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August 23, 2010
Daily
News & Analysis (DNA)
Mumbai,
23 August 2010
Shailaja
Sharma
Back then, the sales were a much-awaited annual affair. Today, discount sales run all year round. Modern retail appears to be learning its lesson on right-pricing the hard way – the Indian consumer will go where the value is.
In other words, those who decide against taking a direct correction by bringing down prices to realistic levels, have to take an indirect cut through frequent discount sales.
"Retailers whose prices did not match with the requirements of consumers have experienced that their highly-priced products may not sell too much," Lalit Agarwal, chairman and managing director of Delhi-based hypermarket company, V Mart Retail said.
So, while the last year saw retailers prepone festival sales or run them for extended periods to be able to clear the inventory, this year is witnessing an increasing number of discount sales.
This year too, most brands went on sale before the usual July 15 timeline. Most stores are still stocking more discounted items than fresh merchandise.
The trend of extending sale period is prominent mostly with retailers who are in the business of apparel and footwear, said Govind Shrikhande, customer care associate and managing director, Shoppers Stop.
"If we have a 17-day sale, we stick to it and have tried to avoid over-discounting for sure, but some stores, instead of doing the usual two week sale, are keeping it on to almost five-six weeks of sale," Shrikhande said.
The last two years have been unusual from the point of view of the expectation versus the achieved space. Where in 2005 most brands started on an expansion spree, the beginning of 2008 effects of slowdown started creeping in.
"So while the companies were opening stores, the sales they were expecting were not achieved. And as the consumer spending became conservative, a lot of companies either scaled back their expansion plans or they shut down stores. So there was a lot of inventory in the pipeline, which was there for the planned growth that never happened. And that to a certain extent created a further dependence on discount sales," said Devangshu Dutta, chief executive officer of retail consulting firm Third Eyesight.
This has led to a seemingly irreversible trend of unending discount sales by major retailers across categories, which is spoiling the consumer, say analysts.
"Last year the discounts were much higher and for longer. Retailers rushed to cut each other’s throat in competition to see who goes on sale first," said a sector analyst who did not wish to be named.
Apart from the usual Spring-Summer and Autumn-Winter discount periods, retailers are increasingly bundling occasions like Mother’s Day, Rakshabandhan, Valentine’s Day and Independence Day, Kumar Rajagopalan, chief executive officer of the Retailers Association of India pointed out.
"Each retailer wants more market share than the other, and to grab the market share, they discount more," Shrikhande said.
Retailers are trying their best to woo customers to walk in to the stores and buy.
"Retailers are seeing lot more competition and also, propensity to spend for consumer is increasing and that is why retailers are trying to get deeper share in consumer wallets," Rajagopalan said.
And customers wait for the time when brands offer the highest discounts, Agarwal said. "Consumers are getting smarter and are willing to delay their purchases to discount periods," he said.
Dutta said that retail in India was still over-priced as western counterparts pay half for the same products.
"The fundamental issue of right-pricing has to be addressed and till that happens discounts will be present in the market. We have an issue with pricing, and modern retail here becomes just more apparent. Unfortunately, over the last few years because of ongoing discounts there is an expectation that has crept into consumers’ minds," Dutta said.
Retailers order goods or inventory basis the sales targets they have and the current scenario in retail is that of surplus inventory that retailers are sitting on.
Last year, British skin care company, The Body Shop slashed its prices in India by 10-30% in order to become a ‘right-priced’ brand for Indians. There are other apparel brands that are perennially on sale.
(This article originally appeared in the Mumbai edition of
DNA on August 23, 2010: click
here to read on DNA)
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August 8, 2010
BUSINESS INDIA
Suman Tarafdar
26 July – 8 August 2010
Paris Couture Week, arguably the world’s most prestigious fashion event, has just got over. The headlines haven’t been kind, pointing out that the Week has been dying a slow death over the past two decades, as clients move away from the ensembles showcased at the event. An epitome of customised luxury in its heyday in the decade following World War II, the event has increasingly become a place for corporate showcasing of logo-encrusted products as falling revenues have forced many a couturier to focus on the less prestigious, but far more financially lucrative, prêt-a-porter.
