Everywhere retailers

A mixed retail strategy helps traditional apparel retailers stitch up a growth story and withstand the discounting blitzkrieg from online marketplaces

Even as online marketplaces stir up the market with aggressive discounting and high pitched campaigns, the old guard among Indian apparel retailers such as Raymond, Arvind, Aditya Birla Fashion Retail (ABFRL) and others are breaking down their old structures to provide customers with a seamless shopping experience. They are reaching out across multiple platforms, from exclusive branded outlets (EBOs) to multi-branded outlets (MBOs) and even online stores, to find their wares a buyer. As a result, the likes of ABFRL, Arvind, Raymond and Page Industries, among others have clocked a CAGR (compound annual growth rate) of 24 per cent in the last five years. And in the process these companies are overhauling the way traditional retail businesses have been run in the country.

For instance, textile conglomerate Arvind Group, which already runs around 1100 offline stores across formats, recently launched Nnnow.com, a platform that links online and offline retail shopping experiences. It wants to move away from discount driven e-commerce market to brand-led shopping journeys, the company says.

"We have started making deliveries from the store within two to three hours of the order," says J Suresh, Managing director and CEO of Arvind Lifestyle Brands. Arvind is not the only one to have found a growth strategy in the mix of EBOs and omnichannel. According to Gaurav Mahajan, President (apparel business), Raymond, digital and omnichannel coupled with exclusive outlets have been at the forefront of their strategic agenda, leading to a CAGR of 20-25 per cent for the last five years for its apparel portfolio.

"The consumer today moves seamlessly between the physical and digital world and technology will intensify this trend in a disruptive manner," says Mahajan. All brands and retailers realise that they must find a way to respond to this. "At Raymond," Mahajan says, "we intend to not just respond but treat this is an opportunity for positive disruptive progress."

Clearly technology will play a key role in the change at Raymond and for others looking to straddle digital and physical retail formats. And companies will need to invest heavily in setting up the linkages between different platforms. Digital and omnichannel are at the forefront of the Raymond strategic agenda and necessary resources have been allocated for the same says Mahajan.

Experts believe that, in a way, traditional retail has been helped by the mushrooming of digital marketplaces as they have heightened brand awareness. On the flip side, by exposing customers to the latest technology for online buying, the e-commerce brigade has also raised expectations when it comes to the shopping experience. To benefit from the growing customer demand for fashion, traditional retailers have therefore had to change the way they ran their business. Greater attention to convenience, returns, delivery schedules has had to be built into their organisational DNA.

"If you want to be a top apparel retail brand, you have to be present in all channels because consumers are buying from all channels," says Prashant Agarwal, joint managing director of Wazir Advisors, a retail consulting firm. However, the branded apparel market in India is under-served. "They have not served even 30-40 per cent of the potential market in India," says Agarwal. As this changes, per capita consumption of branded apparel could go up significantly. What's more, in its recent report on branded apparel retail, CLSA estimates the fashion brands market to double by 2021 to $30 billion from the current $15 billion.

"The branded apparel segment is gaining considerable traction in an otherwise fragmented market. This is reflected in the top 15 brands registering a 24 per cent CAGR over 2011-15 versus 6.5 per cent CAGR for the industry; and the organised value-retail segment as opposed to unorganised retail or independent stores is gaining considerable traction. In our view, the branded apparel sector is likely to outpace industry growth rates by 1.5x through to 2020-21," the CLSA report states.

Significantly this growth will not be at the expense of traditional retail formats. Retailers will find value in setting up exclusive branded outlets as well as setting up their digital marketplaces. Exclusive outlets now stand at 48 per cent of overall organised retail formats, hinting at growing consumer preference for branded products.

The danger here is that the apparel retail industry could face the same fate as bookstores where customers visit the store to check out the merchandise but purchase online. It is to combat such an eventuality, perhaps, that these retailers are investing heavily in robust omnichannel networks.

J Suresh says that the contribution of omnichannel to Arvind's sales revenues could go up from seven to 15 per cent in the next three to four years even as it continues to add 200 stores every year. And Raymond anticipates branded apparel, which is currently roughly a third of the Raymond Lifestyle portfolio, to grow to over 50 per cent of the business in the next three to five years.