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Raghavendra \n Kamath, Business Standard<\/i><\/p>\n Raghavendra \n Kamath, Business Standard<\/i><\/p>\n
Mumbai, \n December 23, 2013<\/i><\/p>\n
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Tesco \n has been powering Star Bazaar, Trent’s hypermarket for a \n couple of years. The euro 72 billion Tesco was a back-end partner \n and provided sourcing and technical knowhow. While announcing \n the formal joint-venture with Tesco last week (following the easing \n of retail FDI norms), Noel Tata, vice-chairman of the Tata’s \n retail arm, had said that the company’s understanding of \n the market along with the UK-based retailer’s expertise would \n allow them to leverage the potential of the India’s retail \n scene.<\/p>\n
“As a JV partner, Tesco’s motivation to bring in \n its systems and knowhow is higher,” says Devangshu Dutta, \n chief executive of retail consultant Third Eyesight. <\/b>Dutta \n says that senior Tesco executives must have been involved in the \n Tata business earlier but Tesco’s management involvement \n can only go up. He reminds that Tesco partnered with Tata not \n just to remain a back-end player but also to study the retail \n front-end. <\/b><\/p>\n
Both Tesco India and Trent did not respond to queries on the \n subject. Retail experts say that Tesco is known for three areas \n of expertise.<\/p>\n
Knowing its customer<\/b>
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Tesco’s customer relationship management (CRM) is well documented. \n It has the popular loyalty card ‘Clubcard’. It also \n owns dunnhumby, one of the biggest data analytics companies in \n the world. “In the UK, depending on what customers have bought \n in the past, it sends customised mailers to shoppers, leveraging \n its database,” says Abheek Singhi, partner and director at \n management consultancy Boston Consulting Group (BCG). Adds Arvind \n Singhal, chairman of Technopak Advisors, “It is its strength \n to analyse every transaction and design pricing and promotions \n at each store that makes it successful.”<\/p>\n
Tesco has not brought in its CRM and data analytics systems to \n India yet because of Star Bazaar’s limited scale of operations. \n Neither has it been able to introduce its good-better-best (value, \n premium and finest segments) approach.<\/p>\n
However, it has helped the Indian chain across its 16 stores \n across the country. Tesco provides its proprietary “planogram” \n software to Star Bazaar, which helps the latter with a better \n display of products. For instance, Tesco told Star Bazaar that \n the retailer need not stock soaps and shampoos near the entrance \n to the stores. The customer will seek out these essential items \n wherever they are kept in the store. Rather, it advised Trent \n to use the vantage position to showcase products with a novelty \n element and hence, commanding a higher margin, for more profitable \n sale.<\/p>\n
Private brands galore<\/b>
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Tesco has introduced hundreds of its SKUs (stock keeping units) \n in Star Bazaar stores from personalcare to packaged foods. While \n the contribution of private labels to Star Bazaar’s revenue \n is in single digits, Tesco sees 45 per cent of business from private \n labels.<\/p>\n
According to executives in the know, Tesco has played a role \n in developing Star Bazaar’s own private labels. “In \n the UK and other countries, shoppers prefer Tesco’s private \n lablels over other international brands due to their quality and \n pricing. We need to see how they will do it in India,” says \n a director of an international management consultancy who did \n not wish to be quoted.<\/p>\n
Formatting the market<\/b>
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According to the proposal sumitted to the government, the JV \n will operate in India through a chain of stores under various \n banners such as Star Bazaar, Star Daily, Star Market, branded \n as ‘A Tata and Tesco Enterprise’. The plan is to open \n three to five stores every financial year.<\/p>\n
Experts point out that Tesco’s calibre in running multiple \n formats would come in handy. Tesco runs over 6,700 stores across \n 12 markets and runs hypermarkets, supermarkets, compact hyperstores \n , express stores and an online venture.<\/p>\n
Star Bazaar has tried another format besides hypermarkets, having \n launched a neighborhood store called Star Daily in Pune, which \n is supposed to be based on Tesco Express.<\/p>\n
The chief executive of a national retail chain says Tesco’s \n best practices might just help Star Bazaar break even faster. \n Though Star Bazaar had set up its first store in 2004, it is yet \n to achieve profits. The chain registered a net loss of Rs 72 crore \n on net sales of Rs 785 crore in 2012-13.<\/p>\n
Many consultants say Tesco could also bring in its renowned ‘Tesco \n in a Box’ – its supply chain systems that are deployed \n in a new country. <\/p>\n
Dutta says, “When a retailer enters a new country, there \n is naturally an erosion in best practices and processes as markets \n are different from each other. Tesco’s standardised system \n in inventory management, supply chain and store operations prevents \n that erosion.”<\/b><\/p>\n
Tesco already plays a key role in the supply chain of Star Bazaar. \n It manages three distribution centres, that ensure high availability \n and supply to the stores. Armed with its advanced demand forecast \n system, auto-ordering mechanism and advanced warehouse management \n system, Tesco has managed over 80 per cent fill-rate (the number \n of times shelves get filled correctly against the orders placed) \n at Star Bazaar stores. The industry average in modern retail hovers \n between 60 and 65 per cent, as against 90-95 per cent in Europe \n and the US.
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