It takes a lot to take a zonal brand and grow it into a Rs 50-crore company. Vishnu Rageev R quizzes its Columbus – Rajkumar Lalwani, director, Royalex Fashions India Pvt. Ltd – to discover the less-covered voyage of a brand called Pan America .
How did the idea of launching a mid-priced brand come to your mind a decade ago?
A decade back, the concept of a mid-segment brand might have been nascent, but today the same class is prospering and becoming the elite. We three promoters (MG Reddy, Ashok Bhandari and Rajkumar Lalwani) had extensive expertise in the garment field, and we had a clear strategic view of the market. We foresaw the upcoming vacancy and applied with full confidence and succeeded. Since the time we started out, 10 years back, we have seen scores of brands launched only to evaporate into thin air within a matter of 3-4 years.
Our belief is that opportunities and challenges are two sides of the coin. We had a great product targeted at the growing, prospering middle class. And we prospered with our audience – the middle class.
What was the inspiration behind launching a brand with an American flavour?
Basically, when we thought of launching a new brand, we had a lengthy brainstorming. I remember distinctly, someone had said that India was passing through a phase that America already had. And that is how we thought of creating an American link to our brand. Our search led us to a company in the United States, and they agreed to license the brand to us. The company was Pan American. And with their assistance, we launched Pan America in India. And thus, till date, the American DNA is within the brand, and not just in the license or the name.
Did you smell any risk while launching an American brand imbued with an Indian flavour?
Not really. It is true that the average American is highly individualistic. His purchase preferences have the WIIFM (What’s In It For Me) factor. In the fashion arena, America is a great believer in changing fads. The Indian middle-class buyer does subscribe to the fad theory, but with a crucial Indian rider – value for money. At Pan America, we balance these two aspects well. We analyse market and consumer trends, and make what customers wish to buy.
Also, from the very beginning, we have had an efficient supply chain, which ensures that we never compromise on the ‘value for money’ philosophy.
What are the similarities and dissimilarities that you find among Indian middle-class customers and American customers?
The Indian middle class buyer has his own preferences, but he constantly seeks out his peer group for approval. At any store, you will see that youngsters prefer to shop in groups. The husband needs his wife’s approval. A group of friends checks out peer reaction before they zero in on the purchase.
The American buying pattern is driven by the ‘buy now, pay later’ culture. Due to the heavy dependence on plastic money, they have a live-for-today attitude. On the other hand, the Indian buyer is cautious. Even today, the accent is on allocating a chunk towards savings. The Indian customer seeks value. And that is what we at Pan America seek to deliver.
When it comes to leisure, Americans are very serious about it. ‘Work hard, party hard’ is the catchphrase. Today, most Indians look at it in a similar way. And that is why there has been a huge surge in casualwear and semi-formals. At Pan America, our sub-brand Legend shirts cater exclusively to this growing segment. This, once again, reflects the American focus on leisure and fun.
What was your startup capital?
We were young, enthusiastic and willing to work hard. We pooled in our resources starting with a capital of Rs one crore. Of course, the biggest investment was, and still is, our sweat equity. After a decade, today we are a cash-rich company with surplus reserves. And that is again because of our dedicated involvement in all the core areas of business.
What were the major setbacks that you faced in the beginning, and how did you overcome those?
Indeed, handling a mid-segment brand is a tricky tightrope walk. Getting the right retailers was the most difficult task. As a start-up company, we could not attract star talent. India is a huge country and we had to grapple with regional design preferences, logistic nightmares and distribution glitches.
Comparisons are made with smaller, unorganised players when it comes to pricing, and with premium brands as far as image is concerned. The mid-segment player has to make every move intelligently, optimising every resource.
We knew that the most important asset that we would own would be the brand; but that is also the most fragile asset and has to be looked after, nurtured and cared for. Therefore, we prepared for the long battle ahead.
Like Robert Frost said, we took the road less travelled. And, indeed, that has made all the difference to us. We walked one step at a time. Steadily. Just like we were a new brand, there were many other aspiring retailers. We supported them. We consistently invested in relationships. We identified distributors who were driven by passion, who had a fire in their belly. We held hands. And we celebrated every small victory.
How would you define Pan America’s growth?
We have grown exponentially. We started out with a mere 1.2 lakh pieces initially. Today, we produce 19 lakh pieces of garment every year. Our monthly production is 160,000 pieces, with 125,000 pieces of shirts and 35,000 bottoms. We have a strong pan-India distribution network and in the last 10 years, we have never had to resort to a sale to liquidate our stock. These are strong indicators of our success.
