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Single brand retailers keen to mingle with great Indian middle-class

Raghavendra Kamath, Business Standard

Mumbai, November 28, 2013

India’s retail sector needs no bigger testimony than the one it got from the CEO of Britain’s largest clothing retailer Marks & Spencer (M&S), Marc Bolland. On a recent trip to India, he said the company has plans to make India its biggest international market, outside its home market. In fact, India tops its list of priority markets, ahead of China too.

The British retail chain, which has a joint venture with Mukesh Ambani’s Reliance Industries, plans to more than double its stores in the country and open some of world’s first sections, such as M&S Lingerie and beauty department in its stores in India.

However, M&S is not alone in its optimism over India. The government has cleared single brand retail proposals worth more than Rs 12,000 crore (nearly $2 billion) in the last one year.

The biggest among them is Swedish furniture retailer Ikea’s Rs 10,500 crore proposal. Others include Swedish apparel retail maker H&M’s Rs 700 crore plans and Decathlon’s Rs 700 crore plan. Since 2006, the government has cleared 60-70 proposals of single brand retail after the segment was opened to foreign investors.

International brands such as Zara, Marks & Spencer, Benetton and Tommy Hilfiger have reportedly grown at 20-50% on year-on-year basis in the last financial year, despite the slowdown in the economy. Clearly, shoppers are not cutting down spends on foreign brands. .

This is perhaps why global retailers have forged ahead with their India plans, despite the alleged red-tapism in India. Ikea is so bullish about India it pursued its India plans for the past couple of years, despite Indian government’s pointed objections on its applications at various points.

The furniture giant is expected to take three years before it opens its first store in the country. Even H&M, which has 3,000 stores globally, pursued its Rs 700 crore application to open stores religiously, despite government raising queries on mandatory local sourcing norms and brand use here. Swedish retailer H&M are yet to hear from the Foreign Investment Promotion Board.

Consultants say, global retailers are betting on the huge potential of Indian markets. According to AT Kearney’s Global Retail Development Index (GRDI) 2012, India is the fifth most favorable destination for international retailers. Of the total Indian retail market, 8% constitutes the organised retail and this segment is estimated to grow at a rate of nearly 30% by 2015, as against the overall retail market, which is forecast to grow by 16% in the same period.

“There are very few countries in the world which offer market potential the way India does. Some international brands may say conditions are not right and require huge investments, there are equal number of players which say they are not worried about these things,” said Devangshu Dutta, chief executive of retail consultant Third Eyesight, which works with global retailers.

However, FDI in multi brand retail is still stuck, as none of the big retailers — Walmart, Tesco, Carrefour — have not sought permission to open stores in India, despite the government allowing 51% FDI in multi-brand retail.

Though retailers such as world’s largest retailer Walmart, UK’s Tesco, French retailer Carrefour lobbied hard with the central government open up the multi-brand retail sector, none of them, it appears, are comfortable with stringent conditions put by the government for them to enter the retailing business here.

A retail consultant on the condition of anonymity said retailers such as Walmart, Tesco and Carrefour entered cash and carry segment with the plan that they will enter front end retailing in the country once that is opened for them but that has not happened.

While allowing 51% FDI in multi-brand retailing, the government put several conditions, including the 30% mandatory sourcing from small and medium enterprises. Central government also played it safe by leaving the permission to allow the international retailers to respective states themselves.

Despite the slight tweaking done by the governmentin August this year, global retailers have not shown interest. The government said foreign retailers are allowed to open stores in cities that have a population of less than one million as the 53 cities where they could set up stores. Overseas retailers can now source goods from SME firms, where the investment cap will be $2 million instead of the earlier ceiling of $1 million.

Says a senior executive from global retail chain: “I think for three reasons have made us stay away from India-policy restrictions, the political environment, and upcoming festival season globally,”

Many such as Rajat Wahi, partner, Management consulting at KPMG believe the uncertainty around multi-brand retail will continue till next year (elections) due to the challenges the segment faces on scale, supply chain challenges, exorbitant real estate costs, state-wise permits required and rule on 50% of FDI to brought in the first tranche. Single brand retail faces no such issues and will continue to invest in India.

(Sourced from Business Standard.)

