights that have helped
14:30Trend become one of the greatest retail
14:33companies in India's growing consumer
14:35market and help them make more than
14:3712,000 cror in Revenue don't forget to
14:40check out the growx EV thesis from the
14:42description I will see you in the next
14:44one ciao
14:46[Music]

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