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A boost for retail

Pantaloon Retail (India) has ambitious plans to grow its business and is using IT
as a strategic tool to achieve its goals. by Soutiman Das Gupta

Pantaloon Retail (India) [PRIL] is a successful retailing company and plans to grow
its business in a big way this year, with the help of new outlets and business
ventures.

IT will play a critical role in the organisation’s productivity, and the company has
crafted a roadmap to ensure that its information infrastructure will scale as
required to support business growth.

Going by its IT strategy roadmap, as a key effort, PRIL plans to deploy secure
nationwide connectivity links. It has also built a sizeable server infrastructure,
created a security architecture from scratch, and deployed a financial management
software.

The company also plans to deploy an ERP, set up a B2B portal, put up a Disaster
Recovery (DR) site, use Business Intelligence (BI) tools, implement VoIP, and
install CCTVs at all locations that can be monitored from a central console and
location.

Business along the way

The company began as a textile and fabrics

manufacturer in 1987 and its foray into the retail
business was kicked off with the first Pantaloon retail
store in Kolkata in 1997.

It ventured into other retail business lines and now

We had to design the network so
that the geographically dispersed
workforce would have uninterrupted
access to the enterprise applications
from any corner of the country
Jitendra Sarode,
Senior Manager, IT infrastructure,
PRIL
has 13 Pantaloon stores, nine hypermarket discount
stores (Big Bazaars), 13 Food Bazaars, and one
Central mall in various nationwide locations. The
Central mall has restaurants, shopping arcades,
toys, books, and lifecycle products all under one
roof. As we read, the actual number of the outlets is
rising at a good pace.

The company owns brands like John Miller and Anabelle, and has also purchased a
few companies such as Indigo Nation and Scullers to add to its business portfolio.
It plans to build 20-odd outlets more in the next few months as a part of its
business expansion plans.

Technology Game Plan

The IT strategy has been framed keeping in mind its ambitious growth plans. The
highlights are:

• Create a robust and reliable information infrastructure.

A wholesale of retail

Retail in India has rushed past all roadblocks, but is it really value for money for the common man?
SANGEETA BAROOAH PISHAROTY finds out at the first India Retail Forum in Mumbai

CRYSTAL GAZING A delegate looks at the model of an upcoming mall at the India Retail
Forum in Mumbai Photo: AP

Urvi Piramal of Piramal Holdings says to a packed auditorium at the first-ever India Retail Forum
held in Mumbai this past week, "When the company started India's first mall, Crossroads in
Mumbai's Tar Deo area in 1997, it became more of a tourist spot than a shopping mall!"

Well, that was then and today, Mumbai has a whole lot of more flashy malls and mega malls trying
to hold customers' attention with inventive ideas. And why Mumbai, "this revolutionary shopping
concept" has stretched to not only our metros but even to the smaller cities now, say for instance,
Ludhiana and Jalandhar, etc. Not quite so long ago, don't we remember when Big Jo's in New Delhi's
South Extension opened their doors, how we all jostled to `have a look.' But why then, just the
other day, when Big Bazaar had its curtains up in East Delhi, didn't we all make it a topic of
conversation as to how `inexpensive the things are there.'

But interestingly, even before you can get over the joy of a `cheap shopping' experience, a whole
lot of new `happy shopping' addresses have either come up already, or are soon to raise their head
right in your neighbourhood!

For real?

Well, is retail for real in India? Industry heads look at you with rather surprised expressions if you
pose the question. "Don't you know that already?" they almost snub you. Well, being the second
largest provider of employment in India now, the industry has reasons to feel so.

Urvi, in her presentation at the IRF, says, in the stretch between 1997 and 2005, her company has
started two more malls in Mumbai, one in Pune and just recently, "a most hi-tech one" in
Ahmedabad. Vikram Bakshi, Managing Director, McDonalds, North India, participating at the Forum,
lays open his plans to spill over to smaller towns with McDonalds' outlets.

