Booming middle class makes it exciting time for lifestyle clothing- An interview of Mr.Ashish Dikshit, president (Lifestyle & Retail) Madura Garments

Extension of the erstwhile men’s only brands –– Louis Philippe, Van Heusen and Allen Solly –– into segments such as women’s wear, youth and fashion is an attempt by the country’s biggest apparel marketer to leverage the country’s changing demographics, says Ashish Dikshit, president (Lifestyle & Retail) Madura Garments, a division of Rs 3,578-crore Aditya Birla Nuvo. Excerpts from a recent tête-à-tête: What are the opportunities in the apparel market? The burgeoning of international brands and ever increasing consumerism are the two big opportunities that India is witnessing right now. I think it is an exciting time for lifestyle clothing because of the expanding middle class. The disposition that they have towards brands is one reason that will boost the growth of branded apparel clothes. It enhances the scope of more brands and creation of sub-categories. Home-grown brands have learnt lessons from international clothing brands. What they require is to scale up the volumes and focus on categories more sharply. What are challenges for Madura Garments? Louis Philippe, Van Heusen and Allen Solly were, at one point of time, classic men's wear brands. We had a very strong positioning for these brands. But slowly we saw distinct and different facets emerging in the Indian demographics. We spotted the opportunity in the women's wear segment as early as 2001. With Allen Solly Woman we introduced our casual and formal wear for women. We witnessed (Allen Solly) women's wear reaping the success and (thereafter) we started pushing other brands (into other segments) as well. It is still very small but choices are expanding. Apart from it, we also witnessed a new set of shoppers emerging –– youth. So now we have fashionable clothing range under all our brands. The extensions are made in casual and leisure wear for youngsters and we are also working on the new positioning for these brands. Recently you introduced casual dressing styles with few of your brands? Are these brands getting a young repositioning? We are surely extending our brands and targeting women and youngsters. But it will be over stretching to say that we are making the brand ‘young'. We think that there is a huge market opportunity by targeting women and youth. We have to make our brand relevant in the present scenario and we cannot afford to miss the critical mass of consumers. The workplaces are increasingly being dominated by women and younger talent. Broadening the apparel into categories such as formal wear, casual dressing and leisure wear for them is just a tip of the iceberg. Madura Garments is conspicuous by its absence in the Rs 15,000-crore kidswear market. Why? I agree that we have not yet addressed the kidswear market. We are still researching and studying the market dynamics. We are doing a SWOT analysis and think we will soon enter this market too. It's surely the next big thing for us. How is the partnership with Esprit shaping up? Esprit is one of the leading international fashion brand that we decided to bring in during 2005. We saw a huge potential in youth fashion industry and thought it to be an appropriate time to introduce a brand that could cater to this segment. The market was prime for lifestyle clothing and Esprit played in the premium casual wear market. With an inclination to set footprints in new segment and attract more consumers, we got sharply focused brand Esprit. We have reached the critical mass and hope to grow three-fold next year. Any other international brands that you’re planning to launch here? We are constantly working on making the premium dressing a significantly large business. There are few international brands that we are planning to bring in India but are currently working on a feasibility report for them. Currently, we are focused on making Esprit a highly recalled brand. We will also invest around Rs 400 crore in establishing exclusive stores for Esprit, increasing the retail space and investing in brand extension. Source : http://economictimes.indiatimes.com

