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