Showing posts with label Lee. Show all posts
Showing posts with label Lee. Show all posts

08 June, 2012

Franchising–The first step towards Entrepreneurship

 

Gitanjali

Franchising has been around for long. Many global brands such as Adidas, Benetton, Levis, Subway and a lot more have grown globally due to their extensive franchisee network. Even in India, Madura Garments (which owns brands such as Peter England, Louis Philippe, Van Heusen), Arvind Mills (Lee, Wrangler and Arrow), Nilgiris (a chain of Supermarkets), Gitanjali Limited (which retails brands such as Asmi, Gili, D’Damas, Lucera, etc.) Crossword Book stores, Barista (Café chain) and many other Retailers have grown their businesses through successful Franchisee Partnerships. Franchising offers a quick scope of expansion for the Retailer while the investment is incurred by the Franchisee. Many first timers and wannabe Entrepreneurs choose the path of Franchising because it is an easier model to crack – the brand (is usually) established and has equity in the market, which pulls footfalls in to the stores. In case the brand is relatively new, then the Franchise fee (usually a one-time fee paid by the Franchisor to the Franchisee) is low, keeping his / her investments within reach. Kaatizone, an Indian QSR chain with a presence largely in South India is on an expansion spree through Franchising. Mr. Kiran Nadkarni, CEO, Kaatizone told in an interview recently. “Franchising has helped us in two major ways: We have been able to generate momentum in expansion quickly. Secondly, the local entrepreneurial talent has helped manage the store operations and brand experience better. Since we are planning to set up a large number of stores, franchising is the best strategy for growth.” Kaatizone has 19 franchises in six cities now and is planning to expand across the country.

The gestation period for recovery of investment can vary from 6 months to 3 years, depending on the location of the store (Malls, High Streets, Corporate locations,etc.) product category, and Brand identity and recognition. Investments could vary from Rs. 5 lakhs to Rs. 2 Crores, depending on the Brand. Some Retailers charge a one-time Franchise Fee and others charge monthly/annual commission on Sales in addition.

Nilgiris - Franchising Opportunity

Advantages of Franchising

Scalability of Business

The Franchisor would be able to scale up instantly by going through the Franchise model. The prospective Franchisees could be spread across the country and hence the business could be expanded quite fast. This is one of the most important reasons that Retailers choose to go the Franchising way.

Immediate availability of capital

The Franchisee brings in the additional capital that is required to invest and operate the business which is a very important factor for the Franchisor.

Day to-day Operations

Usually, the set-up costs, which are substantial are borne by the Franchisee. He also bears running costs such as daily operational expenses (manpower, electricity, housekeeping, interest on capital, depreciation, etc.)

Drawbacks of Franchising

Customer Touch-points

One of the biggest drawbacks in Franchising is that the Retailer usually loses touch with the customers. The front-end is managed by the Franchisee and hence the Brand doesn’t have much role to play in the Customer Engagement as such.

Loss of Operational Control

The daily operations are managed by the Franchisee. Although there are parameters which need to be followed, there are occasions when the Franchisee takes things under his control which could be potential threats in terms of running the business.

Loss of Focus

Once a Franchisee believes in the model, he / she expand their business across various brands and categories. Therefore, the required focus on the business may dwindle over a period of time. It is quite unlikely that the Franchisee would spend the same amount of time and effort on businesses that don’t yield similar returns.

FDI in Retail has already opened up for Single Brand Retail and the country is eagerly watching the Government’s steps towards their decision on allowing FDI in Multi-Brand Retailing. This is indeed a good time for individuals and entrepreneurs in the making to take their first steps towards Organized Retail through a Franchise Opportunity.

Best of Luck.

12 January, 2012

100% FDI in Single Brand Retail. So?!?

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The Government of India officially announced allowing 100% FDI in Single Brand Retail on 9 Jan 2012. “We have now allowed foreign investment up to 100 percent with the stipulation that in respect of proposals involving FDI beyond 51 percent, there will be mandatory sourcing of atleast 30 percent of the total value of the products sold…from Indian small industries/village and cottage industries and craftsmen,” Commerce and Industry minister of India, Mr. Anand Sharma said in a statement.