And why just apparel, household items and food? Hital Meswani, Executive Director, Reliance
Industries Limited, talks of retailing petroleum. "We already have 700 highway retail petrol outlets
and in the next year, we plan to take it up to 2000," he says. Ravi Raheja, Director, K. Raheja
Corporation Private Limited, says, from the lone Shoppers' Stop in Mumbai a decade back, there are
now 17 of them in different cities. The group MBD, which diversified from publishing to hotels (MBD
Radisson at Noida), now has an ambitious plan to open two mega malls in Ludhiana and Jalandhar.

S. Siva Kumar, CEO, Agri Business Division, ITC Limited, gives an exclusive presentation at the
Forum on taking retailing to the rural areas, particularly to the farmers, with the company's
successful agri model, Choupal Saagar. Not only does the computerised choupal tell the farmers the
market price of an agri-product, what to sow during the off season, how much the products will
fetch in the market and how good the soil is for a particular item, they also provide an experience of
shopping for grocery, apparel, etc.

Adi Godrej, Chairman, The Godrej Group, says, they are also into rural retailing with the company's
model Adhar. "We already have 16 village stores," he says.

The honchos also take time off at the maiden Forum to deliberate on what Indian retailing lacks till
date.

Urvi, being the first one to jump into the fray way back in the `90s, says she faced a whole lot of
scepticism at the time of starting Crossroads. "People just couldn't understand the concept. We did
a complete study as to how to go about it and zeroed in on experts from Singapore. We faced a
huge problem in finding trained people to work at the mall. There was also a scarcity of resources.
The local legal and administrative challenges were quite tiring," she states. Food being an instant
attraction, Crossroads, till date, has its food court on the ground floor. "But today, the done thing is,
put all the food stalls on the higher floors so that people go through all the shops while climbing
up," she says.

Arun Nanda, Executive Director, Mahindra & Mahindra, offers a quick reality check: "Can you tell
me, if a tourist wants to shop, where does he go apart from Janpath in Delhi and Fashion Street in
Mumbai? What are we doing to ensure that a foreigner is not cheated here, that he gets the right
product? Look at our packaging. Is it user-friendly? It is time retailing became an organised sector."

Rajendra Arneja, formerly with Unilever, who was involved in its Africa and Latin America projects,
jolts everyone by saying, "Latin America is a million miles ahead when it comes to the retail
business. On a scale of 1 to 10, I would give it 7-8. Africa too is ahead of us. I would give Indian
malls a mere one-and-a-half."

Arneja rues the way Indian malls at present handle housekeeping. "What is the use of having a mall
when people have to fight with each other for car parking on a narrow road? The guards are not
trained, the staff has no idea how to handle customers, there are hardly any facilities for the elderly
customers, the disabled, the toilets are not at the right place, etc. We tend to think that if an item is
cheap, it is going to sell. But what about the quality? Also, who would go to a mall that doesn't
always have a new scheme? Look at Wallmart. It has a new product every month."

Trained staff

In an attempt to bring in trained people, a school has just been started in Delhi. Named Indian
Retail School, it is in South Extension and has various courses stretching from six months to a year.
"If retailers come to us saying we want the School to train an x amount of people for a mall, we do
that too," says Neeti Chatterjee, the school's Manager, Training. A drop in the ocean, but a drop
nevertheless.

And despite all these roadblocks, retailers seem to be quite upbeat when it comes to Foreign Direct
Investment (FII) in the business. "Let global players come here. It will keep us on track," says
Arneja, even as others nod in agreement.
Ajay Dua, Secretary, Ministry of Commerce and Industry, says, "The Government hasn't made a
decision yet on bringing FDI into retailing. But global players can anyway come in through joint
ventures with domestic players. We also have to ensure that domestic players don't suffer when we
let open the field. China today has a law to safeguard the interests of local players, and yet it has
allowed foreign companies into retailing. "

But finally, talking of `aam janta', all that counts is, value-for-money items, a space in the car park,
a staff that doesn't give you a `I-can't-help-you' look and an efficient counter for quick billing. All
we want is an experience that feels unique, not on paper but in reality. And that's when a customer
would confidently say, yes, retail in India is for real.

