Dressed in the finest linen fabric suits, S Krishnamoorthy, CEO-Domestic Textiles, Aditya Birla Group, elaborates on the brands successful franchise model that has taken off in India.
They say that behind every great man is a great tailor, but this would not be possible if a tailor do not have access to the right kind of fabrics. Dressed in the finest linen fabric suits, S Krishnamoorthy, CEO-Domestic Textiles, Aditya Birla Group, elaborates on the brands successful franchise model that has taken off in India.
After the inception of its first EBO in 1992, Linen Club Fabrics, premium brand of Jaya Shree Textiles, (a unit of Aditya Birla Nuvo Ltd), has recently launched its 14th exclusive showroom in Karnataka, which is also the 100th exclusive showroom of the brand in India. S Krishnamoorthy, its CEO swears by his linen fabrics that has been sourced from the Normandy regions of France and Belgium.
Jaya Shree Textiles in Rishra (West Bengal) has a turnover of Rs1,300 crore, out of which linen brings a turnover of Rs 650 crore. Krishnamoothy has plans to double the business at Linen Club Fabrics in the next 3 years to achieve a total turnover of Rs 2,000 crore. Growing by 20 percent year-on-year, the premium brand is expecting to grow at 15 percent in the next 2 years.
From Manufacturer to Retailer
Though the Linen Club Fabrics was started 22 years ago, the real focus on fabrics began 15 years ago. Krishnamoorthy stresses that the Normandy area from where the material for the fabric are sourced is spread across an area of around 400-500 sq.mt. It is located around France and Belgium which is where the best quality of linen grows for making apparel. According to him, linen is still very niche to the world. Approximately 40 percent of the apparel business in the world comes from cotton, 50 percent from polyester, 2 percent from wool and just a mere 0.2 percent from linen. Moving from fabric to retailer, Krishnamoorthy gets a 30 percent marketshare in linen fabric. Considering its anti-septic, anti-bacterial quality with natural textures, linen has grown visible in India catching the tastes of a very niche market.
Out of 10 million meters of fabric that is being produced at their manufacturing unit in Rishra, (it is a 100 acre unit out of which 60 acres is used for making linen), 70 percent of the linen, goes on over-the -counter retail, through the 3,000 MBOs present all across the country. Twentyfive percent of the linen fabric is supplied to domestic brands like Louis Philippe, Van Heusen, Colour Plus, Wills Lifestyle, Peter England and Arvind. While, the rest 5 percent is supplied to global brands like Kenneth Cole and Tommy Hilfiger.
The Franchise Model
Ninetyseven percent of the Linen Club Fabrics EBOs that are present across the country, are franchised. The location are chosen carefully while focusing on high street or main street areas and lanes adjacent to these streets, to attract the affluent male customers who could be the CEOs, traders, senior executives or the likes.
Says Krishnamoorthy, “Oscar Wilde once said that fashion is a form of ugliness so intolerable that you have to alter it every six months. Though, I feel that fashion needs to change every month. In Europe, linen is used mostly for casual wear, but in India we wear it as semi-formalwear. We introduced vibrant colours, including pin stripes, and made something exciting for the Indian consumer. We have tried to change the way people look at linen. Earlier we used to have 80 percent white collection and now it has come down to 70 percent. Our design team at the manufacturing unit comes up with 10-15 designs a day.”
For an outlet of 1,000-1,500 sq.ft., a franchisee would require a minimum investment of Rs 60 – Rs 70 lakh, out of which Rs 30 – Rs40 lakh would go on fabrics and Rs 25 lakh on interiors. Meanwhile, our franchise outlets achieve break-even in the second year and can expect 20 percent ROI from the third year. The brand supports its franchisees with advertisements and promotions; back end training for 5 – 6 sales persons, a helper and an exclusive tailor to provide different styles based on the company’s catalogue. All staff employed at the outlets are educated right from what linen is; and how to wash and maintain fabrics.
