Power of the Private Labels: Success Strategies of Leading Indian MBOs

by Shubhi Srivastava

01-August-2019  |  15 mins read

Pantaloons
Image Courtesy: http://www.rcity.co.in

The Indian fashion industry is presently the mecca of retail opportunities for stakeholders both domestic and international, with new stores, e-commerce portals, or start-ups starting operations every day, backed by a policy structure that effectively supports domestic and international trade. With increasing prospective business avenues harmoniously complementing the rising average disposable income, retailers and brands are now planning to further profits by tackling infrastructure costs and increasing brand visibility, thus popularising multi-brand outlets.

International brands are also investing in the MBO format of sales in India, owing to the current Department of Industrial Policy and Promotion (DIPP) regulation, which only permits single brand retailing for multinational brands where different products can be sold under one brand name, as only 51 per cent investment is allowed in multi-brand retail. In fact, Piyush Goyal, Minister of Commerce and Industry, recently asserted his opinion in a statement, “India will not allow multi-brand retail by foreign companies, and on the pretext of B2B (business-to-business), no entry will be allowed for multi-brand retail.” Thus, brands including IKEA, Nike and Adidas enjoy single brand regulation, but retail bigwigs including Harrods, Wal-Mart, Tesco, Macy’s amongst others have not been able to launch their B2C business in India, further increasing the affinity towards Indian MBOs.

Consumer groups consider MBOs as the one-stop solution store for all their needs, with a plethora of categories, styles, price points and trends served to them across all ages and genders and retailers are cashing in on this retail format to expand business across several pin codes. Smita Murarka, Head of Marketing and E-commerce, MAS Brands (Amante), shares her thought on the same, “Amante has been in the country for almost 12-13 years and MBOs are an integral part of the business. Despite the rise in other retail formats such as Large Format Stores, EBOs, etc, MBOs still have a stronghold due to customer loyalty. People are comfortable with the format. Especially in smaller towns, where high street shopping style is popular, MBOs provide leading brands visibility. A lot of MBOs promote value retail and we have launched a sub-brand to suit this channel of sales – Everyday by Amante, which is now available across many of our MBO partners.”

Retailers are following similar paths to create brands that are compatible with this particular sales channel, while leading Indian MBOs have introduced a carefully curated selection of private labels that exhaustively cover all apparel categories suitable for all pockets. The massive product offering entails micro-management of each process right from design to the store, making sourcing and distribution the most crucial elements of supply chain. Apparel Online talks to the leading MBOs of India to get an insight on the key strategies adopted by them to source smartly and thus, distribute diligently.

Forca by Lifestyle

PRIVATE LABELS ARE THE KEY

As retailers need the platform MBOs provide, the latter also enjoys the presence of major national and international brands as they add value to the private label assortment the MBOs offer. As brand value attracts the consumer, the in-house offering adds to the variety in choice of the products, making private labels the biggest asset of MBOs. Representing an all-encompassing range of private labels with an experience of over 20 years, Pantaloons has doubled its revenues from Rs. 1500 crore to Rs. 2800 crore in 2018, ever since Aditya Birla Fashion & Retail Ltd acquired it. It started its operations more than 20 years back in the Eastern region, with Kolkata thus bringing forth the concept of modern retail in India in context of multi-department stores for fashion. A Pantaloons spokesperson defined the significance of a robust private label offering by saying, “Powering Value retail, we expanded to Tier-2, Tier-3 from East, as the aspiration and purchasing power grew in these retail spaces. Being a pioneer in the segment, Pantaloons has the responsibility to guide these regions to the branded space, and for this, we aggressively expanded our private label portfolio. Private Labels are a lot more price-sensitive, but they give us, the retailer, complete monopoly over the assortment, whether it’s regional level, store level, overpricing, contribution of categories and so on.” The takeover by ABFRL increased the percentage of private labels from 40 per cent to 65-70 per cent today, and Pantaloons is aggressively investing in them relative to the kind of cities and consumers they cater to.

Value-led MBO from the future group FBB has slowly paved its path to become one of the most popular and affordable fashion destinations for the hinterlands. Thriving on an expansive selection of private labels, FBB keeps its assortment in sync with the consumer mindset, and capturing the population of Tier-3 and Tier-4 markets has been a major objective of FBB. Piyush Vaish, Deputy Zonal Manager, FBB (NORTH) talks about the effect of dynamic market trends over the in-house merchandise MBOs carry, “Over the years, the competition between international and domestic retail chains is becoming intense, and bringing forward the correct product category is crucial. There are changes in the market affecting the offering we want to showcase. Take the case of winterwear in India – heavy outerwear is shifting towards pre-winter apparel, and it’s a major change for the buying decision-makers. Another change is the rise of online shopping. FBB has a good presence online, but MBOs majorly thrive on in-store experience. Third comes the branded premium apparel brands that are operating on markdown led cycles, attracting the consumers more. We practice value retail and cannot give further markdowns because that will make us get into the mass segment, and we don’t want that. Thus, first getting price point right is our USP and our monopoly over private labels aids in that.”