An Interview on Private Labels in India of Mr. Nirmalya Kumar

Nirmalya Kumar, Professor of Marketing and Director of the Aditya Birla India Centre, London Business School, and co-author of Private Label Strategy, speaks to Govindkrishna Seshan on the new strategies for private labels that retailers are using and the challenges brand manufacturers face to develop an effective response. Kumar says private label brands, which occupy less than 5 per cent of the market in India now, are likely to corner 50 per cent of the market as the retail space opens up and matures. Excerpts: Q: What role do private labels have to play in Indian retail? A: Retailing in India is still very primitive. At the moment, private labels almost do not exist in the country. They are less than 5 per cent of the retail business and still have a long way to go. But Indian retail is extremely hot and it offers a proposition that can’t be seen anywhere else in the world. Only in China and India can retail chains have as many stores as they have in the US. In no other country can one imagine companies having 5,000-6,000 stores of their own. Here’s a little calculation: in a few years, most retail chains will have close to 5,000 stores in India. A profit of, say, Rs 5 lakh a store a month would mean a profit of Rs 250 crore. Ten such companies would mean profits of Rs 2,500 crore with their combined turnover being more than Rs 25,000 crore. In the next 20 years, the richest Indian or one of the top three richest people in India will surely be a retailer. Private labels will have a huge role to play in this. As much as 50 per cent of Indian retail will be occupied by private labels. The question is not whether this will happen, but when? If the government opens up retail, we would see it happen within the next 10 or 15 years. Q: How have private labels evolved in developed countries? A: Private labels have come a long way over the last three decades. They started with retailers wanting to offer cheaper substitutes. This was for two reasons. One, having a private label meant that retailers could negotiate a better margin from the manufacturer. And the other, when they had private labels they had a differentiator. While every shop sold a Coca-Cola and Pepsi, a private label meant that the store now had something that other stores did not. The biggest change in the last decade or so has been the entry of premium private labels. They are no longer saying “buy us because we are cheap”, instead today, they are saying “buy us because we are the best”. By offering high quality products, many private labels have started charging more than regular manufacturers. Today, retailers have realised that by having top quality private labels they can differentiate themselves from other stores and be a destination store. For instance, Tesco in Europe has a range called the Tesco Finest line. It does have a Tesco Value line, which is cheaper, but the Finest line only sells premium products at premium prices. Tesco’s Finest chocolate, for instance, sells at 50 per cent premium over, say, Cadbury’s. Similarly, its yogurt sells at more than 50 per cent premium over Danone and other yogurts. Retailers are now doing everything it takes to create premium brands. They advertise on television, take up brand-building exercises, and most importantly, they focus on developing a better product than the existing manufacturers’ brands. Q: Is the same likely to happen in India as well? Yes, the economics will remain the same. The share of private labels in any country depends on how consolidated the retail chains are. Developing a good quality brand has a high development and innovation cost attached to it. To be able to absorb such costs, Indian retail chains will need to scale up. In India, the largest retail chain today has around 300-400 stores. Retail chains in developed nations on the other hand have around 3,000-5,000 stores each. So it will start with retailers reverse engineering manufacturers’ brands, and as organised retailers grow larger, their labels, too, will move up the value chain. However, the transition will be faster in India. Q: What would be your advice to Indian retailers? A: Indian retail is ranked 50th in the world, so there is a lot that retailers here can learn from the 49 countries ahead. My advice to them is don’t do cheap and nasty private labels. Private labels won’t work by just keeping the products cheap. Retailers must look at developing good quality and value-added products. Also, they must make sure that they don’t over exercise the private label option. If they fall into the trap of using too many private labels, they will end up losing customers. It has been seen that when retail chains rely heavily on private labels, customers feel they lack choices. Many retailers have suffered due to this; Sainsbury is a classic example. The UK-based retail chain was a mainline traditional retail chain, but when it used too many private labels, customers did not find regular brands at its stores, and as a result, sales dropped. Q: Can private brands ever generate the type of consumer loyalty some of the iconic manufacturer brands such as Marlboro and Coca-Cola have? A: Yes definitely. In most developed countries, private labels have managed to achieve that. Study after study has ranked Aldi in Germany as the nation’s number one brand. In a recent study, its brand name in terms of consumer trust was ranked ahead of even DaimlerChrysler. Again, Tesco is among the top 10 brands in the UK. Similarly, French retailer Carrefour is one of the 10 most recognised and trusted brands in France. So good quality private labels definitely generate a very high level of loyalty amongst customers. Q: How can manufacturers compete with private labels? A: Innovate brilliantly, this is the first thing manufacturers need to do. They need to keep coming up with new products and new value additions continuously. By doing this, they ensure that they are a moving target and not a sitting duck. We have seen that in industries where manufacturers have innovated and upgraded their products regularly, the share of private labels has been low. Gillette is an excellent example. Worldwide, Gillette has constantly innovated its product. It has launched new razors, new blades and upgraded its products regularly, hence the share of private labels in razors is very low. Q: Considering that the private label phenomenon has not yet happened in India, what can Indian manufacturers do to prepare themselves for it? A: Manufacturers here need to realise and respect the strength of the retailer. Today, most companies see retailers as the owners of small mom-and-pop stores and not as a social or intellectual equal. But they need to understand that retailers have equal weight and will soon wield a lot more power than them. Hence manufacturers must start partnering with retailers. They must start working closely with them as soon they will have to work around them. In most developed nations like the US, the UK, South Africa and Australia, manufacturers work closely with retailers. Even in countries like Brazil, Mexico and Thailand one has witnessed this change. Hence Indian companies can begin to build a partnership from now. Large FMCG companies such as P&G and Unilever have learnt to do this well. Consider this: Wal-Mart purchases $10 billion worth of products from P&G, and hence P&G has to organise itself to work around them. The other thing that Indian manufacturers can do is to fight selectively. To do this, they must move out of categories where they are not the number one or two brand. As things move forward, it will make no sense to hold on to number three and four brands simply because a retailer would charge very high margins to stock these products. Retailers would only want to stock those brands which are at the top because they attract consumers. Since they don’t benefit by stocking the rest, it is best to move out of such categories. Also, companies must move out of those categories where their products do not make a symbolic or emotional difference to consumers. In categories where additional benefits are not seen such as in bread, butter, milk or paper towels, private labels tend to sell more. Q: What is the future of private labels? A: Private retailers will occupy 50 per cent of the market the world over. At 50 per cent, they begin to saturate. If they try to occupy more than this, then consumers feel that there aren’t enough choices. In countries such as Switzerland and the UK, private labels have reached this limit and these markets have saturated. But they will continue grow in the other countries till they reach the same level. And this will happen very soon in India, too. source: http://www.ibef.org

