Vasanth Kumar
Executive Director Max Fashion Retail
For the present as well as future success in retailing one needs to have loyalty programs.
Vasanth Kumar, Executive Director of Max Fashion Retail says that loyalty programs are very important for any brand as there is so much of competition in the market as he converses with Fibre2Fashion Correspondent Manushi Gandhi.
Synopsis:
Max, a division of Dubai based retail giant Landmark Group. Max was launched in the UAE in May 2004 and after 10 years it is the value-fashion brand in the Middle East and caters to the mid-market segment. The company has over 226 stores across the Middle East, North Africa and India and continues to expand its chain. With stores that typically measure between 1,800 sq. m to 2,800 sq. m, the company sells its own-label apparel for men, women and children, along with footwear and home accessories.
Vasanth Kumar is the Executive Director of Max Fashion Retail since February 2005. He started his career with a sales & marketing stint in a Consumer Goods company where he handled various marketing campaigns and product launches. Vasanth has an M. Tech from IIT, Madras and a PGDBM (MBA - Marketing & Finance) from XLRI, Jamshedpur.
Excerpts:
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.
What has been the growth rate of Max fashion retail over the last few years? What factors have facilitated this growth rate?
Max is 8 years old and over all we are growing at the rate of 38 % CAGR. And for the next 2 years also we expect to maintain close to 40 % CAGR. Firstly, the organised retail sector has grown rapidly in India. In the past 10 years organised retail sector in India doubled i.e. from 15% to 30%.
Secondly, like-for-like sales of our stores have grown at the rate of around 18% per annum. So, when we see 38 % CAGR, 50% of it comes from the newly opened stores and the remaining 50% comes from the already existing stores. As of now, we have our stores in 43 cities and we have recently launched a new store in Jammu and Kannur in Kerala and we are opening soon in Udaipur. On an average, Max is opening one new store every 12 days.
What expertise is required the most in a brand not only to exist, but to stand out in the apparel industry?
I feel the most essential factor to stand out in the industry is product quality combined with experience. This is very rare to find in this industry. If you see our max collection and range, 97% of it is our private label. We adopt our designs from Dubai and we have in house designers for our ethnic collection. In addition to this, our products are sharply priced; they are all typically around 30% below the comparable products of other brands. We source for ourselves; particularly the design sourcing is totally sourced by us. We have 120 vendors who work for us and we directly retail through our own outlets. This way we cut the whole supply chain and directly reach the customers.
As we are sourcing directly we are able to grow faster. We offer cheaper products in a pleasing ambience, customer friendly atmosphere and services. So the combination of good product and experience is what stands out in this industry. This is so much so that today we are not vulnerable to any market fluctuations or any sale happening or any other slow down. We have combined our product quality price and experience in such a manner that customers can come to our stores any time of the year and buy the latest trend at affordable prices. This has been our philosophy and we are able to grow our like-to-like sales by 18% as well as CAGR of 38%.
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.
In your opinion, which are the countries with high consumption of luxury clothing? What are the reasons?
Luxury clothing has high consumption in 2 types of economies. One is the westrn countries where there is high disposable income and people are ready to pay a good price to enjoy luxury goods. This predominantly includes countries like UK, Germany, France and other western countries.
The other type includes emerging economies like China where the productivity has gone up and there is more disposable income. Such countries have an increase in number of millionaires. They have new found wealth and are spending it on luxury goods.
How have been the apparel markets of the India and UAE for the last two years?
Apparel market in India has been quite good for the past one year. We have seen many players doing well in the country. Since August 2013 the market has been growing because last year in April there was a reduction in excise duty. This has helped the apparel retailers to hedge the inflation without putting pressure on the customers’ pockets. In India there has been a rapid growth of malls which is giving more organised retail space. This is helping more retailers to open their outlets and grow their business.
In UAE for the past 2 years the growth has been quite stable. 3 years back there was some truculence because of the market situation. That time the market went down considerably, but it picked up 2 years back and is stable now.
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.
Published on: 07/08/2014
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
