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The Tommy Hilfiger experience in Indian stores should be like London, like New York: Shailesh Chaturvedi of Arvind Fashions

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In a freewheeling interview, veteran retailer Shailesh Chaturvedi who is the managing director and chief executive officer of Arvind Fashions talks about making foreign brands work in a challenging yet attractive market like India

Shailesh Chaturvedi, managing director and chief executive officer of Arvind Fashions, is a veteran of India’s fashion and lifestyle business with about three decades in the retail industry. He was the chairman of the India Fashion Forum (IFF) 2023. In a freewheeling interview, Chaturvedi talks about India as a lucrative yet challenging market for fashion and lifestyle businesses. Having brought reputed brands like Tommy Hilfiger and Calvin Klein among many others to India speaks about making foreign brands work in this attractive yet challenging market. He also offers some well-meaning advice to foreign brands wanting to win over India…[bs_input_restrict]

Three decades of growing with India as a fashion market. What can you tell us about the journey? 

My journey started in 1998 with Louie Philippe at British Madura Coats, one of the biggest brands in India back then. In 2000, when the Birla Group acquired the business, they promoted me to general manager for the brands Louis Phillipe, Van Heusen and Allen Solly and that gave me the opportunity to spearhead premium brands like Esprit.

The export business for Louis Phillipe required frequent travel to Dubai. I used to visit large malls like the Dera City Centre and see Zara and many other international brands and think that eventually, these brands will come to India and we’ll need to learn to compete with them or bring them to India by partnering with them.

Those were the days of India Shining (a 2000s marketing campaign by then Bharatiya Janata Party government to showcase India’s economic rise and overall economic optimism).

We were all very optimistic about the India story. And we were among the first few senior professionals looking at foreign brands.

I strongly believed that the premiumization of Indian consumers was going to happen sooner than later. I have been proven right in that sense. Not just in fashion, the shift was evident everywhere. People were upgrading their holidays, mobile phones, alcohol consumption and cars, etc.

So, consumption patterns have changed in the last two decades… 

Over time, all of us have upgraded our consumption and it has happened to fashion as well.

In 2003-4, a pair of Levi’s was available at Rs 2,000 and then I started working with a luxury Italian brand for Madura. At the time, everybody was curious about what prices we would sell those jeans. Their actual price at that time was around 140 euro (around Rs 7,000) but I would round it off and say $100, which at the time was Rs 4,000. And people used to say, Shailesh, you will not be able to sell a single pair of jeans in India at $100.

I used to keep quiet because I had a belief.

But there’s a caveat: Indian consumers upgrade if brands meet global standards. If you gave them the wrong product, they won’t buy it. They are smart and they travel a lot now—affluent Indians travel about six times or so a year.

So, that is the learning I got in the early years during my stint with Tommy and Calvin Klein. I call it “like London, like New York”, because the instructions to the team were that we should offer the same standard of experience to a consumer as they get at a Tommy store in New York or London.

Around the time when I was working with foreign brands, Armani had opened a store in Shanghai with a special red colour door. And Chinese people didn’t like it: they found it appeasement. They said they come to Armani because they want to buy the Italian Armani brand. If they wanted red, they would go to a Shanghai Tang, not an Armani.

I realized then that we must not change the experience while bringing a global brand here. Of course, some things we need to Indianize like the ȃ ts, the sizes, and colour preferences, but some broad brand parameters you have to keep at a global standard and not make unnecessary rejig. I don’t like the word jugaad because I feel it also leads to all sorts of compromises.

Sometimes, it is done to cover shortcomings or to take shortcuts.

Yeah. Shortcuts don’t work in the long run. And that’s why a lot of international brands have failed in India. International brand business in India is like a football away game. Most likely you are not going to get a favourable environment, crowd supports etc. Things are against you like the tax regime and fluctuations in the exchange rates. If you want to play this away game, then you have to be very, very smart and not compromise on the overall experience. It should be “like London, like New York”.

One day someone from a big domestic brand asked me: how did you manage to offer the same global experience here, in 70 cities, the same standard of your staff, windows, visual merchandising and product assortment.

So how do you manage it?

It has not happened easily. We work very hard. In the early days, I would visit a small store or an EBO six to seven times. Every store opening is a big thing for us. We would distribute mithai (sweets) and do a muh mitha ceremony. A mail would go out to all stores… even today all the stores in the country celebrate a new store opening by distributing sweets. We have made a store an important thing in our lives. We all lead from the front. In a new store, we know the staff by name, we know the franchisee or the landlord, etc. 