(Suggested Reading: FDI in Retail – the saga continues)

The Indian Industry seems to be equally upbeat;

In an interview to ET, Future Group's CEO Mr. Kishore Biyani said, "I believe both single and multi brand retail together can bring in an investment of $10 billion in the front-end alone. I think this is a significant investment in the next four to five years, and the journey has just begun." The announcement of single brand retail has come sooner than we had expected, though. It is a good move, and a precursor to the bigger one now - the multi-brand retail announcement, added Biyani.

“We hope the initiative is a precursor to further liberalisation in the sector in the days to come,” Rajan Bharti Mittal, managing director at Bharti Enterprises, Wal-Mart’s India partner for wholesale stores, told Bloomberg.

"The notification was expected because single-brand is less controversial, as the brand will not compete with a local retailer," said Bijou Kurien, who heads the lifestyle division of Reliance Retail, which runs department stores, hyper-markets and supermarkets.

“The opening of India’s single-brand retail sector sends a crystal clear signal that India is open for business at a time when economic opportunity is certainly welcome amidst global uncertainty,” said Ron Somers, president of US-India Business Council (USIBC).

We believe that further opening up of the single brand retail clearly shows the government`s positive intent towards bringing about reforms. We see this as an important step towards further reforms in the multi-brand sector as well said broking house ICICIDirect

“Globally, single-brand retail follows a business model of 100 percent ownership and global majors have been reluctant to establish their presence in a restrictive policy environment,” the department of industrial policy and promotion (DIPP), said in a statement.

SBUX

(Suggested Reading: Luxury Retailing in India)

100 percent ownership would be permitted in single brand product retail trading under the government approval route, subject to the following conditions:

  • Products to be sold should be of a single brand only
  • Products should be sold under the same brand internationally (i.e. products should be sold under the same brand in one or more countries other than in India)
  • Single brand product-retail trading would cover only products which are branded during manufacturing
  • The foreign investor should be the owner of the brand
  • In respect of proposals involving FDI beyond 51 percent, mandatory sourcing of at least 30 percent of the value of products sold would have to be done from Indian “small industries/village and cottage industries, artisans and craftsmen”
  • Application should be submitted seeking permission from the Indian government for FDI in retail trade of single brand products to the Secretariat for Industrial Assistance in the Department of Industrial Policy and Promotion
  • The application will specifically indicate the product/product categories which are proposed to be sold under a single brand
  • Any addition to the product/product categories to be sold under single brand would require fresh approval from the government
  • Applications would be processed in the Department of Industrial Policy and Promotion to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for government approval

(Suggested Reading: “UnHate” by Benetton)

Mono Brands such as Tommy Hilfiger, Pepe, Mont Blanc, Rolex, Pizza Hut, Costa Coffee and many others through a JV with Indian partners have been operating in India over the past years. Some like Benetton and Nike have been operating on their own, using manufacturing/marketing as their modus operandi through a predominantly franchisee model. Over the past few years, we have seen even luxury brands like Louis Vuitton, Diesel, Tumi, Armani and Versace enter the Indian Retail market through respectable JVs with the likes of Reliance Retail, DLF Brands, etc. and all of them seem to be doing well in their own way. Indian business houses such as the Tatas, Jubilant Organosys and Dabur have been happy to partner with international brands such as Zara, Dominos and Subway (respectively) and operate large franchise operations. But the fuss over 100% FDI in single brand retail seems surprising, if not confusing. Louis Vuitton, for example expects a sale of over USD 100 million from a 550 sqm outle from its only airport store in the world at Incheon International Airport, Korea. It would take LV a few years to achieve a similar number in the Indian market. In such a scenario, I wonder why would international brands invest and fund their expansion and growth in India all by their own, while there are so many Indian business houses/partners who wish to do so.

Video Courtesy: The Moodie Report

Indian and International Retailers are eagerly looking forward to the approval of 100% FDI in Multi-Brand Retail, which is not expected until the elections are over in key states such as Uttar Pradesh. Major action is expected only when the big boys of multi-brand retailing are allowed to enter India and operate directly and service end-users/customers. And that doesn’t seem to happen soon, certainly not in 2012. Hopefully, the next year – if the world doesn’t end. That is.