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The detail in retail

Nirmal D. Menon

Read on to know how the tribe of organised retailers proposes to grow in a

market that offers immense opportunity, albeit with some riders.

THE Big Bazaars of India know God is in retail. Analysts swear by their stated
corporate ambitions, promising growth potential and soaring performance
graphs. Yet, indicators suggest that we are far from being declared as the
tourism destination for retail therapy.

Like in case of the foods and groceries category, which constitutes 14 per cent of
the total share of organised retailing in India — second only to apparels; key
indicators hint that metropolitan India is way behind cities in South East Asian
countries.

According to a recent fast-track A. C. Nielsen study, the informal eating out (IEO)
market in India is undersized as against Asian markets. When compared on a
scale of visits per 100 population, Mumbai and Delhi score 638 and 1,015 visits
respectively, as against 3,371 in Manila and over 4,000 in Jakarta.

Visits per 100 population, a measure of the visit volume in a market, shows the
number of visits to a category made by any 100 consumers. It is the product of
market penetration in the past four weeks and the average visits in the same
duration. "Affordability is the key to grow the IEO market. Food retailers have to
make their offerings affordable, on par with the crowd-pulling joints like Udipi
Hotels and roadside stalls," says Amit Jatiya, Managing Director, McDonald's
India (Western Region).

The international food retail chain introduced the Happy Meal offer priced at Rs
20 in April this year. This affordability plank significantly improved the bottomline
in the following quarter.

Noteworthy to mention is the status of the US-derived `temples of consumerism'

on Indian soil. Deliberations during the recently-concluded India Retail summit
revealed that only 77 malls out of the estimated 300 to be developed by 2007
are in any serious stage of execution. "Around 283 malls of approximately 19
million sq.ft. area are in various stages of development, out of which 150 of
them are still on paper," says Anuj Puri, MD, Chesterton Meghraj, a property
consultancy firm.

Against the current rate of development of malls in India, he cites the example
of Wal-Mart, which opens a new store every three days. Yogesh Samat, MD,
InOrbit Malls, says malls have been there in the country for a while but have not
really evolved. "Returns take their own time to fructify in mall development
business. Real estate rents are too inflated, and will take us around 7-8 years to
break even," Samat adds. The mall seems to be in the developers' court now.

However, there are players who play their ball harder, like the big daddy of
Indian retailing, Kishore Biyani. In 1997, Pantaloon set up three retail stores and
registered a turnover of Rs 60 crore. Call it savior faire, but Biyani juggled with
the idea of experimenting with various retailing formats while analysing the
purchasing pattern of the great Indian middle-class.

Pantaloon had registered a turnover of Rs 650 crore by then. The corporate

strategy now is to expand from 13 lakh sq ft held currently to 15 lakh sq ft by
2007.

RPG, Shoppers' Stop, Lifestyle, Westside, Ebony are the other flag bearers of
modern Indian retail, flanked by Pyramid, Globus and Tanishq. These companies
are cumulatively worth more than Rs 2,000 crore.

Rapid growth

Organised retailing was worth Rs 23,000 crore in 2003 and is growing at a rate
of 25-30 per cent annually. According to Harminder Sahni, Associate Director and
Principal, KSA Technopak, by 2010, organised retailing will be valued at Rs
70,000 crore and will engage 10 per cent of the total retail market.

While discussing the opportunities of retail in India, B. S. Nagesh, MD & CEO,

Shoppers' Stop, points out that total spend by SEC B has surpassed that of SEC
A and small towns are ready for change and growth.
Like in the case of clothing category, which holds 36 per cent share of the
organised retail basket, key players are widening their distribution outlets
besides using current retail outlets as a B2B avenue.

