Collaring The Value Segment

After spending ten years being tight cuffed, starch-collared and stiff-lipped Madura Garments is finally looking to free its arms and ease its style. Earlier last month the company launched Peter England, its great white hope in the mass market. This step is as significant as it is audacious. "Peter England [is] to be India's largest selling brand of shirts within the first year of launch," says Vineeth Nair, brand manager, Peter England, Coats Viyella India Limited (CVIL). If excessive ambition was a crime then MAdura Garments just signed its mea culpa.

The question is: can the gravity of Madura Garments' act match the grandiosity of its confession? The logic of its marketing strategy and the initial market reports suggest auspicious beginnings. In Hyderabad, market sources say 75,000 units of Peter England had been sold in first two months. Is that much? In the same territory, Van Heusen and Louis Philippe put together sell about 30-32,000 units in a year. Though the company is tight-lipped about the targeted turnover, the industry believes that the year-end Peter England turnover, in the best case scenario, would be around Rs 60-70 crore. That means a volume throughput of 2-3 lakh shirts per month.

This performance, if achieved, would be heady stuff by any stretch of imagination, honestly. Till today, other than isolated examples like Newman, Nine AM, Sero and John Miller, almost no brand has been able to cross the threshold after which it can become profitable enough to expand markets.

This has had a negative fall-out for all the brands. One, there is no established distribution channel to service this segment in key markets. The upper segment (Arrow, Louis Philippe et al) is served by dedicated channels. The economy segment being a largely regional game, has efficient distribution at the local level. For example, Cambridge has an excellent network in Mumbai, in particular, and Maharashtra in general. Only the middle segment, which accounts for almost 50 per cent of the ready-made shirt volumes in the country does not have a proper channel.

The absence of a proper channel starts a vicious cycle. The inefficient channel limits the size of the market that any brand can access. The smaller business size and limited geographical spread reduces the incentive to advertise or spend on communication at a national level. So each brand only builds up a local awareness and depends largely on the trade push. This in turn means a brand like Concept, Ambassador or Turtle cannot charge the premium to either invest in building scales or increasing awareness. The wheel then turns full circle again.

The quick roll-out

Madura Garments is avoiding this trap. Peter England is going through a completely new channel aimed at even the smallest towns. "Peter England will be a trade-led brand aiming to achieve distribution in all 1 lakh-plus towns across the country," says Nair. This is a difficult task. Madura Garments for all its market savvy has little experience in low priced shirts. Allen Solly is sold through exclusive outlets. Van Heusen and Louis Philippe are sold through select group of multi-branded outlets. "Coats Viyella till now has had a universe of about 10-12 retail outlets in a metro. That number would be smaller for mini-metros. Handling an operation of this size is a massive shift," says a market watcher.

And sizeable it is. In Mumbai, Madura Garments is supplying to 160 retail outlets. "They are even looking at multi-brands outlets that stock five shirts," says a market watcher. The most audacious part of the exercise has come in the way the company is going to service these outlets. Instead of using its existing distributors, it has appointed new distributors with extensive experience of the textile industry. So Peter England's Mumbai distributor was formerly a distributor for Trendz.

Having an experienced but fresh distributor will prevent the distributor from focusing on other Madura Garments brands (Van Heusen, Louis Philippe) with higher realisations. More importantly, it will reduce the company's need to grasp all the complexities of managing this high-volume supply chain in the initial phase.

Further market sources say, key distributors have had to deposit Rs one to two crore with the company, part of which has been adjusted against 500 or more units of stock in the initial phase of launch. This is the buffer stock size. Depending on the offtake from each retailer, the distributor will replenish the stock on a daily basis. The company in turn will restore the buffer stock on a weekly basis.

On paper, this is a fabulous move. The distributor, with his money at stake, cannot simply push stocks to the retailer. If he does, and the retailer is not able to sell the stock, then the recovery of dues would be the distributor's problem. The distributor's deposit then is an insurance against any outstandings and a bit more. The distributor is more involved with the company's business given that his own money is at stake.