Celio to outfit Indian arm with global look

Raghavendra Kamath, Business Standard
Mumbai, November 25, 2013

As French menswear brand Celio looks to become the sole owner of its Indian business, it has drawn up plans to not just open more stores, but make them look better as well. Celio, whose joint-venture with Kishore Biyani’s Future Group is called Celios Future Fashions, has got clearance from the Foreign Investment Promotion Board (FIPB) to increase its India stake to 100 per cent in July this year. Celio has already increased stake in the JV to 65 per cent.

It is planning to increase the count of both its standalone stores and shop-in-shops, stationed at multi-brand retail chains (please see box).

"Our aim is to expand this presence and make the brand more accessible to customers. Along with the major metropolitan cities, we aim to grow stores in tier II cities as well," says Rajiv Nair, chief executive, Celio Future Fashions.

CELIO IN INDIA – JV WITH THE FUTURE GROUP

  • Currently has 38 stores, plans to take it to 52 by 2014
  • Has 120 shop-in-shops, plans to take it to 140
  • Has 17 per cent like-to-like growth, plans to take it to 25 per cent
  • Gets FIPB clearance for 100 per cent stake in Indian business

CELIO WORLDWIDE

  • Set up in 1985, has 1,000 stores worldwide; euro 500-mn brand (Rs 4,210 crore)

Not just footprint, Celio is also looking to refurbish its store design to bring them at par with its global presence. It has brought its design concept played out in its Via Del Corso (Rome) and Champs Elysees (Paris) signature outlets to India. So far, two standalone stores and one shop-in-shop have been redone. Nair says that the brand will look to upgrade the overall look to offer the same experience across the world.

The concept stores integrate technology and contemporary chic fixtures. The open and flexible layout and subtle colour scheme are geared to exude a premium feel.

Celio’s plans echo that of Britain’s apparel retailer Marks & Spencer (M&S), which plans to make India its largest market outside its home market and more than double its store count.

Its JV with Mukesh Ambani’s Reliance Industries, is looking to open large flagship stores in metros and supporting stores in neighbouring locations. It has already opened its new concept store in Bandra, Mumbai’s tony suburb.

Celio, however, will face a few challenges as it moves towards becoming the solo owner, say consultants.

"Any brand which is going direct has to connect with Indian realities, both on the customer and business side. Cultural, language and legal frameworks are different," says Devangshu Dutta, chief executive of retail consultancy, Third Eyesight.

Adds Dutta: "The brand has to build both explicit and implicit infrastructure, apart from investing capital. Yet, for a customer it does not make any difference whether a brand is with an Indian partner or not."

According to sources, Future Group provides strategic inputs such as market and product know-how, vendor negotiations and distribution clout to the JV. Celio would have to manage all of this on its own when it forges out on its own.

But an executive in the JV defends Celio’s decision, saying that the French brand has a full-fledged team in India and has sufficient expertise in all areas such as designing, sourcing and marketing.

Like M&S, Celio is increasingly sourcing more from India. In its summer-2014 merchandise, the brand has sourced 53 per cent of its requirement from India.

"This is a crucial step as it also helps us be flexible to respond to the market needs and helps us de-risk the dollar price movements," Celio’s Nair says.

To differentiate, Celio is also looking to underline the simultaneous launches of its collections globally. "We are a very strong product-driven brand with major design capabilities in Paris and a strong sourcing office in Hong Kong, which enable us to bring the same product range (and at the same time) to over 70 countries. So, we offer the same range to the customers in India as we do in Paris, with minor adaptations on account of fits, colors and seasonality," Nair says.

Third Eyesight’s Dutta says that local sourcing helps overseas brands to lower prices as they can by-pass import duties and logistic costs, and helps them with India-specific ranges.

Celio is close to EBITDA (earnings before interest, tax, depreciation and ammortisation)-level break-even at its stores and is expecting at company-level profitability soon.

" We have grown 17 per cent like- to-like this year in our own exclusive stores and we aim at a 25 per cent growth next year," says Nair.

But the question is whether it sustainable as the economy weathers a prolonged slowdown and brands such as Arrow, Van Heusen, Louise Philippe rule the segment or not.

But Nair is unfazed. He says that Celio is one of few only-menswear brands which offers a full wardrobe and has design capability to match. "We are competitive in markets like France, Italy, Spain, eastern Europe where the competition is even more intense," Nair says.

(Sourced from Business Standard.)

Is M&S ready to make its mark on India?

