Something about Tata

Noel N. Tata has been one of the most reclusive business honchos in India. And he insists that it's his nature that makes him that way-and not a desire to keep a low profile. To our pleasant surprise, we found Tata an extremely engaging conversationalist, as he went about debunking common theories and wisdom about organised retail- a business he lives and breathes. Excerpts from his first full-length interview:

BT: But if your competition has 100 hypermarkets and you have 12, then he can call the shots?
NT: It's not that straightforward. Even at 100 hypermarkets, you will have less than 1 per cent of the large vendors' turnover. Scale alone does not bring profitability. If you have six or eight or 10 players all growing-they are all getting scale as well. If one of them decides that I am going to pass on my better margin to the customer, what do you do? You have to do the same and then that margin would disappear. Along with scale, customer service, location, pricing, product mix, availability are extremely important. If a customer comes with 100 items to buy and he only walks away with 60, he won't come back.

BT: One often wonders why Croma was created outside Trent. There's a perception that Bombay House felt Trent wasn't moving fast enough.
NT: At the time Croma was envisaged, we had our hands full with our own expansions. We had expansion plans for Landmark (books and music), expansion plans for hypermarkets as well as for Westside. Also, consumer durables (which is what Croma retails) is a completely different business. So, it was the right decision (to have Croma outside Trent). It possibly wouldn't have grown as fast as it has if Trent had tried to start it as another retail format. We are doing something else in the lifestyle area (with Westside). My sense is that it's only in India that retail is considered one industry. Nowhere in the world is the gamut of retail considered one industry. You don't treat manufacturing as one industry. You have cement, or automobiles or steel, each having its own competencies, each having its own quirks… so why does media or analysts treat retail as one industry? Also, the DNA of an organisation selling luxury is very different from the DNA of an organisation selling value.


BT: But your pace of expansion would seem slow…
NT: Our view is that retail, which appears on the surface to be a simple business, in reality is not. It is a business in which details are extremely important, where the front end needs to treat the customer as an individual even as the back end needs to be able to procure in bulk and get economies of scale… We grow our formats in stages. In Stage I, we open a pilot store to check customer reaction. In Stage II, we open 3-10 more stores to check for location advantage/disadvantage and for further fine-tuning to get a line of sight to profitability. Only once we are confident that the format can deliver profitability do we go in for further expansion.