Now, we are looking at a consistent year-on-year growth rate of at least 20-25 per cent. The current production of 160,000 pieces every month will exceed 200,000 pieces by end of 2008, and should touch the 300,000 mark by 2010.
I personally see the year ahead as a landmark because we are like a huge aircraft. We have built the stability and gained momentum. We are now poised for a big take-off.
Where is your manufacturing unit located?
Pan America complies with international standards and is manufactured in its state-of-the-art factory in Bangalore. The entire process is monitored by a group of experts whose long experience in the business ensures that our garments stand out from the competition. The company’s production philosophy is guided by reliance on total quality and unflinching commitment to using environment-friendly materials. Denims are manufactured in Mumbai.
At Pan America, we buy our fabrics directly from the best of fashion mills. The main fabrics that we use are polyester cotton blends and pure cotton. These are ideal for Indian conditions and extremely easy to handle.
What is the Pan America portfolio made up of? Do you launch separate collections for all the zones?
Pan America has an in-house design atelier to ensure that the latest in fashions are delivered to the market faster. We started out with just shirts and trousers. The focus was on formalwear and a small chunk of casualwear. Over the years, casualwear has become a huge market, and has, in fact, overtaken the formals category. Today, we have shirts, trousers, short shirts, cargos, khakis, chinos and jeans as part of the ever-growing product portfolio. We have recently reintroduced jeans and denimwear.
India is a vast country with clearly demarcated regional preferences. What is hot and happening in the South may find few takers in the North. Pan America uses computer-aided design and manufacturing software. To ensure the correct design mix, we create fabric patterns based on specs from individual markets. These designs are emailed to key distributors and only after analysing the market feedback are these converted into shirts and trousers. The result: a brand that is fully in sync with the diverse needs of India.
Once we reach the critical mass on our EBOs, we will come up with summer and winter specials and accessories. The plans are underway.
Who is your target audience?
The prime target is the 22-35-year-old group in SEC A, B & C, earning a monthly income of Rs 10,000-25,000. The spectrum extends from college-going youth to executives and managers who look at a combination of great design and a lot of comfort. As a youngster, he has a fixed pocket money, and as an office executive, he has a limited chunk to spend on fashions. They virtually live in their clothes for long hours and look for apparel that can withstand that pressure without wilting, sagging, or drooping.
What are your retail expansion plans and strategies?
Pan America is available across the country, except in Punjab and Arunachal Pradesh. The end of this calendar year will cover even these areas. We are very strong in the South, while other regions are also fast catching up.
We have a strong presence in 1,800+ MBOs across the country. This focus will continue. At Pan America, we believe in doing a thorough homework and study to create win-win business equations. We are looking at EBOs to create a clear branding. Although we initially planned to roll out 100 stores this year, we have completed 30 EBOs in the phase I of the test run. The Pan America EBOs are called Pan America Destination stores. Spread across 400 square feet, Pan America Destination stores will offer customers an extensive range at prominent places on high streets and malls. We are still tweaking the EBO format. Very soon, the entire gameplan will be clear and we will roll out a 100 more stores. The Pan America Destination stores will have a huge colour palette and design range. The interiors and the VM will reflect the aspirational focus of the young, global Indian.
We will also adopt the shop-in-shop format at major fashion stores and in malls. As for location, we plan to be available in every city including tier II and III towns.
What was the imperative for building Pan America Destination stores?
The problem with MBOs is that most small and medium stores tend to cater to all segments of the market. As a result, their shelf space is cramped. They have virtually very little brand-building space available. Having our own EBOs can rectify this lacuna.
We have a two-pronged strategy. Admittedly, most customers will still go to MBOs for their shopping. However, over the last 10 years we have built a sizeable loyal customer base. These customers will love to drop in at our EBOs as they have already zeroed in on their brand preference. For them, our EBOs are an ideal destination. Here they can sample a huge range. They can know more about their brand.
Meanwhile, we will continue our focus on MBOs as well. MBO and EBO are two different networks with their own inherent advantages. This year, our focus is on getting into the big hubs of retailing like Lifestyle, Globus, and Shoppers’ Stop. We need to intensify our efforts to tell these biggies that Pan America is like staple. It has a strong customer base and it will pay to stock our brands.
What methodology will you adopt to popularise the branded store?
As I said, we are still in the test phase for our EBOs. Once that is perfectly tweaked, we have ambitious plans for creating a marketing blitzkrieg. At Pan America, we believe in action followed by hype – not the other way round. We are a serious business house and our target customers are extremely demanding. For customers, every rupee they spend has to give them full value. We understand this, and respect their emotions and value systems. That is why we take our steps slowly before picking up speed.