Pantaloon plans major expansion drive even as Reliance goes slow

Even as Reliance Industries Ltd’s Reliance Retail venture said it
would have a tough time meeting ambitious targets for expansion,
Pantaloon Retail India Ltd, India’s largest listed retailer, said it will
spend Rs800 crore to have 10-11 million sq. ft space for the year
ending June from the current 6 million sq. ft retail space.

The expansion will help Pantaloon compete with large domestic
and international companies entering the retail space, chief executive
Kishore Biyani had said at the company’s 20th annual shareholders
meeting on Thursday.Those competitors include Reliance Retail,
which has faced mounting protests in several states over its expanding
retail presence.

The company said on Thursday that meeting its target of 100 million
sq. ft of retail space by 2010/11 would be difficult after protests forced
the closure of some stores.

“It’s a tough challenge at this point of time but we certainly think we
would make a good go at it,” said Bijou Kurien, president and chief
executive of the lifestyle segment, referring to a target set last
November. The company currently operates more than 390 stores
in 16 cities, spanning 1.5 million sq. ft.

But in October, Reliance ended the services of about 400 franchisees
for planned operations in West Bengal state and has shelved a roll-out
in neighbouring Orissa because of protests from small traders, who fear
major job losses.

Reliance Retail in September laid off 1,000 staff in northern Uttar
Pradesh after the state shut 10 Reliance Fresh supermarkets following
similar protests. By spending more than $5.5 billion (Rs21,615 crore) on
its retail venture, the firm had planned to open about 500 Reliance
Fresh supermarkets in the Communist-ruled West Bengal and about
150 in Orissa. “2008, 2009 and 2010 would be the three critical years
in terms of property addition so far as we are concerned,” said Kurien
at the launch of the company’s first jewellery store in Bangalore.

Modern retail faces political obstacles in India because of fears millions
of small shopkeepers could lose their jobs in the fragmented but fast-growing
industry that is forecast to double in size by 2015 from an estimated
$350 billion.

