Rasul Bailay & Shambhavi Anand, The Economic Times
New Delhi, 14 February 2017
Global marquee fashion and lifestyle brands such as Gap, Zara and The Body Shop are resorting to price cuts to stay competitive and increase their market share in the price-sensitive Indian market.
UK’s cosmetic brand The Body Shop slashed prices across categories in India by 20-30% on Friday while US fashion brand Gap is looking to bring down prices of certain products by 10-15% by allowing its India franchisee Arvind Lifestyle Brands to manufacture them locally.
Arvind will produce 30-40% Gap merchandise in India to be sold here, said J Suresh, chief executive at Arvind Lifestyle Brands. “The process has started and we will introduce them in springsummer 2018,” he said.
Spanish brand Zara, the market leader in fast fashion, too is looking at slashing its prices to bring them closer to Swedish rival H&M, said two people familiar with the matter.
Experts say price cut is one of the most effective ways to increase sales and market share in a price-sensitive market like India, particularly in highly competitive and fast-growing segments such as branded apparels and beauty products.
“Most brands strategically lower prices for the value conscious Indian consumer,” said Devangshu Dutta, chief executive at retail consultancy firm Third Eyesight. “In most cases prices are reduced to drive the demand further,” he said.
Gap currently imports all its merchandise into India and its products are about 40-50% more expensive than those of rivals Zara and H&M. Local production will help it bring down prices and compete better with the two faster-growing rivals.
Suresh of Arvind Lifestyle Brands said his company had an agreement with Gap to produce in India since May 2015 when they entered India, but was waiting for attaining a “minimum quantity” to produce here.
Gap has been struggling to keep pace with Zara and H&M in the Indian market. According to business head of a prominent mall in Delhi that has all the three brands, Gap’s sales are at times less than half of sales of Zara and H&M.
A Gap spokesperson in San Francisco said, “We tailor sourcing strategies as appropriate for the markets and channels we operate in to enable competitive positioning.” A Zara spokesperson declined to comment on a specific query about any price cuts in the near future.
The Inditex-owned fashion brand had reduced prices by up 15% when H&M entered the Indian market in October 2015 with its global strategy of aggressive pricing. The move helped record a 17% sales growth during FY16, though that was its slowest sales growth since opening its first store in the country in 2010. Zara posted sales of Rs 842.5 crore during FY16.
Shriti Malhotra, chief operating officer at The Body Shop India, said the price cut will make its products more accessible to consumers. “Lower prices of our best sellers will bring affordable cruelty free beauty closer to diverse consumers across age groups and geographies, recruiting new fans along the way and strongly reinforcing our philosophy of beauty beyond boundaries,” she said.
Price correction is a tried and tested strategy to revive sales in India.
In September 2015, when Arvind Lifestyle Brands took over the business of beauty and wellness retailer Sephora from former franchisee DLF Brands, the first thing it did was a price correction. “We looked at pricing in Dubai and Singapore and we kept it in the band of 5-10% lower than that,” said Vivek Bali, chief executive of Sephora in India.
The company still does small tweaking of prices here and there on slow moving products.
(Published in The Economic Times)