This is precisely the time that Indian fashion has chosen to highlight its version of couture by starting not one, but two couture weeks, making Mumbai and now Delhi only the third and fourth cities in the world to have couture weeks after Paris and New York. Almost concurrent to the recent couture week in Delhi was the Tarun Tahiliani Bridal Couture Exposition. What makes the Indian ‘fash frat’ so confident, especially as most openly admit that they are not as good as their western counterparts in prêt and have anyway missed that bus as brands such as Mango, Tommy Hilfiger, FCUK, Promod, Benetton and, of late, Zara look to capture a major share of the Indian market?
Indian fashion, that oxymoron of a term, is having as busy a time as it ever has. While leading Indian designers stake their claim sporadically to global red carpets and irregular clients, new designers are jostling for space on the runways, even as the number of weeks has increased manifold over the past two years till, as some point out, it makes little sense. Critics have dubbed last fortnight’s Couture Week organised by the Fashion Design Council of India (FDCI) in Delhi as more of a ‘bridal’ week, given the preponderance of wedding and related occasion wear therein. "The purpose of the weeks is not crystal clear," says Puneet Nanda, design head, Satya Paul label, part of Genesis Colors. "We are not, as a fraternity, booking orders six months in advance."
Indian signature
Defining Indian couture is not the easiest of jobs either. "Couture consists of masterpieces created out of the best quality fabrics, intricate embroidery and detailing, which is time-consuming is done to perfection and the Indian touch is omnipresent," explains Pradeep Hirani of Kimaya, a couture retail chain, refuting allegations that it is limited to wedding costumes. "Indian couture today is exploiting the avant garde classicism of the past and infusing a contemporary twist to it, thus displaying a spectacular fashion panorama, which not only echoes the intrinsic charms of the land, but is also a pleasure to beholders."
Designer Anju Modi points to historical wealth of couture in India – zari, zardozi, chikankari and many others made specially, for erstwhile royals. Fellow designer Ritu Kumar explains that India has always had a tradition of made-to-order, and events such as couture weeks will help it get more formalised. She admits that while couture is struggling in the West, as Indians live larger than life and want to celebrate it, couture has a brighter future here.
Designer J.J. Valaya, known for his opulence of presentation, says that Indian couture has carved a distinct identity for itself and should be recognised as such, stressing on its bespoke nature. "Couture is not that much of a business proposition as it is about the romance of it. Each ensemble is a masterpiece, which sets the trend for the less elaborate collections to the season."
Valaya, however, says it is increasingly becoming a loosely used word like luxury. "Everybody does great jackets," he points out, "but only those eight or nine selected names count as couturiers. Indians who aspire to be couturiers should be able to work within the ‘Indian signature’," he stresses. Modi agrees, saying that Indians are still colonised in their mindsets. "Our couture could be global only if we stick to our core design aesthetics." Prices apparently do not matter but a starting point of a lakh is what most agree on.
Designer Jaya Rathore, one of the installation designers – among the seven of the 19 participating designers, who was not on the ramp, but had an installation in the Delhi Couture Week – stresses that the most important facet of a couture collection should be its selectiveness. "The garments should be a limited edition," she says, pointing out that the demand for couture will always be there. Sunil Sethi, president, FDCI, points out that an unbelievable 57 designers applied for the Pearls Couture week. "Even globally, there are just a handful of couture houses," he says (see box). He stresses that it would be a mistake to measure Indian couture with Parisian yardsticks, as Indian couture and fashion are still in their infancy. "Many started as mom-andpop stores," he says, pointing out instead to the enormous talent that these designers possess.
Volume woes
Worthy words, but even those optimistic about the future of Indian
fashion admit that, despite its deep roots in diverse local textile,
fabric and embroidery traditions, it is failing to live up to
its potential and make its mark on the global fashion arena beyond
the Middle East. While no data is available, experts estimate
the top end of this sector the designers’ labels – to be collectively
worth just Rs300-500 crore.