India limits foreign multiple-brand retailers to wholesale or franchise
and licence operations. Talk of easing foreign investment rules have
cooled in recent months, prompting Tesco Plc. and Carrefour SA to
cool India plans.

Large Indian firms, including the Tata Group, the Aditya Birla group
and RPG Group have been stepping up investments to tap growing
consumer spending in Asia’s third-largest economy. Kurien said
Reliance Retail plans to open 300 jewellery stores across India in
the next three years.

Meanwhile, asked by several investors how Pantaloon would deal
with competition posed by large companies such as Reliance,
Pantaloon’s Biyani said: “We should not worry about competition
because the market is expanding. We are looking to create a dominant
position in the eight big cities.”

He said the company would seek to set up more stores of the existing
chains and its other brands to the metro cities to get a head start
on competition. “Our first-mover advantage will be big,” Biyani said.
“Retail is a business where you learn doing and others will go through
a learning curve.”

The company’s current 75- store discount hypermarket chain, Big Bazaar,
will get to 100 stores by February and 120 by June, he said. It will also
add four stores to its six Brand Factory stores—its discounted brand
store—and 20 E-Zone stores—its consumer durables and electronics
store chain— to its current seven stores.

ITC in expansion of Chaupal Fresh

ITC is targeting a pan-India presence for its Choupal Fresh stores. Riding on
the success of stores in Hyderabad, Pune and Chandigarh, the company

is mapping out plans to open these in over 50 new locations. It will set up at

least 10 stores in each location over the next two years.

The proposed expansion will also focus on strengthening its farm linkages in
different states, besides setting up front end stores. The company is likely to
spend over Rs 200 crore by March 2008 to open these new stores. It is also in
talks with a host of retail chains for supplying fresh produce, again buoyed by
the experiment with Q Mart and Food Bazar.

“We are not only talking to more chains for such an arrangement but are also
planning to ramp up this model with existing partners in other locations across
the country,” a senior ITC official told ET. ITC’s existing partners are retail chains
like Food Bazaar to whom it supplies fresh produce.

This would mean bringing more than 2,500 acres under its farm linkages
programme. This model entails partnership with farmers along with a
commitment to source their produce. The company advises farmers on the
crops to be grown and the cropping patterns. It also helps in sourcing high
quality seeds to ensure that the end product matches ITC sourcing standards.

Apart from the ten stores planned for each city, ITC is also looking at creating
a couple of cash and carry outlets in all the locations. The company’s cash and
carry outlets — providing grade-A and grade-B vegetables and fruits in
Hyderabad - is reckoned to have been a success with push-cart vendors
and commercial establishments like hotels and restaurants, said company
officials.

“Choupal fresh stores work on the model of selling the same day’s produce
that we source from local farmers,” S Sivakumar chief executive Agri
Business ITC told ET.

In Andhra alone the company plans to scale up its farm linkages to over
,200 acres by the end of this fiscal. It plans to add 13 more stores to its
existing seven in the city of Hyderabad. “We may add another five clusters
soon and are already in talks with farmers for greater engagement,” he said.
ITC is also working with farmers on the cultivation of exotic varieties like
broccoli, yellow and red capsicum, Chinese cabbage, lettuce and so on.
For this, farmers are trying out both polyhouse and open-air cultivation,
which are inspected regularly by ITC agri field experts.

An Interview of Future Group's MD Kishore Biyani

In an interview with Chief Correspondent Syed Firdaus Ashraf, Biyani,
the founder of the modern retail group Big Bazaar, has redefined the
shopping for Indian consumers, gives his vision for the retail industry
and his company's plans in the coming years.

Why did you say in your speech that 2009 will be the defining
moment for Indian retailing industry?

All the new malls that are in the anvil will be ready by then. We will
also have a retail policy in place and consumers too will be ready by
then, so we are ready for interesting times. We will see lifestyle
retails, high-end retail. Every retailer will be in the market. So,
2009 will be deciding factor for the retail market in India.

Will the bubble burst?

We have too many retail forums and too many malls have come up.
The period to watch out for will be 2009 and it will be a testing time
for retailers, I feel. We will all know by then what the real demand is
and what the real supply is in the market. In the meantime, the
challenge will be to find the right kind of people and trained people
for the industry.