What will be the investment for retail expansion?
Investment is not a problem at all. In fact, we can quite easily roll out a massive retail expansion plan. Yet, three things remain critical:
1) Logistics: In a country as huge as India, unless we can support the retailer wholeheartedly, it will lead to a lot of heartburn. Also, since our EBOs will offer a much wider product and price spectrum, local preferences have to be fully studied.
2) Consistency: Whatever has been initiated, must be followed up. A lot of companies start activities to build hype and then do not sustain the commitment to follow it through. This actually affects their equity.
3) Price: The customer should not pay more for organisational inefficiencies.
At Pan America, we are deliberately slow in our expansion. Nevertheless, like the proverbial tortoise, we are sure to win the race.
What are the criteria that you consider before entering a new city or town?
From an EBO perspective, most cities and towns in India are extremely potential markets for the Pan America Destination stores. Our stores are small and compact, and will have a carefully chosen range.
We do not require elaborate planning to enter new cities and towns as the brand offers a superior price:performance ratio. And we have strong distributors with the muscle and the expertise to make it happen.
One thing that we lay a lot of emphasis on is the ability to service every retailer on a very consistent basis. Every month, we bring in a huge spectrum of colours and designs. This is the single biggest criterion. And that is how our network is on a constantly expanding mode. When we add more counters, it is never at the cost of the existing ones.
What is your unique selling proposition?
The Indian customer is growing and changing, and is willing to experiment in many, many ways. Yet, deep at heart, what makes Indians distinct is their strong connection to Indian values. A very important need for them is to seek true value for money in every transaction. It is this important need that is epitomised by Pan America. It is this focus that drives and guides us in every activity. We at Pan America ensure that this spirit is unflagging and flying high. This is a philosophy that is embedded at the nucleus of the brand.
Pan America is positioned as the “Truly International” brand that the Indian customer can relate to. The apparels are made using the best of fabrics and sturdy apparel engineering. When the customer realises that Pan America is better than the sale brands that he occasionally picks up, it reinforces the strong loyalty factor.
Let’s be clear that today’s customer is not looking at a low price, but he certainly seeks value for his hard-earned money. We do not promise him low prices. In fact, none of our communication focuses on the concept of low pricing. Thus, whether a customer picks up a shirt priced at Rs 325 or the one at Rs 795, he will discover value. We believe in surpassing customer expectations and, thereby, delivering delight.
How do you tackle the competition from similar brands with low price?
Over the last 10 years, we have earned the respect and goodwill of our distributors, retailers, customers and associates. We do not worry too much about competition. Our growth has been slow and steady because of our own design and not because of a competitive pressure. Of course, every year we see emergence of new brands. We are always alive to competition, staying on our toes, learning from them. But we stay focused on the big picture that we have. We believe that the cake is big.
We do not dump stock, but handle inventory management efficiently. We stay focused on increasing the width and depth of distribution. There are not very many brands that have been as consistent as us. Mainly, they are established players who have huge overheads on marketing and production. This results in a higher priced product or a similarly priced product, but without our level of quality standards.
Also, we are extremely proactive. Instead of picking up a high-profile team, we have trained our own people – those who believe in our culture of hard work and sustained relationships. Our distributors often comment about our team for their inclination to go beyond their sphere of work and build proactive win-win relationships. We are not a top-heavy company. A flat organisational structure ensures that decision making is lightning-fast.
We believe that the brand needs to go beyond high-profile marketing, and deliver a happy experience. Though a very difficult task, we introduce nearly 500-700 new designs every month. This ensures that every time the customer visits a store, he will find something new. This appeals to his sense of individuality and creates pride of ownership.
Today, we are happy that we have a spread of 1,800 MBOs and have set up 30 EBOs in a span of 6 months. We have aggressive plans for the year ahead.
With a 300 million middle-class consumer universe, what we have achieved so far is the tip of the iceberg. We have a huge market ahead. So, we do not worry about competition. At the same time, we are never complacent. We fully understand the tightrope we need to traverse 365 days a year.
What are your core marketing strategies?
Our major marketing thrust in the last couple of years has been on cinema, especially the multiplexes. More importantly, we have been able to direct our strategy into controllable pockets. We understand the Indian customers’ emotional link with the big screen.
Upen Patel has been our brand ambassador. Our marketing budget was about Rs 1.75 crore last year. We plan to intensify our efforts this year. Having achieved a width of distribution and stability in the product portfolio, our aim is to now launch an aggressive marketing thrust.
