X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Retail Strategy: Focused or Broad Based? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Mar 6, 2012

    Retail Strategy: Focused or Broad Based?

    The Retail industry's fortunes are directly related to the GDP growth of an economy. India's annual GDP growth was 5 % in 1985-1994, and has consistently increased to almost 8-9% in 2005-2009. So, Indians now have more money to spare, and are spending it more willingly than ever. Habits are changing from basic to more discretionary spending. Consumers are not just buying basic food and clothes, but also accessories like watches, belts and branded jewellery. In fact consumers now are increasingly attached to both domestic as well as international Brand names.

    Given this consumption scenario, big retail players see a huge potential for overall industry growth. While retailers are ramping up their operations to capitalise on this increasing demand for branded goods, they are adopting different strategies to approach the market.

    Kishore Biyani's Pantaloon Retail started with selling branded formal trousers in India in 1987. The company, considered a pioneer in India, has since then grown by leaps and bounds, and now has nationwide presence with a wide variety of store formats (see the Table below).

    Name of the store Main operations
    Home Town Home furnishings including furniture, electronics, tiles, electronic, electricals and services
    Pantaloons Apparels for all genders and ages- casual, ethnic, formal, party wear and sports wear
    e Zone Electronics speciality store
    Central A small mall offering branded apparel, accessories, music, books, coffee shops, food courts, etc
    Brand Factory Stores that sell international fashion brands at great prices
    Big Bazaar Hyper market selling food and grocery, utensils, home furnishings, crockery, etc
    KB's Fair Price Neighbourhood stores serving as ration shops for customers satisfying their daily needs
    Food Bazaar Supermarket selling food and grocery items
    Planet Sports Multibrand sports and lifestyle speciality retail chain

    Westside stores
    Name of the store Main operations
    Westside Departmental stores selling apparels, cosmetics, accessories
    Star Bazaar Hyper market selling foods, beverages, consumer electronics and household items
    Landmark These offer books, stationery, music, toys, gift items

    In a diverse country like India where people's needs and wants are varied, Pantaloon Retail's strategy is to target consumers of all income and demographic types, each with specific Branded retail store formats. For example in addition to its existing Food Bazaar, it has recently launched "Foodhall" an upgraded food store targeted at the luxury segment, and catering to the evolved customer who is willing to pay more. With this strategy, management believes it will broaden its customer base.

    In contrast to this "target all segments with unique formats" strategy; Tata's Trent Limited which owns the popular Westside stores thinks differently. It wants to focus on targeting customers from a broad income band with select store formats. Instead of getting into newer formats of retail stores, the company has chosen to allocate all its resources towards its flagship store Westside, along with Landmark and Star Bazaar. Although the company has a few other stores namely "Sisley", "Fashion Yatra" and "Zara", it aims to generate maximum revenue from Westside, Landmark and Star Bazaar.

    Share price changes of both these retail companies reflect which company's strategy the investors have shown more faith in. Over the last 5 years, the stock price of Tata's Trent Ltd. has gone up by 38%, while that of Pantaloon Retail is down by 52%, both on a point to point basis.

    We feel that even though Westside has fewer formats, it is still able to target as many customers wallets as Pantaloons does. This is because in India the consumers have not developed to be able to create large enough markets for the smaller segments. Trent Ltd. is basically present in all the distribution channels that Pantaloon Retail is in. This includes hypermarkets, apparels, accessories and books and music. These categories account for almost 65% of total consumption basket of an Indian (Source: Technopak report).

    Lately Pantaloon Retail has started divesting its stake in other non-retail related businesses (for example, investments business in Future Capital Holdings), and it is focused on becoming a "pure" retail player. In our view, the facts seem to indicate that the company's financial performance would improve if it reduced the number of its formats to a select few. It would still reach the bulk of the consumers it currently does, and management would be more focused. Investors too seem to have the same view as is evident from the big thumbs down given to Pantaloon share price in the last five years. As with all things, in retail too, it helps not to spread yourself too thin perhaps?

     

     

    Equitymaster requests your view! Post a comment on "Retail Strategy: Focused or Broad Based?". Click here!

      
     

    More Views on News

    Titan: Jewellery Business Lights up the Quarter (Quarterly Results Update - Detailed)

    Aug 10, 2017

    However, growth at these levels are unlikely to be sustainable.

    Avenue Supermarts Ltd. (IPO)

    Mar 7, 2017

    Equitymaster analyses Initial Public Offering (IPO) of Avenue Supermarts Limited.

    Titan: Beating the Demonetisation Blues (Quarterly Results Update - Detailed)

    Feb 14, 2017

    Titan Industries declared its results for the third quarter of financial year 2017 (3QFY17). While topline growth was 14.7% YoY, net profit grew by 13.1% YoY during the quarter. Here is our analysis of the results.

    Titan: Margin Improvement Saves the Day (Quarterly Results Update - Detailed)

    Nov 16, 2016

    Titan Industries declared its results for the second quarter of financial year 2017 (2QFY17). While topline growth was flat, net profit grew by 23.5% YoY during the quarter. Here is our analysis of the results.

    Titan: High Gold Prices Spoil the Show (Quarterly Results Update - Detailed)

    Aug 9, 2016

    Titan Industries declared its results for the first quarter of financial year 2017 (1QFY17). The company reported 3.3% YoY increase in sales, while net profit fell by 16.3% YoY during the quarter.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    COMPARE COMPANY

    MARKET STATS