You mentioned in your speech at the India Retail Forum
that the rising realty rates in India will be a challenge
to the retail industry. Can you explain the rationale?

The consumer always saves money when there is inflation. He spends
less when things are expensive. Inflation affects the consumer's
psychology and people now tend to save money in such scenario and
not spend. It has been observed that when real estate prices keep going
up people tend to save and the consumption drops automatically.

Why have you started credit card banking and how is
the response?

It is only 45 days old and the response has been good. It is one of the
future ways of the retail market and a learning business for us. We
are learning it. We have given loans to 500 customers so far. We are
learning while we are doing our business.

What has the learning so far?

(Laughs) The first applications are always those of fraudsters.

What kind of potential do you foresee?

There is a huge potential and we have just begun. We are creating
our checks and balances. In the last 45 days we have learnt a lot
on who is a trade-worthy customer and that is a business secret.

You mentioned that there are two Indias today. The first
one are those people who have power to spend and the
second one are those who are dependant on them like
drivers, cleaners and housemaids. Can you explain this?

Today, only one India is growing. The people who have aspirations
and brains, they are the big consumers of retail market. This class is
not making the other India grow. Lot of people have to do a lot of
things to change the scenario. One option is that those who have
a good income will have to create an income for the India that is
left out. I call that group as the second India. They have to be
protected in a network and we need to give them a chance to grow
and become one of the consumers.

You once said that social security system is bad in India
and that needs to be improved...

Today, India's social security system is a family security system.
People save money for bad days but if you compare that with
developed countries people spend money because they know that
their government will look after them in bad days. They are not
afraid of spending money in the developed countries. In the same
way we need to create a system in India where people should not
fear to spend money and not bother about their insecurities.

What can private players do in such situation?

The only solution to this problem would be to raise income levels.
If we do that, then everybody will have spending power.

Do you think the real estate market has reached its peak
and will crash?

I cannot comment on it. I would however say that this is a game of
supply and demand. Price correction will always be there in such
situation.

You said that you are approaching the Brazilian and
Mexican ways to develop retailing business. Can you explain?

Every retail shop has domestic finance scheme in some cities of
Brazil and Mexico. We are also looking at that model. If you study
their trend then you will find that there is 6 percent default and
I feel it is okay because 7 percent default is the norm in credit
cards too.


What are the products that can be funded?

Lot of products can be funded. We have started with some products
initially but eventually the idea is to fund consumption as much as we can.

Do you believe in customer brand loyalty?

I believe there is something called emotional attachment to a brand.
People do switch over their loyalty at times. I feel that these days,
maintaining brand loyalty comes with a cost. I personally believe
that the customer is like a nomad. He will go from one store to
another store. He will only come to you if you give him value.

How did you crack the shopping woman's psyche so that
they eventually end up spending in Big Bazaar shops?

(Laughs) We keep women in mind. We work with them. We understand
their emotions and therefore they end up spending in Big Bazaar.

Marks n Spencers with Food and kidswear in India..

UK based retailer Marks & Spencer is all set to foray into high volume
food and kids wear retailing here in India. Marks & Spencer's presence
in India is through master franchisee Planet Retail.


Marks & Spencer has witnessed slow growth in India. To boost volumes,
the company slashed prices and is also getting into new verticals such
as food and kids wear. The first store that will retail this merchandise
is the 20,000 sft flagship store at Gurgaon in the NCR. Both these
segments will be part of existing stores and not be standalone stores.
The chain as a whole believes in large format stores.

The food segment of the store will stock biscuits, confectioneries,
groceries, savories and a special celebration range of the festive
season priced between Rs 95 to Rs 1,800 for high end items. Company
official said that Marks & Spencer aims to provide ultimate quality of
food to the Indian consumer. Keeping mind the Indian taste and
international standards, the company plans to compete with other
retailers.

In the Kids wear segment, the prices will range from Rs 395 to
Rs 3000. The company admitted that the prices will be higher than
local brands, but they said they are offering value to consumers.