admin
September 23, 2019
Realising that sourcing within India helps cut costs, Uniqlo established an office in Bengaluru in 2016 to identify and work with partner factories in India. The company currently procures cotton fibre from India, as a result.
Written By Venkata Susmita Biswas
The Indian retail landscape is abuzz with East Asian retailers. The likes of China-headquartered retailer Miniso, Korean lifestyle brand Ximiso, and Japanese retailer of household and consumer goods, Muji — all known to be low-cost retailers — have set foot in India to grow their businesses. Besides, Japanese apparel retailer Uniqlo, known to make functional clothing, is set to open its first offline store in India in October.
However, carrying forth the mass-market and low-cost positioning from their home countries to India — a $670 billion retail market — will be a challenge for these brands.
Priced to entice?
Muji which prides itself on being “lower priced for a reason” is hardly a low-cost brand by Indian standards. For instance, a 24-sheet notepad at Muji costs around Rs 100, while a pair of ankle-length socks costs Rs 390.Uniqlo, which has a mid-market positioning in Japan, has priced its most basic t-shirts in the range of Rs 990-1,990. It is worth noting that a basic t-shirt from Uniqlo costs ¥990-1990 in Japan (Rs 658-1,323). In comparison, t-shirts at H&M and Zara start at Rs 399 and Rs 450, respectively.
Devangshu Dutta, chief executive, Third Eyesight, says that any international fashion brand tends to have a premium tinge in India even if it is a mass/mid-market brand in its home country. “In addition to perception, there are multiple reasons for this. Average household incomes in India are far lower than those in markets like Europe. Therefore, even maintaining price parity of products leads to international mass/mid-market brands turning into premium brands in the Indian market. Furthermore, sourcing from outside India and having local partners, too, drive prices up.”
Miniso and Ximiso sell everything from nail paints and earphones to stuffed toys and bento boxes, and are similar to dollar stores or the Japanese 100 Yen stores. According to Rajat Wahi, partner, Deloitte Consulting India, these retailers are addressing an untapped market in India. “They offer a host of products in the range of Rs 100-500, similar to the neighbourhood kirana and stationery stores, but in a better retail environment. This is a real sweet spot for retailers in India who want to scale up volumes,” he adds.
However, offering value for money is critical when selling such products. Tyrone Li, India head, Miniso, says that the retailer maintains its global positioning of being a “budget brand” in India, with an aim to make high quality designer products available to the masses. Miniso’s highest selling products in India are cosmetics and nail paints. Nail paints at the store cost Rs 190, while the average price of Miniso products is approximately Rs 280.
When in India…
Wahi believes that retailers that position themselves as prestige or even masstige brands will take longer to scale up here.
Functioning in a price-conscious market like India has driven each of these retailers to tweak their businesses. Muji reduced prices of more than 450 items across departments while launching its India operations. “We made our supply chain more effective, reduced a few unnecessary costs that did not add value to the products or customer experience, and optimised operational costs,” says a Muji spokesperson.
Dutta says improving pricing flexibility and introducing India-specific products that have better margins will in turn drive better engagement. This explains why Uniqlo, which competes with foreign retailers like H&M and Zara, has introduced a premium cotton kurta collection to not just adapt to India, but also differentiate itself from competitors.
Realising that sourcing within India helps cut costs, Uniqlo established an office in Bengaluru in 2016 to identify and work with partner factories in India. The company currently procures cotton fibre from India, as a result.
Meanwhile, Miniso has a more hands-on approach. Based on feedback from a consumer, the retail chain lowered the price of a product by making amends to its supply chain. The retailer is also consciously expanding its presence beyond malls. “While the mall culture is booming in India, it is still not the most accessed place by Indian shoppers,” Li reasons.
Source: financialexpress
