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    India: A Hunting Ground for Benchmark Concepts

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    Like so many other words that conjure up imageries of progressive, admirable, somewhat daring action, “benchmark” has the same instant effect on the mind. Rather, it commands our attention and arouses our curiosity even in the current age when our capacity for curiosity is getting lesser.

    And why not? We live in times where the term “benchmark” itself becomes extremely fluid – today you do something out of the routine or ordinary, tomorrow your new becomes stale already. No one lets you sit on a “benchmark” for long. You must constantly push your own benchmark!

    A rather philosophical way of summing up the situation, one might retort somewhat irritably, especially when one shifts the gaze on to what everybody calls the great Indian retail boom. Sure, the mighty Indian retail juggernaut is rolling; but that gives us all the more reason to be circumspect. We might as well ask the questions now, and find at least some of the answers.

    It feels very right to hear that India is important to the big ones in global retail, particularly fashion retail. Rare seems the day that does not turn out to be a day of announcement of some entry, or of some plan for entry, by one or the other leading name. And then 2006 also turned out to be the year of the first “super size” fashion destinations. The line-up had the denizens enthralled.

    “Lee has opened its largest store in Asia Pacific.” “Nautica launches the largest standalone store outside the United States .” “ Adidas India opens its largest Sport Performance Centre in Asia . ”

    There must be something, after all. These are some super brands here that we are hearing about. They do not take ground action based on hearsay. So, at least the prudence of the matter is more or less settled. But, what is on their mind really? What are the benchmarks they have set for themselves? Is India really a “benchmark” market in their blueprint for growth?

    Philosophies aside, there is a vibrancy to the concept that retail in India is lately discovering and savouring in. It does not require great imagination to get a perspective on the unfolding scenario – a buxom middle class, a flourishing super-rich niche, a common denominator of consumerism different only in degree, and a flurry of money merchants scrambling to grab their meaty pies, make for an engrossing dramatis personae capable of turning around the plot at any time. India has its audience, all right.

    In this special feature, Subhinder Singh Prem, managing director, Reebok , and Hartwin Feddersen, director – marketing , adidas India , share their insights and plans for India, with Padma Pegu, Co-ordinating Editor, indiaretailing.com.

    Question: What benchmark concepts have Reebok and adidas so far implemented in India ?
    Subhinder Singh Prem : Reebok India has been in the forefront of a number of concepts in India .
    • The first exclusive Reebok women’s store outside the United States
    • The biggest Reebok store in Asia, in Jubilee Hills, Hyderabad, opened in November 2006. The store area is 18,000 square feet.

    • Work in progress on exclusive Reebok lifestyle store. It is an international project being driven out of India . Depending on the success of the pilot project, it will be rolled out worldwide.

    • Tie-up with designer Manish Arora and bringing out the Fish Fry line of footwear for women. We will be launching footwear for men and apparel for both men and women shortly. It is the first of its kind for Reebok. In fact, what started out as an India-centric project has now assumed more significance, since quite a few of Manish’s designs have been included as part of the international classic collection and is being lapped up worldwide.

    Reebok
    Hartwin Feddersen : adidas has implemented a significant number of benchmark concepts. Among these is the launch of the line of cricket shoes called 22Yds. This line, despite competitors now following in our footsteps, is still market-leading. The launch of the world’s first intelligent shoe, the adidas_1, in 2005 is another milestone.

    adidas

    India: A Hunting Ground for Benchmark Concepts

    Q: What parameters are to be considered while developing retail formats — brand positioning/power, customer experience and expectation, competition?

    SSP: There are a number of factors that we take into account while deciding on retail formats, including consumer experience and competition. However, it all begins with consumer segmentation — one formula does not fit all. For example, you cannot expect a customer from Motinagar to come to your flagship store at Connaught Place ( Delhi ) and look for Reebok. You will have to take Reebok to him, and in a format that is less intimidating to him. In fact, after studying various SEC classifications, we realized there was an amazing amount of overlap and a lack of coherence in traditional consumer profiling. For a consumer brand like us, we were up against mindsets and not purchasing power.

    Reebok

    Moving forward from that point, we evolved two broad parameters: the “emerging” India mindset and the “traditional” Indian mindset. This segmentation has very little bearing in their purchasing power, but more towards their propensity to spend and consume an experience. For the emerging Indian mindset, we pitched our Arena and flagship stores offering a global shopping format. We have put in live DJs, “Create Your Own Shoe” sections, designer shoes by Manish Arora, and so one. For the traditional Indian category, we have what we call Focus stores where the emphasis is more on the functionality of the shopping experience.

