Executive Director Max Fashion Retail
What kind of risk management needs to be done by retail sector?
Typically in fashion retail the risk factors are high costs of real estate and changes in fashion. Due to fashion changes sales are likely to be affected. It is important for any retailer to hedge against those real estate costs as well the fashion changes. So the apparel retailers should ensure that these risks are dealt with in their own way.
For many of our outlets, we enter into a revenue share deal with the real estate owners. As there are fluctuations, we do not pay fixed rentals for our some stores. We pay them certain percentage of the turnover. Of course, we do give them a minimum guarantee. This way the first risk factor is automatically hedged.
On the fashion side, we have adopted the concept of moderate fashion. We do not sell high fashion as we are not a boutique brand but we are a mass brand. We have our own team for feedback and analysis; we have Enterprise Resource Planning (ERP) systems. We closely study the designs as well sales and trends and accordingly ensure that the collection is kept upto date and in accordance with the season.
Is it that the current market trends have compelled the clothing retailers to go online?
Every clothing retailer has to be online today because of the maturity that is taking place in the online market. Few years back the online market was not much matured. Few years back, there were not many good service providers for logistics and courier, even good warehouses were scarce. There were not much providers for product photo shoots or online content. Today all these services as well as infrastructure in the country has tremendously improved. Now it has become really easy to do an advertisement shoot for an online retailer and that too in a cost effective manner. We have easy availability of third party content providers who can give content for one’s brand. There are many e commerce websites which sells goods of various brands on their websites. A good online environment has evolved over the time. This environment also favours any individual player who wants to go online. The increase in the number of internet users has been happening for the last five or six years but now what has drastically changed is the “online eco-system” and infrastructure. Today, even a small or medium sized vendor can easily afford to go online.
What are major issues faced by the apparel retailing industry in India?
As I mentioned, there mainly two challenges retail space and fashion changes. As a buyer we do not face much problem because we have more than 100 vendors who work for us. Earlier when we were a small company we had to face some difficulties in terms of giving volume orders. Currently, in India, exports have picked up and the export vendors work for us. So, their production capacity, getting them hooked and getting delivery on time is a challenge. Product sourcing in India inspite of increased exports is a challenge because exports get priority.
In India we face lack of infrastructure facilities like road connectivity, power supply etc. There is shortage of power supply and government doesn’t give priority to small retailers. The power deficit has to be handled by the mall through generators which put a lot of pressure on costs as well as convenience. Apart from this, there is not good road connectivity, so reaching a mall is still difficult in the National Capital Region. Only those who have cars are easily able to reach a mall.
We see retail stores offering loyalty cards and points etc. How have they benefitted the business?
Loyalty card is now a matter of hygiene for every brand, irrespective of the goods they are selling or services they are providing, they have to run loyalty programs because there are plenty of choices available in the market for the customers. There are mainly two advantages of loyalty programs. Firstly, a brand can generate stickiness in the costumers and secondly it helps to understand the customer behaviour. They help us to understand trends with reference to geographical location and products. This helps us to observe, understand and address the customers’ needs. Max gets 47% of its business from its loyal customers. So for the present as well as future success in retailing one needs to have loyalty programs.
Which are the other markets where you plan to expand and invest in the near future?
Right now we are in 17 countries across the Middle East and India. AS of now, we are focusing on expansion in India only. If there is any opportunity to expand in South Asia i.e. countries like Bangladesh, Shri Lanka or Nepal, we will look into it. If there is any interested for partnership for the same we would surely welcome it. In India, as of now we have launched many new stores and this keeps us busy here.
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