Weaving A New Spell

Many companies purchase polyviscose yarn from us. Raymond may be using our processing facility. Par jab woh Raymond kee chhap lag jaati hai (but when it gets branded Raymond), no one will want to know where the yarn came from. If tomorrow I get up and say I make the best yarn, nobody will believe me. We will still be regarded as a B-class brand.

As vice-chairman and managing director of Rajasthan Spinning and Weaving Mills Ltd (RSWM), Shekhar Agarwals predicament is understandable. In the eighties, when the assault from the powerlooms began to take its toll on the composite textile mills, many of the traditional textile mills began to change tack. To escape the crushing cost disparities, traditional players like Bombay Dyeing, Stanrose and Thackersey edged into branded fabrics, where the margins were better. Others like Orkay exited from the fabric business to move into smaller niches like upholstery and furnishing.

But RSWM, the flagship company of the Rs 1,200 crore LNJ Bhilwara group, literally stuck to its knitting. After all, there was no real impetus to change. RSWM was by far the largest producer and trader of yarn in the country. It continued catering to the large demand for blended yarn, besides selling large quantities of grey cloth fabric used for childrens school uniform, says a leading textile analyst. As a result, it never quite bothered investing in Mayur, the brand it had launched in the late seventies.

But in 1994, the yarn business, where Bhilwara had anchored itself, began to experience turbulence. Severe overcapacity in the industry sent margins crashing to a abysmal 3-4 per cent. Besides, sharp fluctuations in the demand would often wipe even those wafer-thin profits.

From 1995, Agarwal and his team began a belated attempt to follow the rest of the market in moving up the value chain. Of course, making the shift from a commodity-selling mindset to the high-margin, branded fabric business is a Herculean task.

These days, at the plush eight-storey glass-panelled Bhilwara Towers in Noida (a satellite town of Delhi), there is a buzz of activity. Shekhars team is trying to figure out how to stretch the brand equity for a upper middle class clientele, without shedding its core middle class moorings.

To do that, Agarwal is rapidly overturning every precept of doing business held dear inside the tradition-bound Bhilwara Group. On the anvil is a series of first: a new contemporary identity for the Mayur brand, an exclusive retailing chain, an overhauled design team, and a foray into ready-mades by tying up with a foreign brand.

Now, if Bhilwara wants to decisively take charge of the value chain, instead of being dictated by the trade, it could learn from the experiences of players like Raymond. But aping the early birds may not be as easy as it looks.

Every other brand always aspired to reach for the Raymond slot of exclusivity. They all started early, in the late 1980s, and yet none came close to touching Raymond. But the bunch did manage to create their individual slots, often overlapping at times. So you had the Royal Pataudis Gwalior, the striking Shastris Vimal, connoisseur Digjams Shekhar Kapur or flamboyant Karan Kapoors Bombay Dyeing.

Mayur had none, till as late as 1994. Then, Shah Rukh Khan was roped in for some Rs 20 lakh. Mayur got an identity. It was backed by an aggressive product and distribution upgradation.

As a result, average price realisation on Mayur fabrics went up by over 8 per cent in 1995-96 to Rs 92.54 per metre (see chart). But in another years time, RSWM wants to hike the price realisation to nearly Rs 105.

In a nutshell, the pace set in 1995 is accelerating. Only if the groupsconservative approach would secede soon enough, it could be faster, say critics. They (the company) are like the Indian hockey team, comments an official who got some time to interact with the company on a Mayur project. They manage a penalty hit, get closer to the goal, but never actually score the goal.

The challenge

What were the viable options before RSWM really? It could have stuck to its spinning operations, which with a relevant cost structure would have allowed it to make a tidy profit. But spinners from other South East Asian countries, having lower cost structures, have snatched away the advantage and made spinning untenable for Indian operators, affirms A K Sengupta, vice-president (sales and marketing), Mafatlal Industries. The only alternative was to move up to the next stage: weaving and processing, where 50 per cent of the sales value is concentrated.

But this move has concomitant risks. In the following stages of the value chain, the mill has to pump in larger investments both in machinery as well as labour. And importantly, by getting closer to the market, a textile mill had to also keep a close tab on what consumers wanted. Otherwise, it could find itself saddled with inventory which the market doesnt want.

Given the risks, a great many players like RSWM stuck to the simple task of spinning. Textile makers became marketers while Mayur slept.

Agarwal makes no bones about it. In the period between the late 1980s and 1995, we had a marketing weakness, he admits. We needed to organise ourselves. As S Kumars prospered, newcomers like The Harry Collection gained ground, we lost a lot of market share. Mayurs share of the polyviscose (PV) suitings market went to as low as 2 per cent by the early 1990s. RSWMs predicament, to a large extent, was a result of a radical transformation that the industry was undergoing.

