A STITCH IN TIME

CALL it a stitch in time. Several apparel and fashion accessory manufacturers catering to global
brands are increasingly shifting their focus to the domestic retail market due to slowing overseas
demand and rising consumption at home. More than half a dozen companies including Orient
Craft, Mandhana Industries, Royal Classic Group, SP Apparels and Crew Republica plan to
expand retail network with single-brand stores of either their own labels or partnering foreign
brands.

The move by the garment exporters comes as overseas markets, particularly Europe, is uncertain.
This is because of prevailing recessionary trends as well as increasing competition from cheaper
products from neighboring countries. The domestic market, on the contrary, is on a better note.
As per industry estimates, organized branded apparel market is around $7 billion (approximately
32,000 crore) and is expected to grow to $19 billion by 2015. The opportunity is big indeed.

Most of these companies hope to pull in overseas money and more brands as up to 51% foreign
investment is allowed in single-brand retail. Delhi-based Orient Crafts, which is marketing
German brand Oliver, plans to open around 80 stores by the end of 2012 for around 125 crore.

The single-brand retail market is going through an evolution at both ends of the yardstick. At one
end, while the growth in sales and market size is keeping up its pace, at the other end the market
is maturing in terms of retailing practices and consumer preferences.
Mandhana Industries, which makes apparel for international brands such as Tommy Hilfiger,
French Connection and FCUK, plans to float a retail subsidiary to launch its own casual wear
brands.

With increased spending power, India seems to be a very lucrative destination for business.
Mandhana Industries will initially open 10 exclusive flagship stores in metros and then it will
take it to tire II towns. Tirupur-based Royal Classic Group, which targets students and young
professional with affordable brands such as Classic Polo and Smash, plans to open around 100
exclusive outlets by the end of 2011.The country’s largest textile exporter, Gokaldas Exports,
meanwhile, plans to increase its revenue from domestic market to 30% from current 10%.It is in
talk with big retailers to supply its garment to cash-and-carry format. Alok Industries and Arvind
Mills have announced plans to increase domestic Presence .
.

However, it is not an easy market to enter. After all, many well recognized national and
international brands are already there. Establishing the connect to its target audience with the
brand, being focused and sticking to its brand ethos and finding acceptance would be challenge
for all these companies. The companies are aware of the challenge ahead
.
To create space for new brands would not be as easy as it has been in the past.

The case is not descriptive of actual market conditions or plans from various institutions. It is only narrative of a hypothetical
situation meant to provide students with an opportunity to study, analyze and provide appropriate solutions against the same
and learn the subject objectively.
Imagine all of this at a time when the retailing majors are themselves looking at
something different

BIG retailers may have stumbled upon a huge opportunity in their tug-of-war with big
brands: their own super brands. Private labels, or brands owned by retailers themselves
originally a by-product of the margin differences between modern retail and
manufacturers are fast turning into solid brands, without big advertising campaigns and
marketing activities. Retailers give their own labels prime slots on their shelves and price
them lower than established brands.

Research shows that customers have started to trust the retailer’s brands. Take the case of
Spencers Retail, which sells most food and grocery items under its Spencers Smart
Choice label. From diapers, to food, to household items, to consumer goods, private
labels are omnipresent in modern retail stores. When the retailer brand is extended to a
packaged product, the same trust results into adoption for the products, he says.
According to industry estimates, close to 80% of modern retail customers are repeats and
its natural for them to develop a faith in the retailers own brands. Future Group, the
country’s largest retailer, expects private brands business in grocery and Apparels to
become huge in another five years.

Customers have started to understand that organized retailers have their checks and
balances and sell only the best products. Future Group recently launched a differentiated
community food brand, Ektaa, to retail staples and foods category based on cultural and
geographical considerations. The company has rolled out rice variants from regions like
Maharashtra, Kerala and West Bengal. It plans to bring products such as Wheat, cereals,
papad, poha and rava to the Ektaa brand over the next year .

Spencers has private labels in about 60% of close to 650 product categories it sells. And
its private label sales are growing 40% annually. For Lifestyle International, an apparel-
to-furniture chain of the Dubai-based Landmark group, private labels contribute a quarter
of its sales. But these retailers are not only eating into national brands, they are expanding
the market as well. India is a price sensitive market, and in certain products categories,
brands are not present at price points affordable to all. In such cases, we need have a
private label to fill the gap, which is around 15-25 % cheaper than the national brand.
.
He expects the share of private labels to settle at around 30% of its total sales. Then there
are product categories such as corn flakes, jams, ketchups, soups and furniture, where
there are not many established brands that invite private labels. Retailers get higher profit
margin in private labels despite pricing them cheaper as they do not have to spend on
marketing and distribution .

The case is not descriptive of actual market conditions or plans from various institutions. It is only narrative of a hypothetical
situation meant to provide students with an opportunity to study, analyze and provide appropriate solutions against the same
and learn the subject objectively.
Globally, private labels account for 40% of Wal-Marts sales, which stood at $408 billion
(about 19 lakh crore) in 2009.UK retailer Tesco gets half its revenue from private labels.
And they are widely respected. In 2006, beverages giant Coca-Cola caved in to Wal-
Mart's demands for a change in distribution model for its health drink Powerade, fearing
that the retailer may launch a competing private label .
In fact, private labels which were seen as a necessity for retailers dealing in food and
perishable consumer goods products have also become an important part of their strategy
for the apparels BU as well. The new retail mantra for the retailers is to build private
apparel brands or perish.

Look at some Private Brands in apparel; Bharti Retail Easy Day / Wal Mart – Kid
Connection, George; Aditya Birla Retail – Blue Earth. Then you have a host of Brands
from the likes of Pantaloon, Shoppers stop etc.

Now look at the same with a different perspective. The branded apparel manufacturers,
who were already fighting with each other for shelf space and market share, seem to be at
the receiving end. They are now to face competition with the Retailers and the exporters
in the domestic market. Though we may feel that the retailers may not actually compete
with them, it is far from true as most of the retailers for apparels, are indeed selling store
brands which account to around 25-40% of the overall sales. Accept it or not, it may no
longer be a dream run for the Branded apparel manufacturers. The competition is
expected to be more intense in nature and only the most innovative companies may
survive the same. The one good thing out of the changed scenario is the customer
who may laugh all the way home with a better value at his end.

Kindly analyze the case:

Imagine yourself to be one amongst the under-mentioned branded apparel manufacturers.

(Provogue, Madura Garments, Raymond, Levi Strauss, Zodiac, Bombay Dyeing, Arvind, Any other)

1) What challenges you may have to face with the existing retailers/ exporters.
2) Explain the Distribution strategy that you may consider for your product range.

3) What innovative marketing practices shall you employ to grow in the market?

4) Undertake an Attractiveness study (Porters 5 forces model) and explain the same.

5) Submit a marketing plan for the company

The case is not descriptive of actual market conditions or plans from various institutions. It is only narrative of a hypothetical
situation meant to provide students with an opportunity to study, analyze and provide appropriate solutions against the same
and learn the subject objectively.