Indian couture represents the top end of the fashion scale, and
also perhaps exemplifies its frailties.
"There is no estimate of the sector’s size," admits Sethi, who points out that few designers are willing to share their sales figures. FDCI’S plan to commission a study to understand the sector in India, which has been in cold storage for over half a decade now, even as internecine rivalry and multiplying weeks have ensured that "FDCI has become a joke," says Modi, decrying the insecurity associated with many of her colleagues.
KPMG did a study on the sector in 2003, along with FDCI and predicted the sector’s net worth in a decade would be about Rs.1,000 crore. Nearing the deadline, not even the most optimistic cite that figure. The Indian designer markH is a measly 0.3 per cent of the total branded apparel market, says Hirani, who estimates an annual growth of 15 per cent with East Asia, the UAE and Europe have large consumption of Indian designer wear.
That couture is crucial is uncontested. "Couture is experimental, and allows a designer to design free of the usual considerations," says Rathore. Fellow designer Raakesh Agarvwal says, a couture collection is more of a personal collection. Couture establishes the designer’s brand, which can then be used to develop prêt lines, which provide the volumes and profits. A distinct brand can then attract capital, helping the brand grow further, a model widely followed globally. Therefore, there is also a certain amount of despair at the competing weeks that are currently on. What is also uncontested is the desire for Indians to don ethnic wear for occasions – be it a wedding, a birthday or even a party – a demand met almost wholly by Indian designers at the moment, but even here brands such as Armani and Canali have begun to make forays into the menswear market.
Valaya equates weddings to life blood of the sector. Indians need to marry more; multiple times perhaps. And attend weddings of as many people as they can. For that could be a service to the couturiers.
"Weddings are the main artery as 70-80 per cent of the sales are related to needs to grow them in India." Designer Pallavi Jaikishen puts it at an even higher estimate. "As much as 90 per cent of my couture sales are from weddings," she says.
Increasingly, especially after the recent economic downturn in the West, designers have been forced to look inwards into the domestic market. Sethi even says the main market is domestic, not international.
However, designers such as Valaya point out their international clients. "Eleven first families of the Middle East are my clients," he says. He launched the Alika jacket at the recent Week, which introduced a silhouette that will not change over the years – and something, he hopes, will become iconic over time.
His list of top Indian couturiers who, he estimates, sell about 75 per cent Indian couture include Tarun Tahiliani, Rohit Bal, Abu-Sandeep and Sabyasachi, besides himself.
The designer, who is opening a 10,000 sq ft store at Delhi’s MG Road later this season, is confident that the market for couture in India is as large as the ready-to-wear market, and says the super luxury business in India is thriving and operates at a rarefied level. Designer Gaurav Gupta points to his clients such as Priya and Cham Sachde\!: of the TSG group, who are ready to sport experimental gowns. His solution to growing Indian couture: send a designer to the Paris Couture Week.
Colour of bottomlines
This sector still needs to grow beyond its minuscule level in its modern avatar. Even with the obvious given that design is an extremely individual activity, the Indian fashion sector’s lack of organisation is beginning to affect its growth at this fairly nascent stage. "Fashion weeks have become less and less important even in India," says Dilip Kapur of Hidesign, who points out the almost complete absence of accessories, the staple of runways and healthy bottomlines for most global brands, at events such as fashion weeks.
The few attempted tieups with corporate houses, such as Manish Arora and Reebok, or Narendra Kumar and Banswara Syntex, have not been seen as successful, while Raymond’s venture with designers, Be: did not quite work out. Some designers have attempted creating an entire lifestyle brand a la their western counterparts, but those haven’t worked here either. Sethi says production tie-ups are on the cards, but admits that designers are often unwilling to let go of control over their labels. Agarvwal points out that abroad there are tie-ups with corporate houses for even couture collections, something still to happen here. "I would love a tie-up," he says.
"A certain amount of corporatisation has to happen," says Devangshu Dutta, chief executive, Third Eyesight, a consulting firm focussing on retail and consumer segments. He points out that, unlike in the West where even high end markets have significant volume, and is therefore possible for a designer to carve out a niche, but the Indian market is small. "Design is our strength, but we need to augment it with infrastructure, which if the government does not provide, will come from the private sector." He sees some movement, but says it could be much faster and needs co-ordination, which is missing.
