Devangshu Dutta
March 13, 2009
The Indian consumer market remains one of the most attractive and sustainable markets for international companies. It has even been described as a market of a lifetime by some, meaning that a brand can live through a whole lifecycle of decades if it launches in the market today. The last decade has made the Indian consumer even more visible and desirable to consumer goods companies from around the world.
So it is hardly surprising that many international food and beverage brands have entered the market in the last few years, either by appointing wholesalers as their distributors in the market or, occasionally, establishing a more direct presence through joint ventures or subsidiaries.
These companies have been helped along by the growth of modern retail chains. These offer a familiar sales environment to most of these companies who sell through supermarket and hypermarket chains in other countries.
However, the market presents international brands and their distributors with two challenges.
First, the question whether they should stick to only selling through the more “organised” retail chains. If they do so, they could focus commercially on a limited number of larger business accounts, and service them efficiently as they do the large retailers in other markets. It would also provide them – in the Indian context – an upmarket environment where the display and promotional means allow a more premium positioning.
However, even the largest store chain has a limited footprint, while India’s vibrant mom-and-pop retailers form a much larger platform and continue to reach out to a much larger market than the modern traders. So by focussing on the chain-stores alone, international brands would miss out on the majority of the Indian consumers who do not have a chain store near them, or choose to continue shopping at the traditional stores.
On the one hand you might think that it is logical to reach out to as many customers as quickly as possible. On the other hand, “foreign” equals “exotic” in the dictionary, which equals mysterious, interesting, glamorous and so on. So some of these brands actually benefit from maintaining an aura of exclusivity, and it helps if their distribution is limited.
This challenge, therefore, needs to be addressed by each company specifically, keeping its brand and business objectives in mind.
The second concern is more widespread and includes both the branded supplier as well as the retailer, whether chain-store or traditional mom-and-pop. It is a given that the international brand will share a store environment with local brands. Unless, of course, an international brand creates a separate exclusive branded store (easier to do in fashion and lifestyle products than in food and grocery), or it is only sold in stores which sell only foreign merchandise (of which there are very few).
So the second question is: in the shared retail environment, should the international brands be mingled with local brands and products, or should they be displayed apart from local brands? This question is relevant even if a brand is only present in the modern Indian supermarkets.
Prices of imported merchandise of international brands tend to be high, because the base price can be high to start with, and import duties and other costs push the price up further. So a popular option so far has been to bunch imported brands together at the retail store on one or a few shelves. The reasoning is that these are speciality products, expensive and with a limited consumer base. Shoppers who know about these brands will seek them out, and they are likely to also shop for other imported brands at the same time, so it makes sense to display them together.
Some brands are happy with this display strategy, because it makes a clear statement that their brand is a premium “exclusive” brand, and it prevents a one-to-one comparison with lower priced local competitors.
However, brands that want to be visible to a wider set of consumers would be unhappy with this arrangement. Their take would be that by bunching high priced merchandise together, the retailer is creating an area which becomes a dead zone that is avoided by most shoppers. Thus, a brand that could be otherwise sold to more consumers is forced to become a niche product due to the limited visibility.
Regular readers would know that our approach to creating or judging strategy is dogmatic only in one aspect: “to avoid the cookie cutter”. Whether you’re selling meat snacks, exotic meal packs, kettle chips or iceberg lettuce, multiple factors determine whether a particular international product should be segregated or displayed alongside local brands. And that strategy needs to be dynamic.
The first factor to consider is how familiar is the product itself to the customer frequenting the store. Let’s take an imported salsa as an example. In a location where the customers may not be familiar with Mexican cooking, it makes sense to not just display tortillas, salsa, sour cream and beans together, but also to offer samplers and give away recipes. While the salsa may be of an imported brand, the beans may be of an Indian brand, and the tortillas and cream may be from a local supplier.
In this case, where each component of the meal originated is less important than the fact that the complete meal needs to be presented together to the customer. Putting the imported salsa with other imported products when most of them may not be sure how to use it does not encourage customers to buy it.
In any case, as familiarity increases with time, the product may become more widely available, other international and national brands may also appear on the shelves, and segregation becomes a non-issue.
