Simone Tata has the onerous task of replicating her success with cosmetics in retailing.

By Dilip Maitra

At 68, Simone Tata, the feisty CEO of the Rs 56.92-crore Lakme, is venturing into virtually uncharted territory. With Lakme 's wholly-owned subsidiary, the Rs 10.20-crore Lakme Exports, buying over the Littlewoods store in Bangalore from its parent company, Littlewoods International, the first lady of India's beauty business is making her foray into retailing.

She has little to bank on. Barring RPG Enterprises' FoodWorld chain of supermarkets and Health & Glow chain of drugstores, the retailing business has had few successes in this country. And, after its board meeting on March 13, 1998, when Lakme decided to pay out interim dividend of Rs 80 crore from the Rs 160 crore it received as proceeds from the sale of its brands and plants to the Rs 8,343-crore Hindustan Lever (HLL), Tata's ability to fund the venture is also limited. Particularly since the company has proposed a second dividend subject to legal approval.

Her advantage is that Lakme can source products from the Tata Group's garment export divisions, like Coromandel Garments. And by concentrating on cities like Bangalore, Chennai, and Hyderabad in the first phase, and avoiding the bigger metros of Mumbai and Delhi, Lakme is also keeping its real estate costs manageable. In the city of Bangalore, for the relaunch of the Littlewoods store--along with her son Noel Tata, 40, CEO, Lakme Exports, who is tipped to be the heir to the Rs 36,000-crore Tata Group--Simone Tata spoke to BT's Dilip Maitra. Excerpts:

Ms Tata, why did the Tatas decide to get into the retailing business?

It was my idea to get into retailing; not so much that of the House of Tatas. I think retailing is the business of the future because it is unexploited territory. It is not well-organised today; there are no retail chains. Although there are a lot of boutiques specialising in some areas, general retailing is not developed here.

But isn't your store, Littlewoods, specialised too?

Well, it is necessary to have a special profile. We may change our mind in the future. But, to begin with, our stores will have clothes for men, women, and children; a separate department for jewellery and cosmetics; a section on ladies handbags; a gift shop; and a "Home Beautiful" department that will showcase products like curtains, designer-crockery, and other home products. The cosmetics section will offer a mix of national and international brands such as Lakme , Baccarose, Chambor, Revlon, and Biotique. We plan to introduce new styles every week so as to ensure that the range is fresh, lively, and interesting. The latest international trends will be introduced each season to give consumers a choice not found in other Indian outlets. We are not trying to compete with any established brands. Our objective is to create choices for the customer who, previously, did not have access to international retailing.

You said you may change your mind in the future. Are you likely to get into the retailing of food products, consumer electronics, and white goods?

Not likely; they are not on our agenda now. But I must say that no plan is firm forever, so I cannot rule out the possibility of diversification into other areas. At the same time, we must also keep in mind that when you go in for 18 to 20 stores, your investment becomes very large. So, it's better to be cautious. We are also open to the idea of franchising if we get a good one.

At a time when the Tata Group is focusing on certain core businesses, how does the diversification into retailing fit?

True, we are, somewhat, focused on heavy industries, but we also have several companies serving the consumer directly: Indian Hotels, Titan, and Tata Tea are some instances. So, why not retailing? After all, you have to begin somewhere. Retailing gets you closest to the consumer. The group can, as a whole, also benefit by getting to know the preferences of the consumer.

But the Tatas do not have any experience in retailing. What strengths will the group bring to this business?

Our main strength is through Lakme Exports which, till recently, was an exporting company for Lakme products. We have studied the international market closely in terms of fashion and consumer behaviour. I think this is a good knowledge-base that we can draw upon. Besides, few people know that we have garment-factories in the group, which cater to our garment exports business. This knowledge of the readymade garments business will be very useful for our retail stores.

Can you give us some details of the investments that you have planned in the retailing sector?

Sorry. Although we have planned a significant investment, I am not in a position to divulge the financial details. What I can tell you is that we are planning to open three stores this year: the one in Bangalore, the second one in Hyderabad around the middle of this year, and the third one in Chennai by the end of this year. There will be four more stores in the next year for which we have not yet finalised the locations.

Littlewoods International has lost money in this store from the very beginning. What makes you so confident that you will be able to turn it around?

Littlewoods started off with very large pre-operative costs. It took them close to two-and-half years to finally open the store. They had no knowledge of the Indian market, so they spent a large amount of money on market research. They also overspent on the store, and its establishment cost became unmanageably high. But, being Indians, we are much closer to the market, we know the cost of property in various cities as well as the cost of construction. We also have better knowledge of what to buy where.

You said the store would be renamed soon. Will the Tata name be associated with your retail chain?

We have not decided that--yet. We have some names under consideration, and we will look at the possibility of registering these names. The Tata name will, most probably, be associated with the name of the company, but not with the store. Since the Tatas are better-known for their engineering and heavy industries, and lesser-known for consumer goods, I have always resisted the association of the Tata name with Lakme . In fact, I had endless discussions with J.R.D. Tata in the early years of Lakme on why its products should not be called Tata products. I thought a young lady would not like to buy a lipstick from a company known for steel, trucks, and fertilisers. And, finally, J.R.D. was convinced.

Do you have any plans for a financial tie-up with any foreign company for the retailing business?

We have no such plans for a financial or technical tie-up.

You are the founder-pioneer of the cosmetics business in this country. Lakme was also a successful and profitable company. Why did you decide to give it up?

As you know, in any business, one always plans for the future and looks at the investments that will be required to stay, and grow, in the business. At this juncture, we realised that we would have to put in a sizeable amount of money in the joint venture (Lakme -Lever). More than what we had anticipated two years ago because the competitive conditions in the market would force us to do that. Although we could have put in that amount of money, we had to look at the returns to the shareholder. We found that the returns to the shareholder would surely get reduced in the next few years. Our partner, HLL, asked us whether we would like to sell the business, and made us an offer. This offer was rather irresistible, and we accepted it for the protection of the shareholder.

How did you feel when you had to give up Lakme, which you nurtured for the last 35 years?

Well, I certainly feel sad; at times, very sad. But I had to remember that I am just a custodian of the shareholder's interest, and it was my fiduciary responsibility to see that the shareholder got the best returns. The offer from HLL, we thought, was the best that the shareholders could get.

Your son, Noel Tata, is taking charge of the retailing business. Are you planning to retire?

I don't think I can retire completely, but I would like to have a little less work. I'll concentrate on creative work as I did in Lakme . Perhaps I can contribute to some creative areas in the retailing business too.

Thank you, Ms Tata.

Issue Contents  Write to us  Subscriptions