Vasanth Kumar, MD, Lifestyle International Private Limited
Vasanth Kumar, MD, Lifestyle International Private Limited

Owned by Dubai-based retail and hospitality conglomerate Landmark Group, Lifestyle has created a name for itself by being one of the most trend-led MBOs since its inception in 1999. Vasanth Kumar, Managing Director of Lifestyle, talks about the in-house brands that have helped achieve the reputation the brand enjoys in the market today. “A strong private label offering distinguishes us from the rest in the market – providing consumers a wide variety of styles and trends across categories of apparel, footwear and fashion accessories,” he says, by further discussing the brands in detail, “We offer something for everyone through our 11 private label brands including 4 franchise brands. Our own brands are – Melange, Ginger, Nexus, Forca, Fame Forever, Code, Juniors and our franchise brands are – Smiley & UCLA. Lifestyle also has exclusive rights to sell international sportswear brands, Bossini and Kappa.”

ALL ABOUT ASSORTMENT

Placing the right product at the right place and right time is the objective, and balancing the large number of SKUs for both in-house and external labels makes buying operations to become the game-changer for these MBOs. Catering to India, the Pandora box of diversified demographics is an extensively data-led procedure.

As per spokesperson of Pantaloons, the global retailers are proliferating as they have strength in expansion, but the real advantage lies with Indian retailers as they know the consumers better, and thus, can provide a tailored assortment as per the need. “India is extremely diverse, and it’s necessary to put the right product in the right place. “At Pantaloons, we make an effort to create a store that works for that region,” he says, “A lot of research goes into deciding the proportion of number of styles in a brand, or number of brands in a store, size differences, colour differences, as per the location. Other large format stores might have similar assortment, but they are not as tailored as ours, owing to our understanding of the market. It is both qualitative, including design language, aesthetics, and quantitative, with KPIs such as sales, productivity in a region, margins in stores, cost per feet basis, or SSPD (Sales Per Square Feet per day), with the biggest one bring Gross Margin Return on Investment (GMROI), as it defines growth at the same store level. ”

FBB
Image Courtesy: highstreetphoenix.com

While FBB caters to the consumer group that goes to the store looking for products from multiple categories, the retailer makes sure the region specifications are met efficiently, even if it leads to cutting down products and brands from stores, while adding new product categories. As Piyush avers, “Our core assortment is fixed, and our buying and planning software works by combining store space and the sales data. We are efficient with cutting down brand presence as per its performance as we aim for getting the right space for every range. We have invented aggressively on the footwear segment for women and kids as we see a market gap there. Many footwear brands for men offer mark downs throughout the year, but for other categories, these aren’t there. The shift has been very successful for us.”

SOURCING STRATEGIES

Incorporating varied sourcing strategies has aided in the smooth functioning of these market players. While Pantaloons opts for completely outsourced sourcing process, Lifestyle comes with a strong team of in-house sourcing personnel. “Pantaloons employs 100 per cent out-sourcing, with a network of 200 vendors spread across India, Bangladesh and China for apparel, footwear, handbags and accessories along with cluster-based specialisations based on skill sets and competence. 80-90 per cent is sourced by India, while synthetics, polyesters, where fashion complexity is higher, go to China and finally for scale-intensive orders, Bangladesh is the go-to. We are moving from 4 to 8 seasons, trying to create aspirations while linking with trends. More styles means more SKUs, and the expansion of our sourcing base,” says the Pantaloons spokesperson.

Vasanth talks about Lifestyle’s sourcing team, “All sourcing for Private Labels is managed by internal sourcing team members working in close association with the design and buying teams. We source from various hubs based on our requirements, from across India and a few locations overseas. There are two primary seasons – Spring and Autumn. However, there are multiple drops for each primary season which have their own specific development, design and buying cycle.”

Buying

Tapping on the potential of the resurgence of multiple brand outlets’ popularity, the bigwigs are planning to expand business across different tiers of the market. Lifestyle stores are currently present in over 40 cities with a total store count of 78, a number it plans to increase to 100 by 2021. FBB is planning its expansion in order to extend its brand image beyond just an FMCG store to a value retail chain. In the North zone, they come with a strength of 53 stores and plan to open 14 stores by this year’s end. Aditya Birla Fashion and Retail Ltd. has seen growth in its Pantaloons divisions and aims to continue its expansion with 60 to 70 Pantaloons stores.

Modern retail in India is slowly carving a place for itself in the global fashion industry and an omnichannel presence gives brands and retailers a push in the market. Providing a parallel to the visibility e-commerce provides, MBOs have a promising path laid out ahead of them. Marketing the private labels correctly to entice consumers that otherwise prefer the brand culture is what the MBOs today need to achieve in order to cash in on this opportunity.

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