The tendency of the store’s consumer to compare and decide on the basis of price – as mentioned earlier – can also be an important factor. In some cases, the product may need to be insulated from this comparison, and placed in a defined area with other high-priced imported brands. In other cases, if the brand is strong enough to stand on its own, it could be placed in high-traffic locations with higher-volume lower-priced brands.
The overall store positioning and product mix have a very large role to play in the decision about segregation. If a supermarket has an upmarket catchment, and carries a higher proportion of premium products, intermingling may be the norm rather than an exception. The customer who is serving herself would probably find it most convenient to have the local and imported baked beans or olive oils displayed together. The price premium may even play to the imported brand’s advantage in such upmarket environments and catchments, conveying some form of qualitative superiority.
If a store has a wide enough assortment of imported products which are significantly higher priced than local variants, then it may make sense to do an “international corner”. But for this to work, the customer base must already be reasonably aware of the individual products being sold. The international corner also needs to be kept fresh, with new brands and new varieties of product to keep the foot traffic alive and the products moving. Even then, “packaged solutions” and demonstrations are needed to maintain visibility.
Let’s understand one fact – people adapt exotica into their consumption culture so deeply until it you can’t differentiate between the local and the international. Indian cuisine would be incomplete without potatoes, chillies and mangoes. However, the varieties of all three crops available in India today are reported to have been brought from the Americas and west Asia a few hundred years ago. Among companies, Colgate, Vicks, Horlicks and Bata are all international brands that Indian consumers commonly accept as their own.
Most international companies want to target the millions of Indian middle class households, but their pricing, distribution and retail strategy is too exclusive, conservative and totally contrary to this objective.
Our suggestion would be: go out as wide as you believe is appropriate, because being invisible does no good to the brand. Put your exotica within the reach of the consumer, alongside competing local products.
As long as you’re prepared to support the brand, and sustain efforts to encourage consumers to try the product, there would be a time when your brand is no longer treated as exotic. And that would be a good thing, if you’re looking for large numbers.
admin
June 10, 2008
The Third Eyesight Knowledge Series© comprises of workshops designed and developed to help functional heads, line managers and executives refresh and upgrade functional and product expertise.
The Soft Goods Series is specially focused at the Clothing, Textile and the Fashion Industry. Within this, the Textile Facts & Fabric Sourcing module is aimed at developing a working knowledge of fabrics commonly used by the apparel industry; identifying the domestic and international source markets for these textiles; understanding the costing of textiles based on the value add and finishing processes; and familiarizing participants with the common and varied end uses of these fabrics.
Dates: 4th & 5th July 2008
Duration: 10 a.m. to 5 p.m.
Venue: PHD Chamber of Commerce
August Kranti Marg, New Delhi.
Workshop Fee: Rs. 5,500 per participant (plus service tax)
Other modules in the Series cover topics related to Product Development, Supply Chain Management, Merchandise Buying and Planning, Business Communication and Fashion Brand Management. The workshops have been designed as an integrated series. However, each module is complete and self contained and participants have the flexibility to select independent modules based on their training requirement.
Participant profile: Production Managers and Coordinators, Merchandisers, Retail buyers and Product Developers, Buying House Merchandisers.
For further information please contact us at +91 (124) 4293478, 4030162.
Sharmila Katre
April 30, 2008
India has a rich tradition of textiles which dates back many centuries. The history of the Indian readymade garment industry, however, is very recent and can be traced back to the Second World War.
During the Second World War, as a contribution to the wartime needs of British rulers, clothing units for mass production were set up to manufacture military uniforms. With India’s independence in 1947, the industry stagnated as the policies of the Government were now diverted towards building a new nation. However, the industry began to expand after 1959 with the revision of the textile policy to allow the import of machinery for manufacturing.
The 1960s witnessed social shifts as a whole generation of young people questioned the very basis of their existence, and the hippie movement was born. Tired of their materialistic ‘man-made’ lifestyle, these young people began to seek answers in communing with all things natural, love and peace being the anthem. They began traveling, to explore, to seek the ancient philosophies of the East.