Leonie Barrie, just-style.com

November 15, 2013

Marks & Spencer has so far failed to make much of a dent in the Indian clothing sector since it first stepped into the country in 2001. It currently operates 36 stores in there since forming a joint venture with local conglomerate Reliance Retail in 2008.

But it’s easy to see why India appeals.

The Indian apparel and footwear market is valued at US$51bn and is the third-largest market in Asia-Pacific following China and Japan, according to data supplied to just-style by market research company Euromonitor International.

With a compound annual growth rate (CAGR) of 7.6% from 2012-2017, India is set to be one of the fastest growing markets globally – and by 2017 it is expected to have overtaken European markets such as Italy and France, with sales forecast to reach US$73bn.

"There is general consensus that India is an attractive market for new investment, especially for the world’s leading fast-fashion retailers," explains Magdalena Kondej, head of apparel research at Euromonitor.

International player

Shifting its focus from being a British retailer to an international player comes at a time when M&S is struggling in its efforts to stem a decline in its domestic clothing sales.

Earlier this month the company recorded its ninth consecutive quarterly drop in like-for-like general merchandise sales in the UK – which includes clothing and footwear – despite the much-publicised re-launch of its autumn/winter women’s wear ranges in September.

M&S, which currently has more than 770 stores in the UK and over 430 across Europe, the Middle East and Asia, plans to expand its store count in India from 36 to around 80 by 2016.

India is already its fastest-growing market in Asia – and the move to grow its store count there is a realistic one, experts say. But they also question whether India should be its top priority.

"Looking at per capita spending, an average consumer in India spends US$41 on apparel and footwear compared to US$200 in China and almost US$300 in Brazil," Kondej explains.

"Although the demand for international brands is there, it will take a while for both disposable incomes and consumer spending to catch up with other emerging markets. This immediately makes India a more challenging market to operate in."

She also highlights the state of modern retail development in India among the other hurdles it faces.

"Many recently opened shopping malls are currently struggling, and rents in Mumbai are one of the highest globally. Taking all this into consideration, it is quite surprising to see M&S putting India on top of their priority list," Kondej says.

Local sourcing

Plans by many international retailers to expand in India have been tempered by concerns about requirements to source 30% of their supplies locally. The Indian government imposed these conditions as part of efforts to open the sector up to foreign investment.

But sourcing locally has important benefits, allowing products to be tailored specifically for the Indian market "in terms of style [and] fit as well as to price points," according to Devangshu Dutta, chief executive of consumer products consulting firm Third Eyesight.

"A supply chain dependent on imports raises costs even further, potentially pricing the brand out of the market," he says.

It’s a point also picked up by Kondej. "This is a big deal because – outside their production hubs – the world’s leading fast fashion retailers are heavily dependent on imported merchandise. Both H&M and Uniqlo are now understood to be deferring their first store openings [in India], blaming exchange rate volatility."

She notes: "Gap in India arguably has an advantage over its rivals in that the company already operates a large sourcing base there.

"Any brand planning to embark on a big store network expansion in India would be comparatively well insulated from the devaluation of the rupee if they had localised production as well. For one thing, it would help M&S in developing a more tailored (country-specific) retail strategy and for another, it would provide protection against exchange rate volatility."

M&S highlights its sourcing operation in India and South Asia as crucial its expansion plans. Currently, 33% of its general merchandise products sold around the globe are made in the region, whilst 64% of M&S products sold in India are sourced from local suppliers.

It also says sourcing locally has enabled it to "stretch the seasons," by offering products like linen clothing – of which it sells over half a million pieces every year in India, accounting for 15% of sales – all year round.

Correct positioning

To succeed in India’s apparel market, M&S must get its positioning right and communicate this clearly to the consumer – issues that, worryingly, it also seems to be struggling with at home.

"Does it want to be considered a premium/aspirational brand with a focus on high quality apparel, or an affordable brand for the family with attractive price/quality ratio, or does it want to compete with the likes of Zara in the fast fashion segment?" Euromonitor’s Kondej asks. "It seems like the second option would be the best way forward for M&S in India given its product range and India’s family-centric culture."

Dutta also points out the a direct investment arrangement, whether through a joint venture or a wholly owned subsidiary, "creates more commitment on the part of the brand and also allows it to steer the business with a longer-term approach in mind."

