Twenty-eight-year-old OH was in for a pleasant surprise when Louis Philippe extended its brand into Lp, to target young buyers. The last time OH had visited a Louis Philippe store was more than a couple of years back. Back then, he had told the salesperson that as much as he loved the brand, he would rather buy it for his father. Now, Lp was offering him just the kind of image and designs that young consumers wanted.
It perhaps wasn’t a designer playing the part, but somebody at Madura Garments must have been listening that day. And that’s the advantage of having a strong and direct retail connect with consumers. Exclusive outlets help marketers get cues from customers on a live basis.
So at a time when most consumer businesses in India are still finding their feet in doing business with organised retailers – negotiating margins, cornering shelf space or learning the art of display – a few marketers have gone ahead and set up shops on their own, running retail enterprises themselves, or through franchisees. Cases in point: Videocon and Tata Tea.
The reasons go beyond the clichés of getting closer to customers, providing a uniform brand experience and espousing the right kind of brand values. The objective here is spotting the next trend, test-market combinations that a retailer might otherwise hide at the bottom of the rack, pick-up consumer feedback, and even making customers co-creators. These outlets are the ultimate in being customer-centric.
Beyond being points of interaction, they enable us to pick ideas, track trends, test products and even reverse-engineer products based on feedback. These formats can lead to a lot of interaction with customers and help in keeping ears to the ground.
Before getting into exactly how retail is helping these companies, understanding why businesses are eager to have a retail face is important. One big reason has to do with consumers themselves. In some categories like say cellular phones, consumer attitudes have undergone a sea of change.
India as a country is moving from a penetration economy to a consumption-led economy. Hence marketers need to move from just satisfying customer needs and desires to delivering a holistic experience. There is not much product differential in the market place. So service provides the experiential differentiator. Naturally, retail is becoming very important and growth can come only from retail.
In lifestyle categories wholesale growth is restricted. Take, for example, a scenario where a brand like Van Heusen is retailed through a multi-brand outlet. It would get a maximum display of 200 to 300 square feet, and naturally only the best selling designs or sizes would be on display. As the competition is only a few feet away, no one dares take chances.
In comparison, one Van Heusen exclusive outlet in Delhi is 20 times that size that is about 7000 sfy.
For Madura, which owns brands like Allen Solly and Peter England, apart from Louis Philippe and Van Heusen, this retail play will only get bigger. At present, close to 40% of the company’s sales happen through its direct retail (company owned or company-operated ) network. Over the next three years, its retail operations will account for as much as 70%-80 % of its apparel sales, with the conventional wholesale route accounting for the rest. To set a context, three years back, only 10% of the company’s business came from the direct retail channel.
In some categories, though, exclusivity need not necessarily guarantee sales. Consumers walk into durable stores with two or three brands already in their consideration set, and often walk out with the ones that deliver the best value-for-money. Videocon Industries, on its part, prefers to keep the next chain of durable retail outlets as a “completely independent” operation.
The chain maintains a supplier-buyer relationship with Videocon Electronics, as it would with any other manufacturer. Marketing consultants say this arrangement can help chains like Next to actually gauge buying patterns of consumers like any other retail channel, as the evaluation happens across brands, rather than studying buying patterns within a single brand.