This voyage of discovery not only led to a change of lifestyle, but also the way they dressed. Natural fibres were rediscovered, and principally amongst them “Cotton”. India, with its natural abundance of this fibre, was an automatic choice of a supply source. Simultaneously, the growing settlement of Indian abroad led to a ready outlet for a variety of India merchandise and clothing textiles as an article of trade because of its growing demand.
This sudden demand for cotton garments resulted in the Indian industry growing by leaps and bounds in a very short period. Export of “High Fashion” garments from India started off with the cheap cotton kurtas and hand-block vegetable dye printed wrap-around skirts in cotton sheeting to meet the demands of the western youth.
Cashing in on the boom any and everybody got into the manufacture of clothing. The Government, realizing the potential of earning foreign exchange for the country, announced incentives and tax exemption for exporters. The fallout was an industry that grew in an unorganized manner and developed a reputation for producing low cost, low quality, volume merchandise.
The 1980s established that the industry was here to stay but, in terms of product profile, India still had not been able to move out of the lower end of the world market and continued to have an average unit value of under US$ 5.
The 1990s saw the industry make a conscious effort to shake off the image of being producers of cheap, low-quality merchandise with unreliable delivery schedules. The second generation had begun coming into the business, and contributed to reorganizing their firms for clearer structure and professionalism. Funds were ploughed back into the business with the emergence of large and modern production facilities. Even though most of the export houses were family-owned, trained professionals were inducted into the business for clear-cut departments and areas of functions. Consolidation and retention of business was the focus of the late nineties as the abolition of quotas planned for the new millennium became a reality.
The industry was euphoric but at the same time apprehensive of what the post quota era would bring. Many of the producers looking for a synergy in the business and also to sustain the large production facilities began tentative forays into domestic retail. The face of the Indian consumer was changing. Exposure to the western society via the electronic media helped in creating a ‘borderless’ world for lifestyle products, and contemporary fashion merchandise found a ready market in domestic retail.
The new global consumer over the years has evolved as a demanding and yet discerning individual. The novelty factor along with price and quality has become the watchword of the new millennium consumer. As consumers around the world change, so does the product strategy to keep consumer interests alive and ensure loyalty.
The new millennium has seen the emergence of the ‘Quick Response’ or ‘Real Time’ merchandising in fashion as a strategic solution to nurture, retain and grow the business. ‘Fast Fashion’ was born. Retailers could no longer work on the concept of two major retailing seasons with a couple of promotions thrown in. Product planning and the merchandise on the racks had to be constantly current and trendy.
Fast Fashion is not simply a solution to increase consumption by introducing greater product variety but a strategy to retain, consolidate and sustain the market through proactive product development and efficient product delivery to consumers, and thereby grow the market by increasing market share or developing new markets.
However, fast fashion has been tried and tested in different avatars through the years. In the 1960s and 1970s it was present in the quick reaction time of the unorganized sector to service the demand for block-printed ethnic clothing merchandise. In the 1980s and 1990s it was represented in the proactively researched product development at the source market level by wholesale importer/designer buyers (like Rene Dehry, Giorgio Kauten, Diff and Steilmann). Today it is technology-aided product research and development techniques (practiced by Anthropologie, Rampage, Zara and H&M), coupled with responsive buying processes.
In product design terms, India has moved on from producing and selling ‘fashion basics’ to ‘basic’ merchandise, and now back to ‘fashion basics’ once again. History says that this is where India’s inherent talents and strengths as a source market lie. Rather than reinventing the wheel or try to catch up with other competitors strengths, India should cash in on its strengths to practice and master fast fashion.
Sharmila Katre
March 14, 2008
Fashion merchandising textbooks state – a society that is fashion aware and fashion conscious is a society that is economically healthy. Thus Fashion is a reflection of lifestyle. In the Indian context it is a reflection of the growing ‘affluence’ of urban India – the upwardly mobile Indian middle class, more so, the upper middle class. The growth and progress of the Fashion Industry in the last ten years has even warranted the institution of the bi-annual Fashion Industry event, which is eagerly awaited both by the producers and buyers of fashion in India. Every year the fashion fraternity, glitterati and media await this event with much excitement and impatience. For weeks leading up to the event one reads of the who’s who of the International Fashion scene, the top of the line buyers expected to attend the event ……and yet, when the dust settles, Indian Fashion is yet to truly make its mark on the international scene.