This set-up has allowed Madura Garments to roll-out the brand nationally in a very short time. The experienced and established distributors are in know of a large majority of garment retailing outlets. So Peter England has been able to get into the smallest of outlets in metros in just two months.

Utilising scale economies

This quick roll-out has made Peter England's communication strategy much more effective. Since the company has chosen mass media advertising, effectiveness depended on distribution width.

The communication itself seems to focus deliberately on the functional. Instead of sending out a flaky aspirational message, the company has stressed the functional appeal of the product. In fact, the television advertisement takes a gentle dig at the genre of shirt advertising where protagonists pretend to be what they may not be: successful, on-the-move executives. "That is one smart thing they have done. Though I am still clueless about the meaning of 'The honest shirt' tagline, the TV storyboard is aimed at anyone who can pay Rs 400 for a shirt," says a senior marketing executive with a leading garments company.

Given the state of the apparel market, the timing of the launch is perhaps questionable. But comments a market watcher, "For a strong company like Madura Garments, it seems to be an opportune time to go for the mass market. Media can be bought cheaply, the communication need not be aspirational and fancy, because consumers are looking for something functional. And Madura's distribution strength is in their favour. Says another competitor, "It looks all set to do a Newport in shirts."

And so it does. But there are few things which make MAdura Garments exercise tricky. Unlike Newport, the number of stock-keeping units (SKUs) is much larger for shirts. Whereas Newport started with one fit, four waist sizes and two colours, an average shirt brand has to have 20 styles, four sizes, and pieces per size giving 160 SKUs. This is also where its readystock distribution strategy will be tested.

The risk here is that in the initial enthusiasm to gain distribution width, the SKU preference may be dispersed over too large a retail universe. "There is very little wherewithal at the moment that a company can do to track sales in 100-160 outlets [in a territory] on a weekly basis," says a textile retailer. Even if 50 outlets get saddled with unwanted stocks for a week it will choke the pipeline. That may sound like a truism, but the company is used to dealing with small retail universes in the premium category, where fluctuations are over relatively few outlets.

The other thing to monitor will be the media strategy. This segment is the one with very strong regional competitors which can, except for linings and cuffs, match the Peter England shirt quality at Rs 250-350 a good Rs 100 less. So in the end it will be the brand awareness which will keep the locals at bay. Says a garments marketer, "Over the last year it has become very clear that given the same advertising spend of, say, 1995-96 will not even be half as effective. One can blow Rs 5 crore on mass media and people may forget the brand the moment advertising support is withdrawn."

This makes it imperative to have a year round recall to create the consumer pull so keep the volumes high enough. And moreover, given the oversensitivity of the consumer to price-cuts, branding as an insurance against regional competitors will have hardly any validity.

And then again Madura Garments has to watch out for its own brands too in different ways. It has a mid-price brand Elysee in its stable. Madura sells it mostly through trade. And it is Elysee which may ruin the party for Madura. Since Elysee is priced closer to Rs 350, and is from the Madura stable, all this hype in the segment can well put life back into Elysee.

And in the multi-brand outlets where Louis Philippe and Van Heusen are present, Peter England clearly presents a threat. Says the senior manager of a prominent multi-brand outlet, "This product parity of Peter England is the only worrying factor for us. For Madura, it is not. They make money either way. But my realisation is at least 60-70 per cent higher on Louis Philippe or Van Heusen."

For now, it is a tightrope walk for Peter England honestly.

The Peter principle

What does Peter England have up its sleeve that others before it didn't?

No glitzy showrooms: Besides being expensive, they curtail visibility.

Go easy on umbrella branding: Craft a distinct brand identity that seats the value proposition clearly.

Give choice even if you are a great brand: More colours, more styles, more sizes but while holding the price line.

Shun exclusivity, without losing sight of aspirations: Muscle into every neighbourhood outlet and grab merchandising space.