There is a buzz in the retail industry, this buzz is created by lots of Indian and foreign manufacturers who want to have their retail presence in India especially by way of launching a new apparel brand. Here are some of the issues they need to address while launching a new apparel brand:
The most important part is the positioning in the Indian consumer mind-space. Smart casual positions are taken in by the brand such as ColorPlus, Dockers and Canary Blue. Design wear are gone with square-1 mall and Kimaya, Kazo and individual designer having their stand alone store. Any positioning below that is lapped up by Zillions of manufacturers. Sports category is gone, with Adidas, Puma and Nike. Does it spell dooms day for the new entrants? Not necessarily, there are still wide open gaps which lie agape between these broad categories and one should start considering those to enter.
The location is the key to the positioning, it determines and in turns reinforces positioning; in fact, with about 50% of the operational expenses are taken up by the rentals, it has assumed an even more important position. Its a strategic and vital decision, which can make or mar an apparel brand.
Buying vs. Manufacturing:
It is again a very important decision as about 35% of the expenses in a retail operation are taken up by the cost of merchandise. It is even more important for the foreign manufactures as Indian size set is radically different from that elsewhere, say US. There are innumerable problems of fits especially in western women's wear. Then there is that Indian touch and taste with which even the hot selling merchandise in the western country is rejected by the Indian consumer. If one is manufacturing oneself, one can control the quality and expense, which is not, so if one is buying.
It is said that only thing works for Indian consumers is the price-quality equation. Though this statement is a bit exaggerated, nevertheless, price is a very important criterion in the Indian consumer's mind. It denotes the quality, the status or even the worth of consumer for himself/herself or the loved one. So positioning, price and location should reinforce each other to justify the consumer that particular worth.
Its a moot point whether a brand should be pitched as a foreign brand or an Indian brand. There are brands for example Coutons which even when they use Discounts as their selling strategy, use foreign models in their advertisements to reinstate the quality perceptions in the consumer's mind. In general, pitching a brand as a foreign brand (esp. European) evokes a sense of heightened quality in the consumer's mind and justifies the price premium. But of course, and needless to say, promotion should be backed by positioning, store experience, product performance and prices. Its important also, as just giving one insertion per page per month in the four premier fashion magazines in India can easily consume upto Rs. 1 cr.
Much has been written about discounts in India, unlike elsewhere discounts pull the greatest of crowds. So one can say that fashion doesnt attract so much an average Indian as discounts. In India, discounts hit the mind. At the same time they take away a part of brand equity. Proper strategies should be made regarding the timing, assortment and promotion for discounts.
Uncertainty about Indian Retail/Mall Boom:
India is still in a transition phase as regards the buying habits of the people, even in Metro cities. One is not sure of the success of the retail infrastructure that is developed for the envisioned retail boom. Rentals are the biggest cause of worries as they take away a substantial part of the profits. Looking at all this, a promoter needs to be cautious about the viability of launching an apparel brand.
Government policies are the biggest external factor in the success of a retail brand. Right from allowing the entry of the single brand FDI in India to the Taxes collected out of the profits are a function of the government. Unfortunately presence of leftist faction in the centre will raise doubts about government allowing liberal measures for the success of retail brand. There are also underhand dealings from incorporation of the company to customs clearance of the items imported. All these things should be taken in to consideration while launching the brand.
High Cost of Real Spaces:
As mentioned earlier, location is the biggest factor for the success of the retail brand. There has been an increase in sales at the prime locations, but high cost of reality is beginning to tear down the profits. Whereas there has been a 20% growth in sales in recent years, there is a 30% decline in profits before taxes. Real estate people should take a note of it as they are cutting the same branch on which they are sitting.
As a rule 11% of turnover is standard for a retail business. It should not be more than that but due to intense competition, there is a huge turnover in sales and store staff, which results in poor customer service and lost sales. It also results in less training days for the manpower for the fear that people will leave after they are trained. Thus an apparel brand should do well to train the sales people specifically for their requirement, and not generally. Especially train them for non-negotiable such as uncluttered outlets rather than for higher order things such as merchandise planning.
To conclude, in India as an apparel brand, it is just not enough to say that I am close to the door etc. There is a need for the value preposition in the mind of the customer. Apparel brands initially, instead of thinking of expansion should focus on Core competency, offer and value preposition for the customer.
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