Pantaloons tips the scales for Aditya Birla Fashion

Affordability seems to be the name of the game in the group's expanding empire of fashion

Even as a slew of global and national brands wade into the quicksand of fashion retail in India, value fashion, the affordable arm of all fashion houses, is hitting consumer hotspots, both online and offline. The first financial quarter results for 2016 by Aditya Birla Fashion & Retail (ABFL) tell an interesting story. The numbers show a dip in the performance of Madura Fashion, the arm that holds licenses for several premium global brands, but a spike for Pantaloons, its offline retail venture that focuses on value fashion.

Most brands at Pantaloons have been developed in-house or sourced from a select group of associate designers. These brands are not known beyond the country's borders and at times, not even beyond those of a particular state or region. This is what the industry labels, value fashion. The chain posted a 16 per cent growth in sales in the first quarter of 2016 as compared to the same period in the previous year.

Compare this with Madura Fashion, the group's repository of global labels. It holds premium menswear brands Van Heusen, Louis Phillippe and the mass market brand Peter England. This has shown a three per cent dip in sales.

According to industry analysts, the Indian apparel market has been steadily moving towards branded products. A report released in May 2016 by CLSA said that the entry of a diverse set of global brands with multiple distribution formats, the emergence of a young consumer base and the growth of organised retail is responsible for the shift. In fact reports such as these have fueled the ever-increasing appetite for the Indian market among global brands rushing into the country. However, the Madura Fashions experience seems to indicate a different trend altogether.

According to the company, Madura's brand portfolio was hit by the continuous discounting and promotions by e-commerce companies. The implication being that it is not that global labels do not have a market in India, but it is important to keep a sharp eye on affordability for the brands to make a mark. The company also said that the focus on value fashion in Pantaloons paid off and helped the company to grow its sales and improve profitability.

Is this then an indication that premium brands are struggling as they are unable to fight the onslaught online?

Vasant Kumar, executive director of Landmark group owned value fashion retailer Max says that it would be erroneous to blame just the online discount warriors. Intense competition among fashion chains even in the offline space is bruising many players.

"If the same brand is sold through different chains and at different prices, obviously numbers will be impacted. E- commerce is also posing a challenge," he says. Is it then the case that fashion companies are better off selling their brands in a few select stores or restricting their sales online? Both seem like a short-sighted reading of the situation. Several brand studies have shown that penetration is the key for all brands. It is only when brands provide customers with the opportunity of discovery as often and in as many spaces as possible that they can expand their footprint.

Kumar explains that the clue lies in the nature of the labels being retailed. In the case of private labels (brands owned by a retail chain), pricing is controlled and the impact of e commerce is also limited as they are mostly sold in house and on limited online channels, he says. While 95 per cent of Max's merchandise is private labels, it is 63 per cent for Pantaloons and over 90 per cent for Westside. An executive at Tata-owned Trent says that with the advent of e-commerce, the discovery of price comparison and arbitrage has become easier for shoppers and their decision making. In that sense, therefore, the online marketplaces are helping offline retailers.

Devangshu Dutta, chief executive of consultancy firm Third Eyesight says that pinning the success or failure of retail strategies on the behaviour of e-commerce firms is self-defeating. "The retail business is perhaps the most dynamic and changes on a daily basis - you can't expect and plan for a steady-state environment. Each customer's every action - whether she buys or not - decides incrementally whether the business is on the right track," he says.

ABFL said that Pantaloons, which posted its best performance ever since it was taken over four years back, also benefited from a rationalisation strategy that led to the shutting down of 76 stores under the Madura stable. As for Madura, ABFL said its strategy is focused on building a healthy, sustainable, future ready business; maintaining 'intrinsic' brand premium through calibrated discounts; investment in brand building and continuously rationalising cost structure. "In the short term, this strategy would result in lower sales and profits, but would create a more 'profitable' business going forward," the company said.