Arvind Brands plans to push the retail presence of Newport jeans, the once top-
selling mass-market denim brand priced at Rs 399, from 1,200 outlets across
480 towns to 3,000 outlets covering 800 towns by the end of this financial year.
Similarly, Ruf 'n Tuf, Arvind's entry-level jeans will ride piggyback on the retail
boom spearheaded by Big Bazaar. Ruf 'n Tuf has an exclusive distribution
arrangement with Big Bazaar. "Besides having a B2C arrangement in Big
Bazaars, Ruf 'n Tuf will also use this premise for B2B business where small
retailers in small towns can come and buy our apparel in bulk," says Darshan
Mehta, MD, Arvind Brands.

Moreover, premium apparel brands are playing by the ear. Even Pierce Brosnan's
own apparel brand is planning a retail foray to woo metropolitan India. Reid &
Taylor Retail Pvt Ltd currently has 16 exclusive stores and plans to set up 50
such stores by 2005 end.

"The scenario is fast changing. Given this scenario, retailing in fashion wear will
witness a high degree of specialisation. Soon, there will be ready-to-wear co-
existing with fabrics, and custom-tailoring would emerging in specialty men's
stores. So it will give rise to new segments like occasion-led specialty stores,"
explained Govind Mirchandani, President, Reid & Taylor.

However, all is not hunky-dory with the show business of organised retail in
India. The taxation system still favours small retail business, even as there is
differential sales tax across the length and breadth of the country. Intrinsic
complexities of retailing such as rapid price changes, constant threat of product
obsolescence and low margins makes it a perennial white elephant.

The Government of India does not recognise retail in India, and that takes away
the much of the sheen from this sunrise industry. "Retailing should feature as a
policy on Government's agenda. The Shops and Establishment Act has to be
effectively implemented in each stage, and the Government needs to recognise
retail as an industry," says Raghu Pillai, President, RPG Retail, while pointing out
that in certain States property tax is as high as 75 per cent of the rent.

The Government, however, took a slight shift from its zero tolerance stance
against retail players last week by proposing to allow FDI in retail of specific
brand of products. Though this may call for more competition, retail players felt
that it was a step in the right direction.

"It is a positive step and it will encourage international brands to set up shop in
India. On the other hand, this will also lead to competition among Indian players.
At the end, it will be the consumers who stand to gain," Shoppers' Stop's Nagesh
says.

Ask him about the looming competition from the international czars of retailing,
he says, this time around, when organised retail is just 2 per cent of the total
market, there is enough room to accommodate competition. "It is only when
organised retail touches around 25 per cent of the total market, key players will
feel the competition pinch," he added.

In case of deriving the perfect food retail model for India, procurement is a cog
in the wheel. The retailer has to fight issues like fragmented sourcing,
unpredictable availability, unsorted food provisions and daily fluctuating prices as
against consumer expectations of round-the-year steady prices, sorted and
cleaned food and fresh stock at all times.

"Procurement impediments cause channel wastage due to ambient transportation

and unpredictable demand forecasts. This results in lower procurement prices to
the farmer and higher prices to the consumer," explains RPG Retail's Pillai.

RPG Retail's FoodWorld has devised a procurement model by contracting directly

with nearly 400 farmers in Hoskote near Bangalore for procuring fresh
vegetables daily. The food chain also arranges finances, professional advice for
these farmers.

However, in the business of retail, HRD is as critical as procurement. There aren't

enough people around for multitudinous reasons. There is no regulation that
addresses employees of retail. Unlike other industries, not much is offered in
terms of remuneration and training.

"Unlike their counterparts in the BPO industry, employees of retail undergo very
little training. The call centres in spite of its unearthly working hours offer better
growth opportunities and remuneration. Unless key retail players address the
HRD aspect of their businesses, the industry will only draw a mediocre staff
force," says Niranjan Hiranandani, MD, Hiranandani Developers.

Nevertheless, like most industry-related seminars, India Retail Summit also

wound up with a positive outlook. According to Nagesh, the next two-three years
will see $200 million investment for retail expansion nationwide, which will result
in 15-20 hypermarkets, 25-30 large department stores, 25-30 large
supermarkets, 750 small- and medium-sized supermarkets, and 1,500 brand
chains.

