With the emergence of new formats, distinct paths to sustainable profitability need to be crafted even as retailers in India face the Herculean task of reaching out to the customer through a combination of mobile, social and human connect.
It is believed that an average life of a store is five years before it gets refurbished. So, it is necessary to make 35 per cent profits every year for the next five years to refurbish the store and pay the investors. This is the fundamental bench mark of the retail business.
While discussing profitability, it is very important to keep in mind if you are a brand owner or an operator and do you have the production capability which can give you the gross margins that you want. These are the major factors that set the benchmarks for your brands profitability.
CEO and Director, Lacoste, Rajesh Jain, says, “To make profits in fashion retail, it is necessary to do everything that your competitors are doing and you must have the ability to do beyond that. The four P’s of marketing – product, pricing, position and place – hold no importance in today’s scenario. Quality product and innovation are the two factors that can help you win loyal costumers. Apart from this, for any brand positioning and pricing is very important. Pricing of the product should be such that the positioning of the brand is not compromised.”
He further adds, “The next important step to make profits in fashion retail is to target the right customer. Placement is the other critical factor because if you do not get a right kind of a place at right pricing, then your profitability will definitely go for a toss. Another P which matters the most is people – a committed team and of course, consumers. A brand can earn maximum profit in India by keeping the costs low and have manufacturing units in close vicinity.”
The Story of Benetton
Now, the question arises where is the profit? Is it in a brand or in running a store or design or manufacturing?
The story of Benetton will help us answer this question. The brand was completely tweaked by its subsidiary in India. The DNA of the brand remained the same but its positioning, its methodology of distribution, its ability to reach the consumer completely revamped. The entire design element is now domestic. So, the brand has actually taken its essence and re-created as it is supposed to bottom up.
Commenting on the same, Commercial Director, Benetton, Sundeep Chugh says, “Benetton as a brand has re-invented itself in the Indian market. We achieved this success as we were very clear about our DNA that we are a young and fashionable brand and we have to stick to our DNA. In India, as the population is more urban and young, so we concentrated on catering to the larger part of the Indian audience. Having the right channel strategy is also equally important as right presence across all the channels help to scale the heights scale and penetrate better in the industry. Other important factors were designing and strong backup support which helped us to achieve the profits.”
Strategy to Earn Profits
Operators’ strategy of earning profits is comparatively different from the brand owners. Operators take a global brand, re-position it in the market with very limited capacity to influence price but on the other hand, they have a very great capacity select the merchandise they sell.
Country Business Director, Arvind Lifestyle Brands (Gant and Nautica), Sumit Dhingra explains how they make profits while being a operator, “The major challenge that we face is that we do not have whole margin in the supply chain and we have to go with the global positioning. We focus on the categories that makes sense for us and at the same time do not dilute the brand.”