“We study fashion trends in the area and guide our franchisees on buying stocks,” says Krishnamoorthy. “We even have franchisees that have expanded and opened 5 stores with us. The outlet which opened in Bengaluru this month is a franchisee outlet. He is an old franchisee and has opened outlets with us in Gulbarga, Nagpur and Thirupathi.
We have tie-up with JGA, a leading retail design company of the USA. The Linen Club Fabrics is revamping all their 100 outlets in India to give a similar ambience, space and colour. Krishnamoorthy adds, “We are changing the look of the outlets because we are a premium brand and should have a retail identity which is common across the country. The freshness of the stores will be maintained through the in-house designing and merchandising. We are going to make the Linen Club Fabrics stores a place to walk-in.”
Selling a 100 percent linen in a country where consumers are price conscious, Krishnamoorthy confines that brands like Louis Philippe and Van Heusen were not able to show case much apparel in 100 percent linen range. He explains that linen category comes under luxury, which can only be available over the counter.
When a man walks into Linen Club Fabric outlet and orders for a fabric particularly for a tailored-garment, for, he can decide on the kind of embroidery, buttons, etc. based on the company’s catalogue and the company delivers it, he says that is the USP of the brand.
Andhra Pradesh stands at number one in the consumption of linen. It could probably be due to its climatic conditions in the area that make it suitable for people to wear linen. Also, 30-40 percent of the people in Andhra are educated and understands linen. At a national level Karnataka, Kerala and Tamil Nadu including Andhra Pradesh contribute 40 percent to the sales.
Attracting mostly the rich male consumer, 95 percent of the brand’s product categories are menswear. Krishnamoorthy is slowly tapping into the womens wear segment which is currently around 5 percent. The brand has plans to launch a completely new womens wear collection and to increase the women’s segment by 20 percent. Currently, menswear consists of light formals in flashy bold colours like red apart from the usual white. They are priced between Rs400 per meter to Rs5,000 per meter. Linen Club Fabrics has different blends of linen with wool in the premium segment and linen with cotton in the more cost effective categories.
Importing 100 percent of the raw material does come with its ups and downs. With the Indian rupee depreciating in a volatile manner, costs can fluctuate as 30 percent import duty also goes into it.
Explains Krishnamoorthy, “I have great control over my cost of production. It is slightly lower than China, despite the fact that they are bigger in scale. A few years down the line I see my cost of production going low by 5 percent compared to that of China, because their labour costs would keep increasing. I have reached my own global benchmark that make the costs of production a little under control. By coming up with newer designs and colours, Linen Club Fabrics will continue to excite customers.”
Another major challenge was to keep up with the availability of stock in a store as there is very limited time in which a product can be replenished. He explains, “There are times when the products in the catalogue is not available at the store or is sold out. There are customers who demand for ready-to-wear and for a wider range of women’s wear.
In order to keep replenishing the store, Krishnamoorthy has installed software that are connected from the stores to his head office that gives him a daily feedback of sales and stock requirements. One can calculate the amount of stock that moves every day, know the bill value, customer feedbacks, which customers are buying what product, thus building on customer relationships.
Linen Club Fabrics started its marketing strategies in a big way 5 years ago. Being a B2B brand that attract the likes of customers like CEOs and senior executives, the brand has never brought the end consumer to picture. Now, it has plans to launch its first campaign, which is a film shot with fashion designer Rohit Bal in Mauritius.
Krishnamoothry further says, “Once we have built the brand awareness, instead of the current 97 percent franchise model, we will focus on setting up our own stores. Our aim is to reach 250 outlets by 2017.”
Linen Club Fabrics also has plans of taking the e-commerce route showcasing a strong portfolio of linen garments.”Definitely ready-to-wear is growing faster than ready-to-stitch. So, I do not want to lose focus on that. I want to go into garments slowly but my main area will be fabrics,” he says.
At the moment, Linen Club Fabrics is focusing on south India and places like Goa, Hubli and Maharashtra. “We have rich farmers in tier -II and -III cities, it is not that we are only targeting tier -I cities,” he concludes.