(Suggested Reading: Borders – a book in itself)

01 January, 2012

Retail in India–Way ahead for 2012

Customer Checkout 

Organized Retail in India has come a long way over the past decade and 2011 was expected to change the wind towards the positive side, due to allowing FDI in Retail. Thanks to political unrest and the opposition parties claiming hoarse, FDI in Multi-Brand Retail has been put on hold (hope not shelved) while FDI in Single Brand Retail has quietly been allowed, atleast on paper. While a few International Brands such as Benetton, Tommy, Diesel, Esprit, etc. have been operating in India for many years now through Joint Ventures with Indian partners, a beeline of Brands wanting to enter India is expected in 2012 – a hope that many in Retail have been holding on for sometime now! The coming months are expected to be exciting times for our Industry and here’s a view on how this landscape would evolve;

Malls

From a lakh square feet to a million square feet in 10 years, modern shopping centers aka Malls have walked a long journey all these years. Today, Malls are not places for consumers to just shop but a generous mix of shopatainment – which includes Shopping, Dining and Entertainment. While there are over 200 operational malls today in the country, another equal number is expected to come up in the next few years. A number of mall projects which commenced during the slowdown in 2008 are ready for occupancy now and many are expected to launch this year.

Supermarkets

The neighborhood supermarkets have evolved the most, among all formats of Retail over the years. Size was always a concern for players like Spencer’s and More – getting it right was a challenge, either the stores being too big with empty shelves or too small with regular stock-outs. Many players have exited the marketplace while a few like Food Bazaar and Nilgiris (through franchises) are increasing their presence assuming scale-up would help them gain overall net margins which range in high single digits. This would be the first format, in my opinion that would straighten up – only serious players would exist and they would do a great job while many others would exit – hopefully this year.

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Hypermarkets

With foreigner CEOs and advisors engaging the managements of Indian Retailers, it was widely believed that Hypermarkets must be large, really large like the ones in western countries.Thanks to some early learning, many players like Hypercity and Total have corrected their ways of working. Small is the new Big, with Hypers ranging from 20,000 – 45,000 in prime retail areas in multi-level locations compared to the earlier proposition of being over 60,000 sft – one single floor in suburban areas! Newer players especially multi-nationals like Tesco and Target are expected in this format in the coming year while existing players are planning massive scale-ups.

Department Stores

These large format stores, the blue-eyed ones due to their colorful appearance was and is expected to be the only ones to see some EBIDTA in their early years. That’s a boon and bane in a sense in this format. To ensure they attract high-spender footfalls regularly, they should turn their stocks quite often; that means having the right mix of merchandise is extremely important which is a direct impact of having high quality staff who can choose the right merchandise every consecutive season. This is a vicious cycle and players like Shoppers Stop, Lifestyle, Westside etc. have got it right while a few of them are still struggling to learn.

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Specialty Retailers

Stand-alone specialty stores of international and even domestic brands are seeing dwindling numbers. The total number of stores that were being added year-on-year have reduced considerably. If it was 20 new stores and most being unprofitable four years ago, the numbers have reversed, thankfully. Most brands don’t talk about crazy numbers anymore, only well-merchandised stores and outlet level profitably.

QSRs and Food Retailing

It seems cooking and eating at home is a more expensive proposition these days thanks to high food inflation and going by the sales of pizza chains and fine-dine restaurants. While Dunkin Donuts is almost ready with its first outlet, Starbucks is slated to open quite soon too. Café Coffee Day will ad over 200 new cafes this year while Dominos and Pizza Hut will have company in California Pizza Kitchen and a few others. This would indeed be the most exciting format to watch indeed!

Greenland

Kiranas

The unorganized retailer down the road doesn’t pay taxes or offer health benefits to employees; no one ever checks the quality or quantity of goods sold; BUT he is able to offer lower prices everyday to consumers with other additional benefits such as short-term credit and quick home delivery. Modernisation is the byword for the them and they are indeed giving a touch competition to the organized players.