Today, at Calvin Klein, the median price of products is Rs 12,000 and we sell lakhs of jeans. And I have that smirk on my face… I told you so.

So how many people in India can afford jeans priced at $100 and above?

It is said that about 300 million of the country’s 1.3 billion population belong to the middle class. For a luxury price point of $100, close to 20 million people would be a consumer target. As we go from a $3-trillion economy to $7 trillion, then the 20 million target audience size will expand…perhaps to 50 million or maybe more. 

Some cities are already high on per capita income. The per capita income in Gurugram, the richest district in India, is already at $10,000. The aggregate of Gurgaon has a large lower middle-class and middle-class population, and if we look at the pie slice, the top 30 percentile would be $15,000 per capita and above. When we reach $7 trillion, a lot of today’s youngsters and Gen-Zs will be buying luxury brands.

How has the shopping pattern been post-Covid? 

People are shopping more than they used to do before, and I think COVID has psychologically given a boost to upper- end consumption. People are thinking that anything can happen in life, so let’s enjoy life today. 

Tommy and Calvin Klein’s business post- Covid have come out very strong. Not just Tommy and Calvin Klein, but even in the case of other brands including US Polo, Arrow and Flying Machine, we’re seeing that the premium upgradation has got a further fuel post-Covid.

People call it a K-shaped graph, with one side going up which is the rich people spending and consuming a lot more and then there is a bottom poor class or the rural class currently not doing as well and their consumption may be under pressure. So, two-wheelers are not experiencing as good a growth as four-wheelers, which is a sign of a K-shaped graph.

Where do see India 10 years down the line? 

The number of ultra-high-net-worth people spending on luxury brands kinds of brands will increase. I see people upgrading and I see the upgradation continuing.

Is the shift also expected to happen at the bottom of the level pyramid? 

Yes, if you look at the base level, moving from unorganized to organized, is the first step. I was in Kolkata recently and there I saw Bazaar Kolkata shop where you find shoppers from the real India—the auto rickshaw guys, the house help. They were shopping inside a covered structure building rather than buying from the pavements and which protects them from the sunlight, rain and dust. Then there is a value segment. Look at all the value segment players in India—Max, Pantaloons, Reliance Trends, V- Mart, Vishal Mega Mart—all the businesses have grown.

There will be secular growth and you will get a tailwind from the unorganized sector which is so much larger business as it converts to an organized one. Then from value to sub-premium to premium than to super premium. The standards, however, have to be maintained. We must have a scientific model as the cost structure with higher competition levels has gone up. 

So, if an enterprise must make money, it has to be very, very efficient and that’s the theme of this year’s India Fashion Forum (IFF that is scheduled to take place in Bengaluru later this month)—decoding the DNA of growth and how to deliver profitable growth.

There will be case studies of businesses which have created sustainable value by building capabilities that make them competitive. And that’s why I’m saying sometimes we have to de-emphasize the tailwind and look at execution as the first principle that gives you success. 

Can you elaborate? 

When you look at two axes, you have an X axis—your competitive positioning and a Y axis, your market attractiveness. The old school GE matrix or a Shell matrix. Now, our businesses have been too focused on the Y axis. Oh, Jockey created a big business in underwear, so we will also get into the segment. Irrespective of whether you have capabilities, everybody wants to get into the business. It’s the same case with Nykaa.

Instead, we should say we don’t want to be a Jockey or Nykaa but create a stronger own business. We should keep our DNA stronger, sharpen consumer definition, execute well, become more profitable and deliver better ROCE and generate real cash from the business. 

Just tailwinds of market attractiveness are not the only thing. We are seeing secular growth, we are seeing upgradation. We are seeing India becoming important in the current global scheme of things post at it like a hockey stick, the horizontal part of India may be slightly longer before the inflexion point happens. The pessimist also gets disappointed. Pessimists may believe that nothing will happen in India and that some religious intolerance will take over or destroy it. Or that there are too many infrastructure bottlenecks like airports and highways. But things are happening. Highways and airports are still being made. Goa now has two airports, and Mumbai and NCR will have one more each. The market is growing. Like I said earlier, we sell lakhs of Rs 12,000 Calvin Klein jeans. So, there’s nothing to feel pessimistic about India. India disappoints optimists and pessimists, both at the same time. No need to be super exuberant or unnecessarily pessimistic. But again, the irrational exuberance or euphoria is also not right. I guide global people to reduce their expectations. The China, China plus one or ABC—anything but China, whichever theory you work on, the focus should be on exactly how do I build a competitive edge. How do I build capabilities that will differentiate me from the competition, and excite the consumer. Let’s look at new segments. Let’s look at white spaces untapped yet and look at areas where we can create our competencies and edges. Don’t lose sight of execution, don’t lose sight of capability within and don’t lose sight of the need for profitability as soon as possible. Otherwise, we will burn cash and this whole old theory of ‘will swim when in water’ will not work out. It will lead to failure and shameful destruction of capital.