Nanda feels the government has to recognise the sector as an industry and laments the fact few are taking the lead in this regard.
What has also been in question is the sponsorship at couture weeks. While the ones in Mumbai were sponsored by HDIL (Housing Development & Infrastructure Ltd), a listed real estate development company, the one in Delhi is sponsored by Pearls, a company dealing in real estate, hospitality, media and education. "We felt that associating with this industry will certainly give us brand recognition as well as our support for the best style statement, which is the ethics of all the businesses we are in," says Jyoti Narain, director and spokesperson, Pearls. The HDIL spokesperson had explained his company’s role almost identically.
Even the regular weeks are sponsored by Wills, Lakme and Van Heusen, "all of whom have certain demands," says a designer on condition of anonymity. Those in the fraternity bemoan such tie-ups as they dilute the core, they feel. "India’s weeks are sponsored," says Nanda, explaining that, if the shows are not supported, then the designer has to think about what he or she is presenting – a norm in global fashion. Though no figure is confirmed, it is estimated that a three year title sponsorship deal could cost about Rs 25 crore. Associate sponsorships are estimated to cost about Rs20-50 lakh.
So much priority did the French give to fashion that couturier Rose Bertin served as minister for fashion in the late 18th century. Even the more plebian-oriented Napoleon continued this office. India is to yet to grant even an industry status to fashion. Global evidence has amply shown that labels such as Dior or Pierre Cardin became global names after shifting to prêt. Given that many leading Indian designers do not even consider this option, the stress in couture is perhaps the only way ahead.
(To open a PDF copy of this interview, click here.)
admin
August 6, 2010
Reviewed by Devangshu Dutta
As I read through Arun Maira’s book, the month unfolded with a number of high-pitched disagreements around the world. In India, quotas and reservations were a hot topic, as was an apparent divergence between the Prime Minister and corporate chiefs on executive income and distribution of wealth. Self-appointed moral police disapproved the expressions of a student of art, while, elsewhere in the world, suicide bombers expressed disapproval of foreigners on their soil.
We are surely not the first to wonder why, after millennia of physiological evolution, societies around the world are still stuck in the same, predictable response: where disagreement (on an issue) translates into disapproval (of a person), more often than not leading to conflict that is frequently violent.
The need to accept differences and the use of democratic dialogue as a process to close the gap is the basis of Arun Maira’s Discordant Democrats. While the book is largely about democracy in India, Maira draws from events, personalities and initiatives around the world to make the case for democracy as the only reasonable mechanism to manage diversity in society, and dialogue as the only reasonable mechanism to sustain it.
This is embodied in a quotation that is commonly attributed to French philosopher Voltaire: “I disapprove of what you say, but I will defend to the death your right to say it.” In fact, Maira goes beyond free speech to the need for mass dialogue. While free speech typically stops at the “right to express different opinions”, dialogue is about the free “exchange” that can move people closer. Dialogue, unlike debate or argument, is not about sticking to one’s own point of view but about parties reaching a consensus through a process of mutual expression and understanding.
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When comparisons are made between Communist China and democratic India, democracy is presented as the millstone around the neck of India’s development. India has a demographic diversity that is among the highest in the world, and a body politic that is among the most fragmented. It is the disagreements among the various segments, interest and pressure groups that some people often hold up as the biggest hurdle to India’s economic and social progress. On the other hand, the advocates of “democracy in action”; may hold up noisy debate as the true expression of desires of individuals and small, otherwise powerless, groups. And there is little common ground between these two groups.
But, as Maira writes in the preface: “This book is about democracy and about consensus: two ideas that cannot but be associated with India. Indeed, one must wonder whether India could be one country without democracy or without consensus.”
Maira takes a middle path, in differentiating between the “hardware” and the “software” of democracy. He describes the hardware as the mechanisms that we are all familiar with — the Constitution, devolved institutions and the framework of free and fair elections, whereas the software is dialogue and deliberations. The democratic hardware enables the freedom of divergent expression. But it is the democratic software that enables a convergence to consensus and the emergence of a functional rather than dysfunctional society.