E-Commerce

But the real competition, if not threat to all formats of retail in 2012 is going to be through E-Commerce. Sadly, many brands and retailers are not paying attention to the increasing internet user base – over 100 million as of 2011 compared to just three million in 2001. This has allowed fly-by-night operators to open websites that sell everything from toothpaste to watches, apparel to expensive jewelry! Most of them have no clue how e-commerce works and many are even buying merchandise and selling – something which goes against the fundamental philosophy of transacting online!

29 September, 2011

Controversial Ads, Branding and Footfalls

There has been a lot of furore over the recent so called “indecent” advertisements in the mainline media by “Flying Machine” (FM), a popular denim wear brand in India for close to two decades now. The brand, which was one of the earliest entrants in the denim wear market competed with international ones such as Lee, Levis and Pepe since the late 90s and has hence maintained its position as an entry level fashion wear due to its affordable price tag and distribution reach – since it shares shelf space with other brands such as Arrow and Lee from the house of Arvind Mills. The debate is about how much indecent an ad can get and what the society would feel rather than its impact on sales! Well.

(Suggested reading: National Shopping Day)

Denim Market in India is highly unorganized – with less than 25% of all denim wear sold at Organized retail outlets such as Shoppers Stop, Lifestyle, Central Malls, MegaMart, Brand Factory, Fashion @ Big Bazaar and other exclusive brand stores. We have denim wear (bottoms) starting from as low as Rs. 200 (1 USD = Rs. 48 approx) on footpaths at Linking Road in Mumbai, Janpath in New Delhi, Commercial Street in Bangalore, etc. to over Rs. 10,000 across premium brands such as Tommy Hilfiger and Diesel and in the range of Rs. 20,000 – Rs. 40,000 across exclusive luxury brands such as Versace and Armani. Denim for long was not considered a comfortable dress to use in India due to various reasons;

  • The texture/fabric was rather thick – and many thought it wasn't suitable to wear during hot and humid weather which is the case across the country for 6-9 months a year
  • Washing the Denim wasn’t an easy affair since most households (in the urban areas) didn’t have Washing machines and maids would complain washing denim by hand due to its heaviness when soaked in water
  • It wasn’t well accepted in the society – Colleges had banned them, Offices preferred formal attire and hence Denim was rather dedicated for a select few special occasions
  • Women were not the main Target consumers, essentially because denim bottom wear couldn’t be well coordinated with other dresses in the wardrobe
  • Blue and Black were the only colours mostly and the “fit” was standardised

Things have changed and how over the last decade!

The fabric has been well-treated to ensure it is light-weight and easy to wear. Also most reputed brands mix denim with cotton fabric, thus ensuring sweat is absorbed and hence making it a comfortable thing to wear all through the year. A fully automatic Washing Machine from a reputed brand that used to cost over Rs. 20,000 during the early part of the past decade is almost half the price now. Most urban households have moved away from the concept of house maids (especially for washing clothes) and now boast of semi-automatic or even fully-automatic washing machines which also dry the clothes after washing within an hour! Most colleges do not have such bans anymore, as long as the students wear decent clothing! More and more offices are moving towards smart work-wear and hence denim (especially on Fridays / Weekends) at most offices and all week across companies in the IT and ITES sectors, Ad agencies, etc. is an accepted norm. Denims are now available in various colours and women coordinate with traditional looking “Kurtis” or short-tops. To the benefit of consumers and retailers, the market has indeed evolved for good. The number of “fits” available today is exhaustive and one can really choose the best fit for oneself – mostly across brands.

(Suggested Reading: Customer Service)

So, do brands in this space still need controversial aspects to advertise, to divert attention? FM is not the only exception. During a Fashion Show last year, actor Akshay Kumar, the brand ambassador for Levi’s walked up to his wife and yester year actress Twinkle Khanna who was seated in the front row for her to open the button fly in full public view! The act was a trending video online and the photos would have been searched a zillion times! Bizarre, some quipped. What a great attention seeking tactic, many others said. “Seeking Cheap Publicity” – a few blasted. Well, no more than that.