Indeed, he adds, since moving into a joint-venture with the Reliance group, "M&S has committed to investing in larger stores, and also tweaking the product mix to suit its reading of the upper middle income consumers in India.

"While it is feasible to grow the business significantly in India, it needs to create a balance between seeking volumes and maintaining its premium ‘international’ positioning."

(Sourced from just-style.com.)

Jockey: Thunder Down Under

Vishal Krishna, Businessworld

Bangalore, November 12, 2013

If the Rs 1,000-crore Page Industries, the Bangalore-based manufacturer and distributor of international innerwear brand Jockey is in the spotlight today, it’s because of a strategic move it made four years ago.

Sunder Genomal, managing director, Page Industries, introduced a women’s innerwear line, marking his entry into the $1.7-billion segment. He backed this up with a ramping up of Page Industries’ retail presence from 18,000 to 23,000 outlets over the next three years. The women’s range received a push-up, with over 100 styles on offer.

That appears to have paid off as the women’s range alone contributes 25 per cent to the company’s topline. Interestingly, about 45 per cent of the company’s sales comes from tier-3 cities. And that requires greater reach and availability of products on demand. To cater to this, Genomal reached out to some of India’s biggest e-tailers. Though e-tail sales — largely through Myntra, Jabong and Shoppers Stop — comprise less than 1 per cent of Page Industries’ revenues, they help tackle the bigger issue of customer dissonance with the brand when it’s not available despite the consumer’s ability to pay.

Page Industries was set up two decades ago with the purpose of manufacturing and distributing Jockey products in India. In the boardroom, you cannot but notice that the walls are lined with awards. Most are for best manufacturing and retail practices, but there is one award that stands out. Amid catalogues of the latest lingerie collections, there stands a large silver trophy in the shape of briefs. It is in recognition of Page Industries’ excellence in design and style.

In 20 years, Genomal has managed to make the brand synonymous with premium innerwear and has gone on to garner a marketshare of some 5 per cent. Leaders Maxwell Industries (VIP) and Rupa each enjoy a 15 per cent share of the organised innerwear market.

However, the Indian market continues to be dominated by the unorganised segment. The lower and mid-market segments form 86 per cent of the industry. According to Technopak, a retail consultancy, the size of the innerwear market in India is $2.9 billion; the category is also growing at a compound annual growth rate (CAGR) of 12 per cent and is expected to reach $5.1 billion by 2017.

“Corporate governance makes a company successful in the long run for both the promoters and the management,” says 58-year-old Genomal. He adds that a lot of his learnings were from his school days in the Philippines where his family held the franchise for the Jockey brand for five decades. “You need to create and maintain relationships if you are to be a long-term player. You need people who can also execute and believe in your vision,” he says.

In addition to Jockey, Page Industries is also the master franchisee of Speedo, a swimwear brand, with 12 stores across the country. It is also available through 730 retailers. Rival Maxwell Industries currently has over 110,000 distributors and sells through 550 retail outlets.

“Jockey has been a sought-after brand because of its style, fit, its representation of a young urban India and, most importantly, for being an aspirational brand,” says Devangshu Dutta, CEO of Third Eyesight, a retail consultancy.

Genomal has emerged number one in BW | Businessworld’s rankings of the Most ‘Value’able CEOs in the small companies (Rs 500 crore-Rs 1,499 crore) category largely on account of his modest compensation package of Rs 1.1 crore. He has achieved a 101 per cent CAGR on sales over two years. His closest competitor, P. Kaniappan of Wabco India, an automobile ancillary, has delivered around 47 per cent CAGR. However, Genomal is modest: “There are so many inputs like employee relations in the corporate structure that cannot be put down in numbers.”

“My goal as a leader is to ensure an environment and a culture founded on mutual respect, where everyone’s contribution is important, regardless of the rank or type of job,” he adds. The MD says such an environment instills a sense of bonding and belonging, not just as employees but as members of a family.

Finally, for Genomal, it boils down to passion. He loves golf and his BMW, but they aren’t the sole drivers for him aspiring to be the best. He got into the game to create an industry that stands the test of time.

(Sourced from Businessworld issue dated 2 December 2013.)

Marks & Spencer plans to open 44 more stores in India by 2016

Zahra Khan, Sapna Agarwal, MINT

Mumbai, November 12, 2013

Marks & Spencer (M&S) on Monday said it expects to have 80 stores in India by 2016, making the country the largest international market by stores outside of the UK.