This is an important distinction when we examine the relative success or failure of countries that are all apparently democratic in structure. Most elections may be free and fair, but are the results later really representative of the electorate’s wishes? From what we can see around us, the hardware of democracy is robust, but there needs to be greater emphasis on the software.
Maira devotes the latter part of the book to tools that he calls Weapons of Mass Dialogue. Using topical and real-life instances of the dialogue mechanism being applied, he takes the reader through the steps of creating a common aspiration, exploring and identifying the thought anchors of the parties in the dialogue, framing the situation and then arriving at a solution.
As a comparison, the example of a Native American tribe comes to mind. To resolve conflict between members, the tribe follows a structure that requires a member to silently listen to the other’s views and then express that person’s views back to him until he or she concurs that the listener has completely understood what has been said. Only then does the first listener get the opportunity to express his own views, while the first speaker only listens and then reiterates what he or she has heard.
This mechanism may appear lengthy in most modern debates, but when we are dealing with issues as complex as the evolution of our cities or the uplift of disadvantaged castes and socio-economic classes, do we really have any other option?
Our genetic response to crisis is hard-wired from our days in the wild: fight or flight. While the latter is clearly “escape”, the former is also an “exit” because it shows an inability to deal with a discord to a mutually satisfying result. We need to expand this to a trinity of responses that includes “unite” – an integrative process that can help cope with the complex and interrelated world we live in.
There are few alternatives to dialogue. The tools may look contrived and slow to those championing the cause of “action”. But in a world where discordant democrats do not often listen to each other, Maira’s Weapons of Mass Dialogue are definitely worth a try.
EXCERPT:
We want action. And we want democracy. Sometimes,
in despair, when that speedy action is difficult in democracy,
he seemed willing to forsake democracy. But that is a cop-out.
We have to find a way to have both – speedier action and more
democracy. Once again, a very important “either-or” choice is
raising its head. We must convert it into a "both-and"
solution. As Einstein said, we cannot solve the difficult problems
that we face with the same thinking that led us into those problems.
Rather, we must look into the theories-in-use that are causing
the problem, and develop a new one. In this case, the problem
with our theory-in-use of how people can work together to resolve
problems that they are all part of. The call for an authority
above them, “insulated from the intense pressure of democracy”
– a dictator or expert that they would be willing to unquestioningly
delegate upwards to – is giving up on the further evolution of
humanity’s democratic enterprise.
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Published in BusinessWorld, 6 August 2007
admin
August 2, 2010
By Gouri Shah
MINT (Exclusive Partner The Wall Street Journal)
DELHI, 2 August 2008
Mumbai: It was close to midnight and the crowd wasn’t showing any signs of letting up. The DJ was still spinning fast paced music and finger food and non-alcoholic energy drinks kept coming. And the hosts weren’t complaining that the party was stretching into the wee hours.
That was because the "party", which kicked off at 10pm and lasted until 2am, was hosted by denim marketer Spykar Lifestyle Pvt. Ltd and had already generated three times the revenue that a similar sale by the company during normal day-time hours at the Bandra store in Mumbai.
The midnight-sale by Spykar -open only to invitees such as loyal customers, celebrities and media-has become one of the many retail innovations that stores are using to get more shoppers into their stores. And, much like a "happy hour" in a bar, retailers are offering steep discounts during such "off" hours or on certain days when foot traffic is normally slow.
Benetton stores, for instance, offered shoppers additional discounts if they shopped at different hours, such as starting at 7am or say between 9pm and 11pm. These kinds of sales are par for the course in many Western markets, especially in the US, where local laws are much more flexible on store hours.
They are only now starting to happen in India though, much more as a response to weak sales in a slowing economy or as sales gimmicks to attract media attention-such as this Mint story.
Many retailers, saddled with excessive inventory and caught flat-footed by optimistic sales forecasts, have had to launch early "end-of-season" sales this year and the more innovative ones are trying to stand out in that deep discount clutter.