"The future of retail will depend on the right kind of policies, the right economic
environment, the right infrastructure, and the right people. Unless these things
happen retail in India would not be benefited," says T. K. Banerjee, President &
CEO, Haier Appliances, while presaging the course of Indian retail.

By and large, retail players have been there and done that. But what most
players lack is sharpness to read the consumer mind. Jayant Kocchar, MD,
Ambero Retail, points out that many times retailers turn a blind eye on gender-
based shopping insights, in-shop procedures that overlook customer
convenience, and merchandise placement that does not differentiate between a
man and a child. "Food chains allow people to see, feel and sense their offerings
unlike other retail categories. I do not understand why other retail categories
deny the customers from experiencing the product," Kochhar questions.
Well, in this age and time when the consumer is the king, retailers also need to
realise that they never can say, "I can't

The remarkable world of retail

World over, the retail segment has performed exceptionally since its inception in
the 20th century. Sample these facts:

· Retail is currently the biggest industry in the world with · · sales of $7.2 trillion
· Every 10th billionaire in the world is a retailer.
· 25 of the top 50 Fortune 500 companies are in retail.

The Indian retail story couldn't have been more different. India has approx 12
million retail stores, more than rest of the world put together. But the per capita
square feet area under retail is just 2 sq.ft or 0.2 sq. meters with fragmented
keerana stores being the predominant players. Retailing in India has remained in
the unorganized sector and largely untouched by corporates.

However, times are changing.. With the GDP at an all time high and income levels
shooting through the roof, the average Indian consumer has never had it so good.
The propensity to consume has reached peaks that had never been scaled before.
Credit cards are flashed with disdain and shopping baskets are getting bigger all
the time. Here are some factors that indicate the potential of retail in India:

· At 271 million, one of the largest consuming base in the · world, forming 27% of
the total population
· A high spending community below 45 years comprises
81 percent of the population
· A young population with 54% population below 25 years
· Increased literacy from 44% in 1965 to 70% in 2003
· Increase in workingwomen from 1.3 million in 1961 to
4.8 million in 1998
··Increase in media penetration to 38-million cable household and 80-million TV
household in 2001

Inspite of all the above factors organized retail stands at 2 per cent in India
compared to 85% in USA, 40% in Thailand, 55% in Malaysia and 20% in China.
Consultants have predicted that retail in India is in a take off stage and expect the
share of organized retail to jump from the current 2 per cent to 10 per cent by 2010.
No wonder that consultants have estimated that by 2005, the retail business would
have absorbed 5 lakh employees directly.

Pantaloon: Fashion by Pantaloon

Pantaloon is the company's departmental store and part of life style retail format. In
fact, PRIL took its very initial steps in the retail journey by setting up the first
Pantaloon store in Kolkata in 1997. In a short time Pantaloon has been able to
carve a special place for it self in the hearts and minds of the aspirational Indian
customers. The company has depth of offering for both men and women at
affordable prices. A striking characteristic of Pantaloon has been the strength of its
private label programme. John Miller, Ajile. Scottsvile, Lombard, Annabelle are
some of the successful brands created by the company. With 13 stores across the
country and an ever-increasing stable of private brands, Pantaloon - in the coming
years is poised to become a leading fashion trendsetter.
 Big Bazaar: Is se sasta aur acha kahin nahin
Big bazaar is the company’s foray into the world of hypermarket discount stores,
the first of its kind in India. Price and the wide array of products are the USP’s in
Big Bazaar. Close to two lakh products are available under one roof at prices lower
by 2 to 60 per cent over the corresponding market prices. The high quality of
service, good ambience, implicit guarantees and continuous discount programmes
have helped in changing the face of the Indian retailing industry. A leading foreign
broking house compared the rush at Big Bazaar to that of a local suburban train.

Food Bazaar – Wholesale prices

Food Bazaar’s core concept is to create a blend of a typical Indian Bazaar and
International supermarket atmosphere with the objective of giving the customer all
the advantages of Quality, Range and Price associated with large format stores
and also the comfort to See, Touch and Feel the products. The company has
recently launched an aggressive private label programme with its own brands of
tea, salt, spices, pulses, jams, ketchups etc. With unbeatable prices and vast
variety (there are 42 varieties of rice on sale), Food Bazaar has proved to be a hit
with customers all over the country.