One global CEO says it is India’s decade, another says it is India’s century. What’s your take on India’s potential? 

My first message would be to manage the expectation of global headquarters otherwise we tend to hype India too much. Too soon. Let us temper down expectations to avoid disappointments later. 

A lot of time, it’s largely speculative trends- spotting. As I mentioned earlier, we go wrong on the time axis; things usually take longer time to happen than we envisage.

Look at our car industry. When I was starting work on bringing foreign brands to India in the early 2000s, we weren’t even a million cars a year market. India has now become a large domestic car market, crossing about 3 million cars a year. Optimists need to be guided well and not get too excited as things will happen. But they take time. 

Also, India is very different—each region is different in tastes, in colours. So, if you look at it like a hockey stick, the horizontal part of India may be slightly longer before the inflexion point happens.

The pessimist also gets disappointed. Pessimists may believe that nothing will happen in India and that some religious intolerance will take over or destroy it. Or that there are too many infrastructure bottlenecks like airports and highways. But things are happening. Highways and airports are still being made. Goa now has two airports, and Mumbai and NCR will have one more each. The market is growing. Like I said earlier, we sell lakhs of Rs 12,000 Calvin Klein jeans. So, there’s nothing to feel pessimistic about India. 

India disappoints optimists and pessimists, both at the same time. No need to be super exuberant or unnecessarily pessimistic.

But again, the irrational exuberance or euphoria is also not right. I guide global people to reduce their expectations. The hockey stick horizontal part is much longer than in a traditional hockey stick. The inflexion point is there, but it takes more time and eǹ ort and capital than expected in any ready market. Like what you saw in China or Russia or some other parts of the Arab world. That won’t happen here.

So what should one expect of India? 

India is still a price-sensitive market with its per capita confusion as we are the most undervalued currency in the world. So, in pricing calculation, we need to take purchasing power parity in mind. There is huge price sensitivity even with rich people. My friend who runs a Mercedes dealership tells me that many wealthy Indians come to buy very expensive cars – Rs 1.5 crore car but they still haggle for an extra keychain and extra doormat which costs nothing. These are unique things. We need to be realistic. Be patient and don’t oversell India. We should say we will double or triple in so many years…that’s good enough. India will grow for sure. It can create a very strong volume business but in a price-sensitive way. We will have to remove inefficiencies to achieve the margins required. Make things in India as much as possible because duties are very high. So, there’s a need for an India formula. It’s not like you can just bring Italian pizza and sell it in India.

It’s also not true that we will not buy pizza at all, or we will buy only chola bhatura. We will buy pizza but we will love it with Indian flavours….and we will need the price positioning of India—a sharply priced pizza. So, one should avoid both extremes – optimism as well as pessimism. 

Are we in a way mimicking China or we are charting an entirely different course? 

I like a report which said India is like three different countries in one—the upper class behaves more like Mexico, the middle belly more like the Philippines and the bottom in terms of economic prosperity is more like North Africa. That to me resonates a little better. 

Through our Tommy and Calvin Klein businesses, we see a little more connection with Latin America, Panama, and Mexico with some parts of Australia and some parts of the Philippines. China is different. We are a $ 3 trillion economy and China is $16 trillion. China is a lot more disciplined, has great infrastructure, consumers are ultra-brand conscious and it’s a much larger sized market. Chinese travel a lot and spend a lot more outside of China than even American citizens. 

In fact, China did the first favour to India. When the China volumes increased for foreign companies, everybody asked who is going to be the next China and they said India could be the next. In the early to mid-2000s, many foreign companies got disappointed because India is not even close to China, even today. India is unique and India is different. China is a big force already, so let’s not compare. In boxing, you must compete with someone in your own weight category and sometimes you suffer if you try to punch higher than your weight. Don’t fly the kite too high, bring down the expectations of the world about India. Just tell the foreign brands that yes there is a tailwind and yes, a huge conversion is happening from unorganized to organized but there is a much greater need for execution, planning and sharp pricing. 

This article first appeared in Business of Fashion magazine February 2023 Issue.

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