Marc Bolland, chief executive of London-based Marks and Spencer Group Plc, said India is the retailer’s new “priority market” and a “key sourcing hub”.

“We also want to expand to attractive tier-II cities like Surat and Kanpur, and aim for more than 80 stores by 2016,” he said in an interview, adding, “China used to be the priority international market, but now that has changed.” The company declined to give details of its investments plans.

The company runs its business in India through a 51:49 joint venture with Reliance Retail, owned by Mukesh Ambani’s Reliance Industries Ltd, called Marks & Spencer Reliance India Pvt. Ltd.

M&S said it will continue to work closely with its Indian partner and does not plan to invest directly in the country. India last year allowed 100% foreign direct investment in single-brand retail. “Sometimes, cooperations can be difficult, but this one (Reliance Retail) has been a great partner,” said Bolland.

The company said its India sales were up 28% in the first half of fiscal 2014, with double-digit growth across all stores. Apart from its growing store presence in the country, M&S has given a push to its local sourcing operations as well. Bolland did not disclose the revenue generated by the Indian subsidiary, but said going forward “the financial contribution will be much higher”.

M&S competes with local retailers such as Shoppers Stop Ltd and Dubai-based Landmark Group that runs the Lifestyle chain of stores. It also competes with stand-alone brands Benetton India Pvt. Ltd and Tommy Hilfiger (the latter is present in India through a joint venture with Ahmedabad-based Arvind Ltd). Japan’s Uniqlo and Sweden’s H&M are in the process of opening stores in the country.

M&S has always been aggressive about the Indian market and moved from a franchisee model to the joint venture model in 2008. In 2008, the British department store chain outlined plans to set up at least 50 stores in India by 2013, a target it could not meet, mainly because of an economic slowdown. Currently, M&S has 36 stores in India.

“We don’t focus on quantity, but on quality; we always look for good placing of our stores…and this time our strategy for India is different than it was three years ago,” said Bolland.

Devangshu Dutta, chief executive at Third Eyesight, a retail consulting firm, said M&S started cautiously in India with a franchise model, but moved to the joint venture as it considers India a key market. Over the years, the retailer has increased its India sourcing for domestic and global markets, and has lowered prices and widened the range of offerings to appeal to a larger number of consumers in India, Dutta said. As such, both Reliance and M&S have deep pockets and they can make the commitment to grow, he added.

M&S recently opened a flagship store in suburban Mumbai, a 35,000 sq. ft outlet with over five floors. “We require bigger stores as we have a bigger catalogue, but we will also have more mid-sized stores going forward,” said Bolland.

“We have been cutting pricing, mainly backed by our sourcing capabilities, and have brought it down to mid-market level,” he said, adding, “33% of all M&S’s products sold around the globe are made in South Asia, while 64% of products sold in India are sourced from local suppliers”.

India’s organized apparel market accounts for $8 billion, or 20%, of the overall domestic apparel market, according to Technopak Advisors Pvt. Ltd, a retail consultancy. “Most department retail chains in India are expanding and opening five or more stores per year depending on availability of real estate,” said Abhishek Ranganathan, vice-president (retail, real estate, institutional equity research), PhillipCapital (India) Pvt. Ltd.

Shoppers Stop and Lifestyle are also expanding. Shoppers Stop has over 65 stores and plans to open 8-10 stores a year. Lifestyle, which has 45 stores, plans to open three-four stores this year, Kabir Lumba, managing director of the Landmark Group owned company, had said in a 1 September interview.

The Times of India newspaper, in a report in March, had said M&S planned to launch its food retail business as well in India.

(Sourced from MINT.)

India fizz to cola war: Pepsi to bring in $5.5b, Coke $5b

Meghna Maiti, KR Sudhaman, Financial Chronicle

Mumbai/New Delhi, November 11, 2013

PepsiCo and Coca-Cola are in a competition of another kind, both saying on Monday they would invest huge amounts in India. If they do come about as promised, investments amounting to a total of $10 billion will come in from the two cola giants by 2020.

Elections or no elections, PepsiCo’s India-born chairperson and CEO, Indra Nooyi, said the firm would invest $5.5 billion (Rs 33,000 crore) in India by 2020 to more than double its capacity here.

“We are not guided by elections. We are guided by the potential of India. We are not waiting for any election results. We are investing in India for its economic story,” Nooyi told reporters after her meeting with finance minister P Chidambaram.