Internationally the Indian apparel industry is better known as a supplier of competitively priced, mass produced, ‘fashion basic’ apparel merchandise sold by various retail chains and discount stores. In design terms however, that merchandise cannot be truly distinguished from any of the other merchandise on sale in the same outlets that have been produced in other Asian, Caribbean or east European countries. So where is the uniqueness of Indian fashion/design visible globally??? And yet when India forayed into the global clothing business in the late sixties it was its design identity of unique silhouettes, textiles and value addition techniques that gave it international acceptance and demand. What sold very happily and profitably at that juncture was ‘Brand India’ through it cotton crepe kurtis and ‘drawstring pants’, and its hand block printed wrap skirts. Indian fashion laid the foundation of an industry that today employs over 35 million people and contributes 14% to the GDP of the nation.
Indian Fashion has true potential to grow exponentially in the next decade, but before that there are many issues that the creators and producers of fashion need to address.
Most importantly what comes to mind is design discipline, understanding the commercial viability of design and realizing that the business of fashion is like any business enterprise. To grow the fashion business, fashion merchandise has to reach out to market segments beyond the fashion leaders and innovators and consumers of bespoke fashion or couture apparel. Product design through design discipline should enable a product to be scalloped and extend the product’s life span to justify the cost of design development. The product line has to evolve beyond the all encompassing design technique perspective. It has to have an individual signature that has a sense of permanence and identity of ‘unique’ design like an Hermes scarf, a Chanel jacket, a Bill Blass sheath dress or a LV handbag. The signature design element itself becomes the product’s brand identity.
The Business of Fashion requires business strategies, planning, organized marketing and selling, promotion and positioning. Design research based on market and consumer feedback, lifestyle trends, market economics, raw material resources, colour palettes, textile trends and other factors need to be done in depth and in all seriousness. Fashion merchandise is highly perishable and dynamic. Product research and development needs to become an on going and continuous process, very much like the R&D processes, which are the norm for all other lifestyle products. The business of fashion too, needs to be pre-emptive, and proactive rather than reactive. Product design needs to be clever and production friendly to ensure timely deliveries with out taking away from the design innovation factor. Market potential needs to be studied vis-à-vis the adaptability of the design/fashion content of the product to enable growth in the market share and business by straddling consumer segments. The time has come for the talented Indian Fashion fraternity to truly shift the focus to the Business of Fashion.
Devangshu Dutta
December 27, 2002
This is a brief note to share an impromptu impression (and some anguish) about our apparel exports that came up after reading a magazine article recently. But let me start by sharing quotes from that article:
Quote 1: India is an ideal sourcing base…Company A has a global purchasing process in place, which helps to source from any best “QSTP base” (that’s quality, service, technology and price) across the globe. “Some of the Indian suppliers are providing the best QSTP”, points out the vice-president of corporate affairs for Company A.
Quote 2: Exports today make up 12-15 per cent of Company B’s US $ 200 million (Rs 1,000 crores) turnover, and are expected to contribute 25 per cent of revenues in three years…”We recently won the bid for a specific product. This is a product that we do not make in India, yet our facility won the bid,” explains the director of exports in Company B which made US $ 1 million from the product and will start exporting it to Canada soon.
Quote 3: “The advantages of sourcing from India are assured quality to meet customer requirements, a wide product range, availability and competitive pricing. India is a perfect sourcing base.”
Quote 4: “I believe India should aspire for an export growth of 20 per cent per annum over the next decade – nearly double the current target of 12 per cent in our Tenth Plan.”
Do the above sound like anything you have recently heard from our customers? If so, congratulations! If not, you need to seriously ask yourselves. Why not! Would you believe it if I told you that the four quotes above are from industries where India had virtually no competitive advantage even five years ago (and I am not talking about software), and hardly any presence in the world market?