We have also been using magazines and outdoor media selectively. Our advertising in mainline dailies is for tactical promotions. A major chunk of our budget goes to point of sale since this is the last mile. We have been focusing on signage and visual merchandising to create desire and encourage impulse buy.
Also, we have with us Shrinivas Ayyar and his company Virtual Reality Communications. He is the strategic brand consultant and has been with us since the inception of the brand.
What was the company’s revenue last fiscal and what do you expect this fiscal?
Our current turnover is Rs 50 crore and we are targeting a turnover of Rs 100 crore by 2010.
About 60 per cent of our business comes from South India, 10 per cent from North, 15 per cent from East, and 10 per cent from West.
Are you into export?
Nearly 5 per cent of our sales come from the United Arab Emirates, Saudi Arabia, Bahrain and Kuwait. By 2008 we will be exporting to Europe and the United States.
What is the design philosophy at Pan America?
At Pan America, we believe in Judo Marketing. Unlike many big companies, our decision-making processes have lightning speed. We work on a 3 F mode – Fit, Fast and Focused. Thus, innovations happen on an almost daily basis. And these have to happen with a pan-India focus. What could be innovative in South may be passé in the North, and vice versa. What is important is to have an ear to the ground and understanding of the consumer pulse. All these are collected in a cyclical manner and implemented fast so as to reach the market before the fad peaks. This is critical and is often a tightrope walk. The slightest of delays, and you will be left with dead stock and heartburns.
What gives Pan America an edge vis-à-vis other brands?
In a competitive arena, where every brand and retailer resorts to at least two sale events in a year to liquidate slow-moving stocks, it is to Pan America’s credit that in the last 10 years we have not had a single sale. In India, low price has connotations of poor quality and craftsmanship. This is the image that we seek to change.
Our strategic step-by-step approach has facilitated our growth from a regional to a national player with consummate ease. At Pan America, we are like the proverbial tortoise that wins the race on the strength of sheer consistency. Most companies feel it is easier to create hype and then ride on its crest. We looked at the equation in a diametrically opposite manner. We have created a strong distribution network and are now poised to ride on that and create an aggressive marketing and advertising activity.
We have an excellent R&D as well as a design studio, with fashion designers who understand trends and integrate it in our merchandise mix. Every piece of apparel is thoroughly quality-checked to conform to global production parameters. We lay a lot of focus on packaging and aesthetic visual presentation.
We are on a continuous dialogue with our distributors, retailers and customers. Any new change or need is brought in quickly so that there is no gap whatsoever.
Do you have sales promotions?
We have been using sales promotions very sparingly. Our Free Watch and Free Bag schemes have been widely appreciated. We have introduced consumer promotions to induce trials.
We also have a number of trade promotions including foreign travel schemes. We look at these as relationship-building activities and means for getting useful feedback from top performers. The feedback is recorded and the good ideas are put to use on a systematic basis.
Since the time of your entry, how much has the apparel market grown? What are the major changes that have happened in the apparel market?
The changes have been incredibly dramatic. I would call it the great metamorphosis of the Indian market. When we launched Pan America, the concept of a mid-segment brand was at a nascent stage. Today, it has matured and has become the largest segment in terms of both volume and number of active players.
The market has gone from a formals-dominated one to casuals, to the crossover dressing that is emerging now. The Indian customer has evolved from a shy shopper to an advanced, experimental, adventurous buyer.
Once upon a time, we had this huge festival peak and a nine-month steady sale. Now, India is in a fest mode 10 months in a year. With India being one of the youngest nations in the world, the changes will continue with a blistering pace. And that’s the biggest challenge for marketers.
Based on your experience, what are the main points that you would recommend to a new entrepreneur for considering before launching an apparel brand?
The apparel industry is fiercely competitive and there is no place for a me-too or an also-ran. And today’s customers are smart and savvy enough to demand their pound of flesh. There is room for many, many more players to come in. But one cannot afford to be complacent.
I would suggest that you follow what we did. I call it the IMPACT formula. As a brand owner, your primary goal is to create an impact on your customers. The IMPACT mantra can be understood in these terms:
Investigate: Find out the niches available.
Meet: Be close to your customers. Listen to them and engage them in active conversation.
Probe: I have my own chain of retail stores, where I often meet customers and understand their changing needs.
Apply: Whatever you learn, be fast to put them on an implementation mode.
Convince: This is what your brand needs to do.
Tie-up: Work with excellent distributors and retailers who are convinced about your strengths, who believe in you and are willing to tie up customers for you.
This process of Investigate-Meet-Probe-Apply-Convince-Tie-up is an ongoing process. Get this right, and you just cannot go wrong!