The company has so far invested $2 billion in India since its entry in 1989. It said new investment would be made to strengthen its capability in various strategic areas, including innovation, manufacturing, infrastructure and agriculture. “The Rs 33,000 crore investment we are making is going to cover both food and beverages and we will more than double the capacity of our business over the next seven years,” Nooyi said.

Not to be left behind, Coca-Cola India said it planned $3 billion new investments in India till 2020 to further capture growth opportunities in fast-growing, non-alcoholic, ready-to-drink (NARTD) beverages. This would take Coca-Cola’s India investments between 2012 and 2020 to $5 billion, a company statement said.

“Achieving continued, sustainable and responsible growth in India is core to achieving our 2020 vision of doubling system reven­ues in this decade,” Muhtar Kent, chairman and CEO of Coca-Cola, said.

“Our ongoing investment in India is focused on delivering innovation, partnerships and a portfolio that enhances the consumer experience, ensures product affordability and builds brand loyalty to deliver long-term growth,” he said.

Devangshu Dutta, CEO of Third Eyesight, said, “India is a fairly strategic market for Pepsi since its focus on non-carbonated beverage and packaged food has gone up significantly.”

Alpana Parida, president of DY Works, a brand strategy and design firm, said, “Pepsi could look at launching its own new brands and acquiring outside brands to make a deeper entry in the Indian food market.”

As per Euromonitor, Coca-Cola enjoyed leadership position in carbonates in 2012, accounting for 60 per cent of the total value of sales. It maintained a strong position with two brands — Sprite and ThumsUp.

“Also, stronger distribution in the existing categories and entry in new markets in rural India helped the company retain its strong position,” Euromonitor said.

Pepsi is the only other significant player in carbonates with 36 per cent retail value share in 2012, according to Euromonitor.

Pepsi has 42 plants in India, including franchises. Nooyi said, “India is a country with huge potential and it remains an attractive, high-priority market for Pepsi. We’ve built a highly successful business in India over the course of many years and we believe we’ve only scratched the surface. This investment is PepsiCo’s vote of confidence in India’s future.”

For the company, India is the largest market. Pepsi will continue to expand the range of foods and beverages in its portfolio. In India it has eight brands that generate Rs 1,000 crore or more in annual retail sales — Pepsi, Lay’s, Kurkure, 7UP, Slice, Mirinda, Mountain Dew and Aquafina.

Apart from raising capacity, Pepsi will expand its selling and delivery infrastructure. It will also step up collaborative farming that the company claimed has benefited 24,000 Indian farmers. “Most importantly, our investments will be aligned with India’s interests,” Nooyi said.

Since entering India, Pepsi claims it has created opportunities for more than 200,000 people through direct or indirect employment and agriculture collaborations. It is estimated that the strategic initiative announced on Monday will add more than 100,000 additional employment opportunities.

On the other hand, Coca-Cola said it had already invested more than $2 billion in India since it re-entered the country in 1993. The fresh investments will raise the amount to $7 billion.

Coca-Cola India directly employs over 25,000 people and indirectly more than 1,50,000 people. The carbonates market is projected to grow at 10 per cent annually in terms of retail volume, according to Euromonitor.

Growth will be driven by rural areas, as urban areas are facing a degree of saturation, as well as shifting to healthier options, such as fruit/vegetable juice and bottled water. Companies are targeting rural areas to build share.

Coca-Cola has equ­ipped retail outlets in remote rural areas with solar coolers. Smaller pack sizes are driving sales in rural areas whereas PET bottles are pushing sales in urban areas.

Coca-Cola bought up Parle’s four big soft drink brands — ThumsUp, Limca, Gold Spot and Maaza — which gave the company an instant 60 per cent share of the Indian softdrinks market when Pepsi had less than 30 per cent.

(Sourced from Financial Chronicle .)

Big Bazaar ups its fashion sense

Raghavendra Kamath & Sayantani Kar, Business Standard
Mumbai, November 10, 2013

Shikhar Dhawan has often twirled his much-coveted handlebar moustache after his blazing international cricket performances. But he will now be seen flaunting his moustache in ads for Fashion at Big Bazaar (FBB), Kishore Biyani’s flagship clothing brand sold in his hypermarkets. The yet-to-be-launched promotional campaign for FBB’s winter collection replaces the earlier Desh badla, bhesh badlo (new attire for a new nation), featuring cricketer M S Dhoni and actor Asin.

