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The Journey from Distribution to Retail

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He believes that there is no thumb rule for the distribution business. Images Business of Fashion talks to Ajay Sharma, director, Upmarket Group, about his journey from distribution to retailing.

He believes that there is no thumb rule for the distribution business. The key to success is to keep evolving, be innovative and make new strategies everyday. Images Business of Fashion talks to Ajay Sharma, director, Upmarket Group, about his journey from distribution to retailing.

Simple living and high thinking is the term that best describes him. Quite enthusiastic while sharing his journey, Ajay Sharma said, “I started my distribution business with Pepe Jeans that came to India in 1991. We were the first who tied-up with the brand and started its distribution in North India. Gradually, we added Uttar Pradesh as its territory and that’s how ‘Upmarket’ was born.”

Share more about your company.

We started Upmarket Group in 1997 as a distribution and logistics company to identify new markets for established as well as emerging fashion brands in India. In the beginning, we were mainly looking after MBO operations and expansion of the brands. Gradually, we added a lot more fashion brands to our portfolio, and have launched many fashion labels in the country.

What are the brands you distribute?
We have the distribution rights of brands like Arrow, John Player, Adidas, GAS, UCB, Wills Lifestyle and a lot more. Today, the entire scenario of distribution business has changed. Brands have become more demanding and for a distributor it is getting difficult to handle more than two or three brands. Hence, we are working with Yishion group at present. We are looking after its expansion in the Indian market, not just as a distributor but are also taking charge of its complete retail business.

How many cities and retailers do you cater to in your region?
Currently, we have more than 100 shop-in-shops and MBOs. However of them, only 25 to 30 are active at the moment. In India, the MBO scenario is quite different. Based on the city’s potential, they are categorised as ‘A’, which are active throughout the year; ‘B’, which are seasonal; and ‘C’, which are active only once in a season. In UP, the top retailers are Bachoomal in Agra, Mark One in Kanpur and Bindals in Meerut and Ghaziabad.

What is your brand wise category split?
It is more related to the brand we are dealing with. For example, with Pepe Jeans we have its denim and casual wear, with Arrow we are into semi-formal and sportswear, and with Adidas we are only doing sportswear.

What are the top selling categories in your region?
I would say denim because when we started in 2005 there was no other denim brand apart from Wrangler. Lee was quite small and Lee Cooper had come for a short while. So, Pepe Jeans emerged as a big denim wear brand. Next is casual shirts. Its rise has been phenomenal in the category. People have experimented with casual shirts from semi-formal to Friday dressing.

Which is the most innovative distribution strategy you introduced?
Between 1999 and 2003, we started a novel concept of shop-in-shop. It was a new concept in the market that time and we introduced it at MBOs. As the brands were not ready to take the risk of independent store commitments, so, we took a dedicated space in MBOs with our furniture’s, modules and display. We put the stocks of 500 pieces and kept refilling it. This concept not only gave us sales but it also added to the brand image.

On an average how much margin do you fix on your sales?
Sales margins are governed by the brands and it varies from brand to brand. With established brands, the margins are moderate but if the brand is new or to be launched then we can expect 5-7 percent margins higher than the established brands. It is a complex formula completely governed by brands and further redesigned by distributors’ at local level. A distributor does his own improvisation on the margins by introducing cash incentives, early payment schemes and shopping shopper schemes to mobilise better payments and better sales.

What are the challenges in distribution business and how did you tackle them?
The biggest challenge is to identify the right channel partner or an MBO partner. There is potential in developing markets, but it takes 2-3 months to get the desired response andin fact, payments go haywire. In my view, retail in India still needs to redefine itself. In order to control such issues, I generally go back to my ABC approach. In our line-of-business 80 percent of sales come from 20 percent of the active MBOs. We concentrate on 20 percent of the core retailers as they do more business and the payment from them is assured, regular and consistent. Moreover, the brand’s image also remains intact as they are happy being presented in a favourable way.

What promotional strategies do you adopt to drive sales?
Our promotional strategies start with the launch of a season. At that time, making a month-by-month promotional strategy is more effective as the market is evolving. For instance, in April we started promotional schemes like buy something and get a gift voucher of some amount that can be redeemed on next purchase, or, buy something and get 20 percent discount. It encourages customer to buy more through indirect discounts. That’s how we make season-to-season promotional schemes.

What kind of financial risks are involved in this business?
Believe me, its a major financial risk the biggest is its stocks. Your payments are not secure. As a distributor you supply to deep-seated parties and they themselves are in pressure to finish off the stocks and inventories. In that case, you really have to push them to clear the payments.

What are your plans for this fiscal?
This financial year we will focus on consolidating our position. We are turning our effort to stabilise the growth trajectory. We will solidify on the brands we have been working with. Moreover, we are expecting to add more international brands to our portfolio.

Any lessons you learnt in this business?
Firstly, always be honest to the brands and your channel partners. Secondly, communicate immediately and open up in case you are facing any challenge or problem; and thirdly keep evolving. This way you may be slow in your growth but it will benefit you in a long run.