From homegrown brands, such as Kala Niketan, to major retail chains, such as Shoppers Stop, Westside and Wills Lifestyle, loyal customers are often invited to have the pick of bargains, sizes and fits in select hours or sometimes a day ahead of a conventional sale. Promod, a fashion brand, was doling out croissants and coffee to its best customers who had been asked to check out a special sale preview.
"The idea was to break through the clutter," says Sanjay Vakharia, director-marketing,
Spykar. Surprised by the response, the company is now planning an all-India mid-night
sale each year. "Something that’s more like a carnival," says Vakharia.
Benetton, too, says it will turn the annual sale into a festival that the whole
family can enjoy. "We may consider letting out the space in front of our
stores to different vendors and create a festive mood which can be enjoyed and
experienced outside the store," says Sanjeev Mohanty, managing director,
Benetton India Pvt. Ltd.
He says the idea came to him when he saw a long line of customers waiting to enter a Benetton store in the Vasant Vihar neighbourhood of south Delhi at 2am. "It was crazy, the line was snaking around the store, and some people were sitting on their car and eating pizza while they waited for their family or friends," he recalled. Benetton racked up eight to 10 times more revenue than it does in a normal sale.
The plethora of discounts and sales stemmed from the April-May period that, according to Darshan Mehta, chief executive officer and managing director of Reliance Brands Pvt. Ltd, "has been the worst season ever for the apparel industry."
Even before the stock markets tanked and the economy started slowing, events such as the Indian Premier League cricket matches kept shoppers out of many malls in the evening and over weekends. Devangshu Dutta, CEO of New Delhi-based retail consulting company Third Eyesight, says apparel sales are also likely to suffer in a downturn.
"While there has been a growth in income over the last few years, the spending is now fragmented over more products and services. In a slow down, some of these such as apparel, eating out and entertainment are likely to get hit quicker. Basics such as food and groceries will get hit later," he said. "The discounting phenomenon will also be visible in businesses that have expanded substantially in the last few years, such as lifestyle, food and grocery chains, etc."
admin
July 29, 2010
By
Saumya Roy
FORBES
INDIA, Jul 29, 2010
Seema Kakkar has followed a simple routine for the past few weeks. At least once a day, without fail, she makes sure she pops over to her Mecca, a glittering new store that’s opened next to hers. As the entrepreneur who launched Remanika, a women’s wear brand, Kakkar has modeled her entire business concept on Zara, one of the most successful fashion retailers in the world, known for getting the latest designs into the market before anyone else. More than five weeks ago, Zara opened its first store in Delhi, followed soon by Mumbai. The Mumbai store in the Palladium mall is a few meters away from Kakkar’s shop-in-shop outlet inside Pantaloon department store in High Street Phoenix. The chance to observe Zara’s has proved hugely beneficial. "I wanted to be an Indian Zara, so this is like a school for me," says Kakkar.
Kakkar’s response isn’t surprising. Zara is indeed the Coca-Cola of the fashion world. Starting sometime in the mid-Seventies in Spain, Inditex, the Euro 11 billion (revenue) company that owns Zara and some other labels, built a hugely successful business model of taking the latest catwalk designs and converting them into affordable high street fashion in a matter of three weeks. Zara focuses on rapid product development and design and outsources the manufacture in small batch sizes to a network of dedicated suppliers. Its ability to bring changing fashion quickly to market has meant that while customers in Europe visit other fashion stores just three times a year, they visit Zara 17 times, according to one study.
Many entrepreneurs have tried imitating Zara, but none of them have been quite as successful. For most part, Inditex remains notoriously secretive. It attends very few industry conferences and is guarded in revealing too much about its business model.
Zara’s track record on globalization has been enviable. Its flexible, high-speed business model has traveled from Spain to 77 markets around the world, including China. It entered mainland China in 2006 and has close to 44 stores there. Pablo Isla, the 46-year-old chief executive of Inditex, is now betting big on India. In earlier media interactions, he has also made it known that it may well be among its most challenging market entries yet.