The close-to-Rs 200 crore budget for FBB’s promotions would mean the audience will soon see a lot more of brand Dhawan in the next seven to eight days when the campaign is launched. What it also signals is Future Group’s designs on the apparel industry, after its Pantaloons venture.

After selling off the department store format to the the Aditya Birla Group, Kishore Biyani, Future Group’s promoter and group chief executive (CEO) now wants to drum up the credentials of his other apparel brands.

Other hypermarkets across India are stressing on their apparel merchandising, too, because of the comparative high margins, starting from a basic layout change by bringing apparels upfront at the stores. Fashion carries 40-50 per cent gross margins, while food and grocery 10-15 per cent.

Devangshu Dutta, CEO of Third Eyesight, says non-food items always add more margins than grocery and food items. However, clothing also brings with it the extra task of product development apart from the merchandising and stock planning that are common to food and non-food for the retailer. He explains, "Future Group has its roots in fashion and textiles, having started with Pantaloons. So, it is now looking to redevelop the front-end presence with such campaigns. It will also have an impact on how Big Bazaar will now look as fashion items would need a zanier space than what grocery calls for."

The new campaign is geared to achieve an image makeover for the brand, which Biyani expects to clock Rs 3,000 crore next year. Dhawan is seen inviting viewers for a makeover and a chance to feature with him in further ads, with the refrain: "My mooch (moustache), my style". Referring to H&M, the Swedish departmental store’s racy campaigns, Biyani says, "We are styling our campaigns on similar lines with edgy shots and ambassadors with an attitude. If H&M has (UK footballer David) Beckham, we have Shikhar Dhawan."

Abneesh Roy, associate director, institutional equities, research, Edelweiss Securities, says, "Biyani sold Pantaloons because of the stress on the company. Pantaloons had EBITDA (earnings before interest, taxes, depreciation and amortisation) margins of 13-14 per cent. That must have given him confidence in building the next big brand. But the question is how many years it will take him to build the next Pantaloon despite investing heavily in advertising, given the market slowdown and a competition more intense than the time Pantaloon was launched."

But unlike in the past, Future Group has access to scale, as Biyani points out, in both retail outlets and the supply chain. Sourcing from multiple suppliers across Tirupur, Jaipur, Ahmedabad, Delhi, among others, with 29 designers on board and a lean supply chain (a national distribution centre at Nagpur has cut supply chain and transport costs by 20 to 40 per cent and inventory by half, say group executives). Biyani insists that the scale would be an entry-barrier for others to replicating FBB’s strengths. The retail reach would span all of

Big Bazaar’s stores and 30 standalone FBB outlets. "Hypermarkets/supermarkets have 10 to 15 per cent sales coming from fashion but Big Bazaar gets 35 per cent of sales from fashion," Biyani says.

While the communication for FBB would be aspirational, a la departmental stores, the ground play would see a lot more stress on volume sale. The selling strategy would be as much about the price points as about the looks its new spate of ambassadors will sport. Apart from Dhawan who will make eight to nine appearances for the brand and feature in national campaigns over the next couple of years, the brand will focus on regional celebrities, like actor Jeet in a campaign leading to this year’s Durga Puja in Kolkata. Print ads would carry the prices for the items of clothing that Dhawan and company will be sporting.

"My idea is to sell a lot more under the FBB brand. Europeans buy fashion items eight to nine times a year and 11-12 items together but Indian buyers buy three to four times a year and two-three pieces. The real challenge is how to make people pick up eight pieces instead of three pieces of clothing, which they are now doing at our stores," says Biyani, while pointing out FBB has a low-cost supply chain that ships in bulk as prices (beetween Rs 199 and Rs 999) are low and encourage cluster-buying. FBB is targetting selling 100 million pieces next year. Biyani plans to set up neighbourhood stores for more modular consumption of the brand, with such stores selling basic T-shirts, salwars, churidars and such for mix-and-match purchases in 4,000-5,000 sq ft stores. The group has already done some pilots in cities and is looking to open such stores soon. However, FBB will face stiff competition from Reliance Trends, Max of Dubai’s Landmark group and Megamart by Arvind who are aggressively expanding their footprint and wooing customers with offers.

(Sourced from Business Standard.)