After the financial crunch in the global market, regional players are utilising various strategies to attract customers from metros as well as rural India After the early revival witnessed in the global market, there has been a drastic transformation in India’s apparel industry with a number of regional brands sprouting in various towns and smaller cities across India. Therefore, this has drawn the attention of various private equity (PE) players in the global market.
It has been observed that regional brands such as Liverpool Retail India’s Barcelona, Vir Retail’s John Hill and Nahar Group’s Cotton County, among others are selling their products ata much cheaper price as comparedto the national brands. “Most regional brands are posing stiff competition to national brands. The regional brands are aiming to gradually make their presence felt at the national level and thereby occupy a significant market share,” says Jagdish Rai, manager of Fabric World, a small-sized apparel retail store in Surat.
“Such brands adopt marketing strategies such as lowering the cost of the products, employing workers at low salaries, provide discounts to customers as well as offers such as ‘buy one and get three.’ Through these marketing strategies, companies are looking to clear their inventories much faster and earn higher profits,” says Rajeev Mehta, proprietor of JK Garments, a mid-sized garment manufacturer and retail store in Chennai.
 While on the other hand, the national retail brands maintain their product prices at three times more than the regional brands because the former tends to spend a huge amount for promotion of their brands. The expenditure incurred by the national brands for promotion is recovered from the customers; therefore, they are able to maintain the net margins at around 8-10%. The national players depend on the profits earned from every store and they first target the metro cities instead of tier II and tier III cities.
Measures adopted by regional players
Vir Retail, an Indus Mandhana group’s venture in Bengaluru, has introduced 50 John Hill stores in cities such as Belgaum, Gulbarga, Baroda and Bharuch within a period of 3 months. The company is also planning to open smaller stores that would be able to provide low-cost products so that consumers from the low income group with a restricted budget would also be able to purchase these products.
Moreover, many brands like Liverpool Retail’s Barcelona are targeting rural regions in India such as Mehsona and Palampur. Most franchisees are interested in the discount segment as they are of the opinion that the stock that are not sold by the company could be taken up by the franchisees and deployed to those places where there is a high demand for them.
It has been observed that most of the regional brands are planning to sell their equity stakes to PE companies in order to earn higher profits and subsequently implement their expansion plans. Liverpool Retail that is reportedly earning Rs 180 crore plans to earn Rs 50 crore through the PE route and also has plans for initial public offering (IPO) in 2010. Retail brands such as Allen Cooper and Lee Solly have also gained prominence due to its branches in places such as Hissar, Sundernagar, Amritsar and Jamshedpur. Sabrina Mitchell |