Zara’s global model will be tested in India on three counts. One, there aren’t too many seasonal variations. In most parts of the country, winter is non-existent or at best lasts barely a couple of months. So driving new fashions every season isn’t easy. Two, there is the cultural issue: Although the new mall culture is inducing buying habits to change, Indians still don’t change their wardrobe that quickly. And it is Zara’s ability to get customers to visit and buy several times a year that enables it to achieve scale. Three, as a concept, Western women’s wear is still catching on. For most part, traditional Indian wear tends to dominate the wardrobe. And there is a strong preference for bright colors as opposed to the limited color palette–black, white and browns–in the West.
So far, Zara has cranked out all its designs from a hub near Madrid and airlifted the finished product to its stores around the world twice a week. The added costs have been defrayed by charging a higher price in each of these foreign markets. In India, most foreign retailers have struggled to build a strong franchise based around import-led premium pricing strategy.
This is why Isla is clear that he isn’t hoping for a quick ramp-up in India. Apart from the two stores in Mumbai and Delhi, Zara will in all likelihood add two more stores in Delhi and Bangalore–and then learn from its experiments, before it begins expanding. A 2002 study says Zara follows what it calls an "oil stain" strategy. It means Zara opens its first few stores in a country to get an understanding of a market and then uses that knowledge as it expands into that market. "The most important thing for us to enter a new market is the existence of potential customers: People sensible to fashion phenomenon. And, in an operational sense, the availability of suitable locations," says Inditex’s official spokesperson via email.
Now let’s look at its initial performance. The fact is that Zara has had an opening few foreign brands have had in India. Through the opening weekend, there were long queues outside its trial rooms as women jostled to try out clothes. According to industry sources (Zara itself is famously reticent about sharing numbers), it had sales of close to Rs. 1.25 crore in the first weekend in Delhi and nearly the same in its Mumbai store. Delhi’s Select Citywalk mall recorded 40% more footfalls than it usually does and Mumbai’s Palladium mall recorded close to 30% higher footfalls.
"Any mall owner will want Zara now for free because it has an ability to bring more people of a certain kind into the mall," says Arjun Sharma, promoter of Delhi’s Select Citywalk mall.
"Their opening has been far beyond expectations," says Govind Shrikhande, chief executive of department store chain, Shoppers Stop. He credits the brand with opening up the premium women’s wear market in an unexpected way. Industry executives such as him pin Zara’s initial success to the fact that it faithfully brings its famously international brand appeal and experience without having the higher prices that foreign brands typically have in India on account of high duties.
At more than 16,000 sq ft, the stores look and feel exactly as they do internationally. The merchandise is also the same as is available in international stores currently, except that these stores have more of its "Basic" and casual wear collections rather than the higher end "Collection" clothes and accessories.
Industry sources say price points are mostly below its international competitors in India, including Mango, Guess, Esprit, and French Connection. They are also in line with Zara prices in other markets including Singapore, Dubai and some European markets. This has come as a surprise to customers because international brands have tended to price above Singapore and Dubai prices because Indian duties could add 30-40% on retail prices, while duties in these countries are much lower. Devangshu Dutta, managing director of Third Eyesight, a retail consultancy based in the capital, reckons that Inditex may be taking a long-term view of the Indian market and relying on strategic pricing.
The attention to detail was telling. Its shop windows were elegantly laid out and the shop attendants were well groomed and sophisticated. To keep its loyal customers hooked, the stores in Delhi and Mumbai had different merchandise every few days after it opened its doors. Store and mall staff worked through the night to replenish stores before their early opening at 10 a.m. To keep up this constant churn in merchandise, Zara stuck to its unique model of every store manager communicating their store needs to the design team in Spain. Accordingly, twice a week the design team flies down a consignment for every store.
However, the initial euphoria may not last forever. Pankaj Ghemawat, professor of global strategy at Spain’s IESE Business School, says it may be too early to judge how the stores will do over the longer term. In fact, expanding in Asia, and India, could force Inditex to confront some of the issues that face its centralized model that has brought it much success.