Leading Business newspaper The Economic Times has carried an interesting article over the weekend that illustrates how internationally denim brands use controversial advertisements and other such acts especially in the print media to create attention. The big question though is “Has it increased Sales?”. the answer is a big NO. But what it does is create a flutter effect – people get talking about it and the word spreads faster these days than before, thanks to powerful social media tools such as Twitter and Facebook. For Retailers (and Brands), the most important outcome for any investment is a substantive increase in footfalls at its stores. Research has it that only 30% of men and 60% of women who enter a store undertake “product trials”, however over 80% of those who took a trial end up buying the product. And this applies all the more for Denim-wear because each fit is different and unique in its own sense. Now, do such Ads pull shoppers into the stores? No. And hence the question of “new trials” doesn’t arise. However, Ad agencies benefit enormously in the meanwhile. #justsaying

(Suggested Reading: The Levi’s way of collaboration)

I bet if such ads are a great way of brand-building, especially when the Brand is communicating to middle-class masses who neither understand nor appreciate such bold communication. It is a lot different when showcased at Fashion Weeks in London or Lisbon, Paris of New York. For now, the focus should be on creating Ads that have a pull-effect; one that attracts the eye of potential shoppers and drives them to the stores. If not anything, the Retailer’s names and contact numbers could have been a font bigger in the said Ad. If only someone is wanting more footfalls, that is.

31 May, 2010

Learning from Levis; Collaborate, Cooperate and Succeed.

It’s quite rare to see (in the Indian context) Brands working very closely with Retailers or Malls. Most often, each Brand would like to leverage its presence within the large format, be it a Department Store or a Hyper or even a Mall by taking up pole position (read – prime locations at the entrance). Retailers cash in on this trend by charging a premium for such locations which Brands pay, albeit not happily. Many Brands, international, domestic and regional believe that a prime location within the store would attract footfalls and the Brand magic would result into higher conversions. In most cases, it is not so. Corner locations alone do not guarantee higher business potential. What’s important is for the Brand to work closely with the Retailer in mutual interest and both must make best use of each other.

A recent example is that of Levis. I have read somewhere that on an average an American owns 1.65 pairs of Levis. That’s very similar to the count on Wal-Mart, that over the past 40 years, over 90% of all Americans have visited the world’s largest Retailer atleast once in their lifetime. In India, of course we cannot share such figures with authenticity though. Back to Levis. The Brand was among the earliest entrants in the casual-wear denim wear segment in India during the early 90s and continues to remain among the most aspired affordable fashion brands in India. After a small lull during mid-2000 decade, Levis has bounced back in strength. A very strong merchandising and marketing team is at work and the results are on the face. After many successful campaigns over the past months, the most recent one is an encouraging trend set by the brand again. This time, its outright collaboration.


Levis and Lifestyle, the Department Store chain owned and managed by The Landmark Group of Dubai, have come together in what seems to be among the most talked about promo in town. The tagline, aptly named “Just4YOUth” targets the young by age and young at heart to enjoy the mood and spirit of youth. This at a time, when most first-timers enter their college days, an important part of growing-up. To have a bit of variety and participation from other brands, LEE and ARROW have also been roped in. The promo seems simple; an assured gift with a minimum billing and a chance to win a Mega Prize, VW Beetle, the newest and coolest Youth icon in the making in India. And there are other prizes to be won too, including a YAMAHA motorbike and voila, a chance to be the next model for the Department Store chain! This is seemingly similar to the promotion that was held a year ago at Bengaluru International Airport to celebrate its first anniversary. Although many sceptics believe that such promos do not offer tangible benefits, I refuse to believe so. Indian shoppers are value-seekers and if they see anything additional to their purchases, they would just grab it. It’s been so for many years now and will remain so for times to come. The simple promo is a great crowd puller into the Lifestyle Stores, especially for Levis fans to check out the latest collections. On similar lines, Levis has also partnered with Shoppers Stop, India’s largest Department Store chain with another exciting promo – “Denim Rocks”, attracting music lovers by offering a Promotion revolving around the most favoured fabric of rock stars, pop stars and rappers. Here, the associate partner is another fashion brand FLYING MACHINE.


Today, Brands should seek more prominence among shoppers by not just having a premium location but by experimenting such promotions from time to time. The mantra is clear – Collaboration between the various parties, i.e., Brands and Retailers. Cooperation among Brands within the store. And the result – Mutual success for all. Wish more brands understand this simple logic, rather advertising silos on supplement first-pages!

A Firefly finally takes off

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