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Star Bazaar pats itself on slowdown strategy

Business Standard, Mumbai January 27, 2011

Raghavendra Kamath

Star Bazaar, the chain run by Tata-owned Trent Hypermarket, says it used the economic slowdown to book properties when prices were down, allowing it now to open more stores.

Rentals of retail properties were 30-35 per cent lower than their peak during the economic slowdown of 2008-09, as retailers shut stores and scaled back their expansion due to lower footfalls.

Starting the first store in Ahmedabad in 2004, Trent Hypermarket runs 10 Star Bazaar stores and plans to double the count by the end of 2011. Hypermarkets are larger versions of supermarkets, mostly stocking food and grocery, apparel and general merchandise, among other products.

“We have a good property team. Our team quickly went and seized the opportunities during the slowdown,” said Jamshed Daboo, chief executive officer of Trent Hypermarket.

Trent Hypermarket did a turnover of Rs 289.7 crore in 2009-10, with a net loss of Rs 29.1 crore. Last year, on the sidelines of Trent’s annual general meeting, chief financial officer P Venkatesalu said the company expected a break-even for Star Bazaar at the company level after it attained a critical mass of 25 stores.

The late hypermarket entrants such as Reliance Retail and Aditya Birla Retail came much later but have opened a similar number, or more, of stores. Aditya Birla, which opened its first megastore in 2009, in Aurangabad, today runs nine hypermarkets. It wants to open seven-eight new stores every year. Reliance Retail, which opened first hypermarket in 2007 in Ahmedabad, today operates 18, under the Reliance Mart label.

In 2008, Noel Tata, the then managing director of Trent, the parent of Trent Hypermarkets, said the company planned to invest Rs 2,000 crore to set up 50 hypermarkets in five years. The same year, Trent entered into an exclusive franchise agreement with UK’s retail giant, Tesco, to access the latter’s expertise in supply chain, marketing, stock management and retail information, among others.

“Our essential game plan is to be the best hypermarket chain, not the largest. All our efforts are to simplify operations and make it foolproof to improve profitability," Daboo said at the Retail Leadership Summit organised by Retailers Association of India last week in Mumbai.

Star Bazaar stores are about 70,000 sq ft each. Other retailers such as Hypercity are also planning to open stores in that range to optimise space utilisation.

Retail consultant Devangshu Dutta, who works with many national and international retailers, does not think Star Bazaar’s slower pace of growth is an issue. “Every business has its own logic and plans. As long as they achieve their targets, they are a success. In the retail business you can pump a lot of money; stores can bleed for years. In the last five years, many retailers have lost money and have had to scale back," Dutta says.

An executive from Trent said the company’s conservative strategy paid off, as it remained profitable during the slowdown and did not close a single store. Others — Reliance Retail, Aditya Birla, Spencer’s, etc closed over 300 stores, mostly supermarkets, to stem losses during the slowdown.

“We were fortunate in the first cycle and have learnt our lessons. We have calibrated our growth,” Daboo said at the summit. Apart from introducing a live kitchen in its stores, the chain has introduced Tesco’s store brands in personal care, health and beauty and food in its stores. Star Bazaar will launch more products of Tesco, Daboo said.

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