But that is actually the case. The industries and the companies are automobiles (General Motors), consumer durables (Whirlpool), speciality chemicals (Clariant) and fast-moving consumer goods (Unilever/Hindustan Lever). Cast your mind just 15 years ago to Premier Padmini and Ambassador. I still remember the ad launching the Ambassador Mark IV with its “sleek” looks (that was what the ad said!). And here we are in 2002, when two of the largest car companies in the world, Ford and General Motors are exporting cars and components to other markets. The very same country, the very same industry, and a much more competitive time. And yet, the India supply base is managing to shine! The same is true of the three other industries quoted above. And I haven’t even started talking about the software industry, let alone many other sectors.
So, in that context, let us talk about our traditional (centuries-old) strength, with over 30 lakh people under employment base — the textile and apparel industry. Once upon a time India used to have a market share of 25 per cent in the global trade. People within the industry can readily prepare a long list of problems to share with anyone willing to listen, explaining why we are no longer in that dominant situation. Most people think that the problems the industry is facing are very recent.
In the context of the (correct) view expressed in the government that future growth will be garment-led, let me quote another fact. Indian garment exports missed the target not just in 2001, but also in 1997, 1995, 1993 and 1991. In 1996, we barely scraped past. Does this mean that the apparel export growth target unrealistic? Or is it that the industry is slipping up in terms of taking enough action, and is only reacting to external events? Is there a way to take the industry successfully into the future?
It seems that every time there is some external adverse factor, the Indian industry seems to get badly hit, otherwise it seems to do just fine. Even global trade statistics and Indian export statistics suggest that India is riding piggy back on the growth in global trade. That means when the going is good, it rides the wave, and when the going gets tough, there is very little internal strength for it to sustain itself.
September 11, market recession. Maybe WTO quota-free environment in 2005 will, therefore, do the same thing? As individual companies, some firms (I won’t name them) have invested wisely and may be still around as a growing part of a diminishing base of companies. Others will have to think hard now, if they still want to be around and growing. My suggestion. Don’t think only about “price” or “cost”.
The thought process, and the actions that we take, need to reflect – Product, people, process and technology. Why? Because, if business trends are poor, buyers tend to first dump the worst suppliers. If the business trends are good, buying from the best suppliers increases the most. It’s really a very obvious choice. Only companies that take into account all the above factors, will migrate towards the better end of the scale and therefore survive.
H&M is one of the larger sourcing companies in India. Yet, I remember sharing the stage at a CII conference a few months ago with their global sourcing head, and he said (with some regret, I believe) that India’s share in their sourcing was going down. This is from a company whose own business has been growing rapidly. It is our misfortune that we are not able to capture the growth equally in our exports to this company.
The government also presents a mixed bag of actions and inaction, because there is no clear growth vision that is strongly lobbied by the entire industry (from fibre to apparel as a supply chain), or even from an entire sector (for example, all apparel exporters). A journalist, I was speaking to just about one year ago, quoted a prominent north Indian garment exporter who was extremely pessimistic about his company’s and the entire industry’s business prospects. If there is such “confidence” within the industry, what kind of a picture can we present to external parties? (A short story break: A poor man prayed for years and years to his family’s deity, asking for help in managing his household expenses. Finally he got sick and tired of the whole thing and started to throw the sacred idol out of his house, when the god appeared and asked him why he was so angry. The man vented his frustration about not getting any help from god, despite the years of prayers and meditation. The lord said, “My child, you also need to make some effort to give me the means to help you. The least you could do is to buy a lottery ticket!!”)
Substitute “government” for “god” and “industry” in the place of the man, and we find a similar situation in real life.
People actually sit up when I say that the Indian industry exports about Rs 30,000 crores of garments, and a total of almost Rs 60,000 crores in all textile products. People, even within the industry (surprised?) are not aware of the magnitude of the importance and the impact of the apparel industry. It is one of the best kept open secrets. There is very little hype, and very little interest. Therefore, there is very little support from anyone else that the industry needs support from. The only time the Indian fashion industry hits the news is when a “Fashion Week” comes to town, representing the interests of a segment that does a total of less than Rs 200 crores of business! So will the Indian apparel export industry be around in 2005, or will it be one of the seven missing wonders of the world?
A 6-year old quoted the following in his school assembly a few days ago, “The real difficulty lies within ourselves, not in our surroundings.” I think that is a very good introspection with which to end this note (although I have many more thoughts to share), and a good starting point for the rest of our thought process.
