Indian industry giants Reliance and Tata are once again going head-to-head, and this rivalry is poised to deliver significant benefits to Indian consumers.
Reliance Retail is challenging Tata Group‘s Zudio with ‘Yousta,’ its response to the success of Zudio, a brand known for combining style and affordability. And why not, the value fashion segment in India is one of the largest and fastest-growing segments within the apparel market, as per a Motilal Oswal Financial Services.
Launched in August 2023 to compete with Zudio’s success, Ambani’s Yousta reached a milestone of 50 stores within its first year.
All products in Yousta are priced below Rs 999, with a majority priced below Rs 499, a model that is similar to Zudio.
Zudio’s success story
Noel Tata-led Trent opened first independent Zudio store in FY18 and it has been a runaway success. It is now among the biggest apparel brands in the country. Since its inception in FY17 within Star stores, Zudio has seen considerable expansion.
Carved out as a separate format from Star Bazaar in FY18, the Zudio format now accounts for more than a third of Trent’s total revenue, compared with 8% a few years ago. And it has been the fastest growing format for Trent, surpassing Westside in terms of store count in FY22 and in terms of revenue in FY24.
As of June this year, the company had 228 Westside stores, 559 Zudio stores and 36 stores across other lifestyle concepts. Despite multiple retailers operating in the value retailing segment for more than a decade, Zudio surpassed most of the existing players in terms of revenue as well as number of stores.
Trent reported a 50% surge in sales for 2023-24 to Rs 12,375 crore and a nearly fourfold jump in net profit to Rs 1,477 crore. Trent’s consolidated revenue has increased at a five-year compound annual growth rate of 45%, most of it contributed by Zudio, which has surpassed revenue of Rs 7,000 crore in FY24 in yet another year of substantial growth.
Tata cracked the code, Reliance to follow
Zudio was able to crack the code of India’s new consumer class which has come up in small towns. While growing disposable incomes have given it an appetite to spend, spread of internet and social media has made it fashion conscious.
Experts say India’s consumption structure was skewed in the past over a narrow base of rich consumers accounting for a large chunk of the market, as per an ET report in October. However, as the economy is broadening across many more cities and the impact is reaching further down the income ladder, the opportunity for value formats and value brands is expanding.
Zudio has ridden to success on this expanding consumer market in India’s small towns where people have now grown fashion conscious too. Marrying style with low price for the small-town buyer is the secret behind Zudio’s success which is also backed by Tata, the name that has spelt quality for decades for a lot of Indians.
Zudio’s success has been aided by an exclusive design portfolio and a low gross margin of 35-40%. This enables the company to achieve high store productivity, with a revenue per sq ft of Rs 16,300, which is twice the industry average.
Why Reliance needs Yousta
Reliance Industries‘ retail division reported a gross revenue of Rs 76,302 crore in Q2, marking a 1.1% decline year-on-year. The growth was affected by weak demand in the fashion and lifestyle (F&L) segment, ongoing efforts to streamline operations, and a calibrated approach to the B2B business aimed at improving margins, according to the conglomerate’s report.
Reliance aims to replicate Tata’s success with Zudio through Yousta. RIL pumped about Rs 14,839 crore into Reliance Retail as debt last fiscal year to support its long-term investment plans. The funding, the largest by the parent in the last ten years, was routed as an inter-corporate deposit from the holding firm, Reliance Retail Ventures.
With Yousta, Reliance Retail aims to expand its portfolio by introducing new collections every week, while also offering daily unisex and character merchandise. This strategy mirrors Zudio’s success, where frequent inventory refreshes have attracted more buyers, and its franchise model has helped reduce capital costs.