Central Mall - Shop, Eat, Celebrate.

Located in the heart of the city, Central is five floors of customer fantasy. From the
basic to the extravagant, from home furnishings to groceries, from apparel to white
goods, from ATM’s to restaurants……………. And many more all under one roof!

Central will provide customers the opportunity of choosing from amongst the best
brands in apparel, toys, books, music, sports, lifestyle accessories and more. With
more than 300 brands and floors dedicated for women, men, youth and home,
Central aims to provide customers with an array of options never seen before.
Tired of shopping? Restaurants and food courts are just a floor away.
Need a manicure, please step into the beauty parlour.
Looking for an evening out? A pub and a nightclub await you.
Central in a nutshell is a one-stop destination for shopping, eating and chilling out.
Who will win India's retail war?
Gouri Shukla | May 03, 2005

First, the similarities. Both started operations in 1997. They were the earliest homegrown retail
companies to list on Indian bourses. And both opted for the large format retail outlet route.

Now the differences. At present, Kishore Biyani's Pantaloons is four times the size of the Tata
Group-owned Trent (sales turnover 2003-04). It occupies eight times more retail space than
Trent's Westside. And for every Westside outlet in the country, there are nearly four owned by
Pantaloons.

"Retailing is like riding a bicycle, you can't stop pedalling," Biyani, who is the managing director of
Pantaloons Retail, had told The Strategist.

And even as the first-generation businessman pedals at Olympic speeds, the Tatas have stuck to
their soft strategy, be it setting up new stores or entering new locations.
The organised retail industry in India is worth Rs 900 crore (Rs 9 billion) and counting. Who will
win the race to be No 1? Will Pantaloons' size breast the tape or can Trent's cautious optimism
survive the distance?

Margin for error?

Do the numbers indicated in "Bare facts" mean that Pantaloons wins the war even before
battlelines are drawn? Not quite. According to industry experts, as players keep adding
floorspace, expansion has little meaning if the revenue per square foot added falls with every foot
added.

Echoes Irena Vittal, partner at management consultancy McKinsey, "Growth in terms of locations
is easy in the Indian market. What will determine success will be profitable growth."

In 2003, with a floor space of 210,000 sq ft, Westside earned a revenue of Rs 50 a sq ft.
Currently with a marginal increase in floor space to 220,000 sq ft, it earns Rs 70 a sq ft.

On the other hand, Pantaloons' revenue per sq ft has declined from roughly Rs 76.7 to Rs 59 in
2004, while floor space has increased from 580,000 sq ft to 11 lakh (1.1 million) sq ft.

That's where the margin game comes into play. Westside was the first to recognise the
advantage of in-house labels. What's the advantage? Better margins, for starters. Private labels
earn gross margins of 25 to 30 per cent, compared with 5 to 15 per cent for branded apparel.

Besides, the store has better control on the brands and design and can develop unique
positioning for in-house brands.

Westside's leveraged its private labels well, appealing to more sophisticated, urban customers,
compared to Pantaloons, which was bogged down for several years by its middle-class, budget
store image (that's changed now, though).

Realising the importance of in-house labels, even Pantaloons has scaled up the number of in-
house labels from 20 to 40-odd private labels currently. In contrast, almost all the brands sold at
Westside are in-house, private labels.

Which means the chain has better margins, and therefore better revenues, per label.

The impact on operating profit margins is visible. Trent's OPMs have improved to 15.18 per cent
in FY2004 from 13.27 per cent the previous year.

In comparison, Pantaloons' OPMs have remained sticky at 8.41 per cent in FY2004 from 8.17 per
cent in FY2003. The implication is clear: higher OPMs mean the chain is managing costs well and
is better placed to build reserves, which will help future expansion.

But, says Arvind Singhal, managing director of retail consultancy KSA Technopak, margins may
vary because of the nature of business. He adds that it is the stock turnover that should be the
benchmark of superiority.