While designs are all made and shipped out of Spain, it is the interaction between store managers and designers that leads to some degree of localization in store merchandise. For instance, Asian stores may get smaller sizes and more cotton clothes than stores in Europe. But as the chain gets larger, this could prove harder to do and add expenses to Zara’s supply chain, says Kasra Ferdows, co-director of programs for global logistics at Georgetown University’s McDonough School of Business.
This is because clothes manufactured across the world, including India, Bangladesh, Sri Lanka, Turkey, Spain and Indonesia, are shipped to Spain and then sent to stores according to the specifications of the design team and store managers. This could well add to costs as Zara seeks to expand in Asia. At the end of fiscal year 2009, Zara had 1,608 stores worldwide, of which 219 stores were in Asia. More stores have opened since, but merchandise comes in from Spain. So, for instance, there are clothes in the Indian store that are made in India, Bangladesh and Sri Lanka, presumably shipped to Spain and then sent back to the store here.
Zara started expanding internationally with a store in Portugal, as early as 1980, to access larger markets and soon opened stores in New York and Paris to establish its positioning as a fashion forward retailer. It has expanded very quickly over the last more than a decade and India is the 77th country it is in. Still, more than 61% of its stores are in Europe, says Ghemawat, who has written a well known case study on Zara.
"If they are to make a serious play in the Asian market they will need a second hub there," he says. But given that the Spanish design team works with each store manager to localize the merchandise, moving the business model away from this will not be easy, he says. Although Inditex runs several labels, Zara contributed 63.8% of its Euro 11 billion revenues for the fiscal year 2009.
In fact, several international retailers, including Marks and Spencer and Benetton, have started to source Indian products for their Indian stores to meet Indian demand for quality and value as they see the potential for growth in the Indian market. "Supply is creating demand and the market is getting created for women’s Western wear now," says Shital Mehta, COO of premium men’s and women’s wear label, Van Heusen.
Even till a couple of years ago, there were few women’s Western wear brands. Technopak, a leading retail consulting firm, estimates that Western wear accounts for just Rs. 3,000 crore of the Rs. 49,000 crore women’s wear market, which includes ethnic wear, woollens, intimates, etc. But now, the entry of Indian and international brands is helping drive change. The segment is growing at a faster rate than the overall market. Van Heusen’s women’s wear sales growth has been double that of men’s wear in the last few months, albeit on a smaller base, he says.
Other international wear brands faltered earlier because either they were too expensive or the Indian franchisees did not invest in growing the brand, says Arvind Singhal, Technopak’s chief executive. He thinks Zara could well look at earning revenues of $500 million in India over the next 10 years or so. But to fully realize the potential of the Indian market, it may have to source locally. For that, Zara will need to have at least 100 stores in India, says Ferdows, who co-wrote another well-known case study of the Zara business model. "Otherwise it is too much of a hassle and expense for a few stores," he says.
Even as Zara settles in, the rest of the Indian fashion retail sector is hoping for an immediate rub-off. Third Eyesight’s Dutta reckons a lot of smaller players will now be encouraged to work harder, be more customer focused and look at things which they may have overlooked earlier.
On her part, Kakkar is hoping that Zara’s coming will create a market for different styles and more frequent shopping. In the past, whenever she tried to drive the market by offering several new styles, customers saw it as too experimental. But, she says, a brand such as Zara will make it acceptable to experiment and wear different styles. "I feel Indian customers want to experience great shopping and Zara will make people buy more." That’s something Isla would be hoping for too.
SIDEBAR: The quick change artist
Zara’s ability to quickly bring the latest designs to its stores rests on its unique business model.
1. Zara’s design team monitors fashion trends and store sales.
Based on this they come up with 1,000 designs a month.
2. They send these out for manufacturing around the world.
3. Completed designs are shipped back to Spain.
4. Local store managers in each country tell the Zara head office
in Spain what the store needs and how much.
5. The design team then flies or trucks out consignments for each
of Zara’s over 1,608 stores based on local needs and trends. A
store gets consignments twice a week.
Find this article in Forbes India Magazine of 30 July, 2010