    HF: adidas is no different from other leading retailers, in that we consider a whole host of criteria when we develop global retail concepts. Our stores in India use the latest global retail concept, which is continuously evolving. The most important considerations are brand positioning (our stores being such a powerful means of positioning the brand) and customer experience. Customers expect much, much more than just a nice place where a brand displays products. Today, the customer expects a great shopping experience. While we are monitoring what competitors are doing, adidas focuses on developing unique stores that reflect the adidas brand, and the need of adidas customers. We are following a global segmentation model based on seven psychographic customer segments. There is no one segment driving the market.

    Q: How much of the strategy is influenced by the maturity of the retail sector in India , particularly in the context of the perceived saturation of the Western/developed markets?

    SSP: I agree that the retail sector is yet to mature in India , and there is a perceived saturation in the Western/developed world. However, the strategies that we are implementing in India have been designed for the Indian market. To use an old adage, “Think global… act local.” We are doing what we feel is best for the brand and the consumer in India , rather than mindlessly hoisting an international point of view. From that perspective, I think the Indian market is quite matured. At the same time, we would not like the consumer to be deprived of the global experience in terms of product offerings or retail experience. It is the mix of local understanding and multinational marketing prowess which has contributed towards Reebok’s success in India , where we command 50 per cent of the market share.

    HF: India is an important market for adidas, in particular because mono-branded stores are such an important channel here (more so than in developed markets). However, the needs of many countries are taken into consideration when developing global store formats. That being said, we acknowledge that market conditions in India and other Asian markets are distinct, and therefore we localize global retail concept together with our Asia Pacific retail team. We have developed a system locally that allows us to categorize stores according to well-defined tiers. The exact design of the store then depends on the tier that the store belongs to.

    adidas

    Q: What is your opinion about the present experimentation of a few brands with super-sized retail stores? Is it going to be a long-term and more widespread strategy for your company? Also, what location appears to be better for such stores — high street, mall, or any other? What is “super size” in the Reebok/adidas book?

    SSP: We have set up our Arena stores in Lansdowne Road (Kolkata), Residency Road ( Bangalore ) and Jubilee Hills ( Hyderabad ). But to be true, in retailing it is not always about size — more often, it is what you choose to do about it. The large-format store allows us to interact with the consumer and offer her/him an enriching experience. We want consumers to feel and profess that Reebok is “The brand that fits me”. To that extent, the super-size store is an integral part of our strategy and you will see more of them in the months to come.

    HF: Naturally, there is a limit to the number of mega stores that we can profitably run in India . In principle, a 29,500-square-foot store model (size of the New York Sport Performance Store) can be replicated in India . However, we need the market and our business to develop further, before the time is right.

    We will continue to be very selective in the rollout of our stores in India . The right properties for the large-store size (cannot be less than 7,000-8,000 square feet) is typically in high streets, not in malls.

    Q: How many retail outlets does the company presently have in India , and what is the total retail space? Of these, how many are multi-brand outlets (MBO) and how many are exclusive-brand outlets (EBO)? How many outlets can be termed as “benchmark” stores, whether in terms of size, product portfolio, customer segmentation, or total experience offered?

    SSP: We have 400 EBOs, 1,500 MBOs and 200 shop-in-shops. The EBOs are spread across 155 towns/cities and cover 5.2 lakh square feet. The number of benchmark stores in India is 55.

    HF: We have approximately 220 mono-branded stores. In addition, adidas products are available in approximately 1,300 MBOs. As for flagship outlets in India , we have no more than a handful.

    Q: How does the retail aspect plan to reflect the recent merger of Reebok and Adidas?

    SSP: As such, there are no ramifications on the retail aspect. We will continue to compete as separate brands and retail through our own stores. Going forward, if we find synergies to collaborate, we will. We are talking about the possibility of opening joint factory outlets. Hence, we will definitely get together where it would make sense to collaborate depending on the consumer segment. Having said that, we are two separate brands having our own heritage and drawing on our individual brand inspirations, and that is the way the consumer will continue to see us.

    HF: The market will continue to see Reebok and adidas as two distinctive brands, with distinctive positioning and with separate retail presence. However, we are one company, and therefore, both brands now work closely together to optimize the business results of the overall adidas group.

    Q: What percentage of the company’s total global sales is accounted for by the Indian market? What has been the sales growth in India , year on year?

    SSP: In the last two years, we have more than doubled our sales volume and have grown by over 50 per cent YOY.

    HF: We do not disclose market-specific information; however, the growth of adidas in India continues to be in the high double-digit territory.