If that's the parameter, Pantaloons leads marginally: it has a stock turnover of five compared to
four for Trent.

Gain an extra inch

According to K K Iyer, partner at management consultancy Accenture, being the first mover in
new markets has its own advantages. The biggest plus is in grabbing the hot seat as far as
property is concerned.

Once a store enters a good catchment area, its competition loses that advantage.

Trent would agree: When Westside first entered Mumbai in 2000, it opened shop in elite south
Mumbai. At the time, the suburbs were ruled out because Shoppers' Stop cast a long shadow
over the western suburbs.

And even when Westside finally moved northwards into Andheri (where the first Shoppers' Stop
outlet is located), in end-2004, it chose Link Road, which is away from Stop's line of vision.

Being a quick mover and expanding fast brings in another advantage – of size. And size brings
bargaining muscle and, hence, economies in sourcing.

"You end up picking up better terms with dealers and reach economies of scale much faster,"
says Singhal. Confirms Biyani, "We can optimise our supply chain expenses and marketing costs
by spreading them over an increasing number of retail outlets."

Numbers back up this claim. In 2001, Pantaloons' marketing and promotion costs were 3.34 per
cent of sales. As the number of outlets went up from around 20 in 2002 to 44 in 2003, the chain's
spends on advertising and promotions were down to 2.84 per cent of total income in 2004.

In comparison, Trent advertising and promotion spends were 11.4 per cent of total income in
2004, compared to 12.3 per cent in 2003, for a relatively smaller scale of operations.

Too much, too soon?

Are Trent and Pantaloons growing too fast? Cautions Iyer, "When you grow rapidly, there is a
small risk of over-extension." For instance, it becomes difficult to manage manpower to ensure
that quality employees are present in all stores.

And it's not just about good front-end staff: expansion, especially in the multiple format model
preferred by Pantaloons, has to be accompanied by adequate depth and width of a core
management team.

"Pantaloons, as it rolled out, has visibly beefed up a senior management team. Trent, however,
has more or less stuck to a core team," says a competitor.

From a completely top-driven approach, Biyani has delegated the management of categories and
formats to professionals.

Also, of the two, it is Trent that is tightening its belt on employee costs. Which is important,
considering even mammoth departmental store chains like the £8 billion Marks & Spencer has
stabilised its employee costs at 7 per cent of its total revenues.

In FY 2004, Trent spent 6 per cent of its turnover on employee costs (the figure hasn't changed
for two years, even though the number of stores has increased from eight to 17). On the other
hand, Pantaloons' employee costs as a percentage of total income have gone up from roughly 3
per cent in 2001 to 4.17 per cent in 2004.
That's not too much, especially if you consider that the number of employees has doubled in FY
2004 to 3,500, from 1,700 in 2003. (By April 2005, Pantaloons had close to 6,000 employees,
mostly at the front end.)

Multiple formats

Do multiple formats have a clear advantage for Pantaloons? If margins from apparel sales in
Pantaloons (the lifestyle store) suffer, the company does have the option of moving stock to the
discount store, Big Bazaar.

Moreover, losses in margins in one category can be absorbed by profits in another.

Trent, too, has recognised the advantage of multiple formats. In end 2004, it launched Star India
Bazaar, a 50,000 sq ft hypermarket in Ahmedabad.

How does the stock market rate the strategies of the two players? Since 2002, Pantaloons' share
price has moved from Rs 30 to Rs 882 (April 25, 2005) currently.

Over the same period, Trent has climbed from Rs 71 to Rs 580.95. "Pantaloons' high reliance on
debt to finance its growth remains a cause of concern," says the 2004 Fitch report on the retail
industry.

Pantaloons' debt-equity ratio was 1.86 as of 2003-04, compared to 2.17 in 2002-03. Trent's debt-
equity ratio has remained fairly stable at 0.001 per cent in the same period.

Consultants refuse to give their verdict on which player will be strongest in the long run. As Biyani
himself admits, "There is no ideal retailing strategy to follow."