New industry forces

Actually, it was around the mid 1980s that the powerloom sector began eating into the share of the composite textile mills. These small-scale production units didnt pay any duties, their cost of production was low, the quality of basic piece-dyed fabric was more or less the same and the price, much lower than what the mills charged. So you could have a powerloom fabric for Rs 50 per metre and a nearly same quality mill fabric for Rs 120.

No wonder then that the share of powerlooms has risen to about 60 per cent of the textile trade now, from less than 40 per cent in the late 1970s. This was aided by the commodity nature of the market. People bought fabric, synthetic or cotton, not brands like Vimal or Raymond.

The early 1980s changed the concept of clothing in India. There was a mass movement from dhoti-kurtas to shirts and trousers; women shifted to synthetic sarees and salwar kameez. High durability of synthetic fabrics, greater design-orientation, minimal maintenance, and its economical nature propelled the market. Alongside, sellers had begun to recognise the power of powerlooms. The 1982 mill strike only fuelled that power.

Thus began branding in synthetic fabric. Reliance launched its Only Vimal campaign in the early 1980s. Bombay Dyeing busied itself in opening exclusive retail shops and involved flamboyish Karan Kapoor to get that cutting edge. The Arvind Mafatlal group too, graduated to high-value fabrics.

Mayur kept pushing through the trade to the Chandni Chowk or Lajpat Nagar segments, as Agarwal identifies his earlier sales points. As competition kept pouring in, Mayur, as a brand name, began paling. RSWM had established a name in middle class homes, but never nurtured it. If you look at it from the companys business plans, it seems understandable to an extent: it had other things to attend to. Yarn was RSWMs primary business. Four years back, yarn sale comprised Rs 212 crore of RSWMs Rs 285 crore; it still brings in over Rs 350 crore in its total Rs 425 crore of sales.

The diversifications of its parent group, which include things like graphite electrodes, sponge iron and hydro-electric power generation projects, also took away a lot of its attention. As glamorous faces splashed screens to grab a chunk of customer mindspace, L N Jhunjhunwalas company remained steadfast in the age-old trading mentality. We were firm that we will not use a woman to sell cloth, says Agarwal. We did not want to be a Lux; we were more conservative. We did not want any glamorous publicity.

Building a star brand

Shah Rukh Khans endorsement, therefore, was a major leap in attitudes. It came only after a lot of tussle within the company. There was an infusion of very young professionals as part of a totally fresh design team. The company changed its entire marketing team and inducted younger people. This was soon after the change of CEO in 1992, who had held on to the seat for over a decade.

It was all to beat that old concept, reasons Agarwal. We had to change our entire thinking. Agarwal is regarded by many in the industry to be the most dynamic of the lot in-charge of the company. Now consider this man, who does not watch movies, agreeing to associate his brand with a film star. Then consider the trouble the more conservative in the group would have had.

With nothing much to lose and a lot to gain, Agrawal and his team went for a thorough upgradation of the entire marketing mix:

lcreate an aspirational value and establish brand recall;

lupgrade the product through a very exclusive designing concept, superior quality and better finish to stand up to that aspiration;

lsimultaneously hike price points in accordance with product quality to extract better margins; and

lbeef up distribution.

The first task was to up its weaving capacity. Alongside, both exports and production were given a major boost. Production capacity for Mayur went up from 3.5 lakh metres per month in the early 1990s to 9 lakh metres a month. It has added eight more looms this year and plans to add another 25 in 1998-99 when capacity for Mayur should be touching a projected 10 lakh metres a month. The group as a whole produces 15 million metres of fabric a month, up from less than 30 lakh metres a month a decade back.

Since 1996-97 was not a very good year for textile marketers, Mayur had to cut back on production to avoid inventory pile-ups. In any case, right now the synthetic market is working on overcapacity, feels Harminder P Sahni, senior consultant, KSA Technopak.

This is when Mayurs exports thrust also came handy. Though the company has been exporting for the last 10 years, the push came only in the last 3-4 years. RSWMs exports more than doubled in 1996-97 to Rs 15 crore (see chart). It began exporting to Europe.

On the domestic front, Mayur worked by attracting more, and bigger, wholesalers, so that it could widen reach as quickly as possible. RSWM, like other players, divides the textile market into 24 wholesale mandis nationally. They are overseen by 25 agents who, in turn, have 5-6 wholesalers under each. Even two years back, an agent had only one or two wholesalers under him, each of whom did an annual business of some Rs 20-25 lakh. Now the wholesaler count stands at 110. Each does a business of about Rs 1 crore a year, claims the company. Plus, over 70 per cent of these wholesalers have been made exclusive to Mayur.

We offered them additional incentives, states a marketing official. The incentives work thus: if the ex-mill price of a metre of Mayur fabric is Rs 100, the wholesaler will sell it to the retailer at Rs 115, and the consumer will get it for nearly Rs 135, adding Rs 20 to the retailers cash register. The agent, who works on a delcedre arrangement (industry parlance), receives a commission ranging between 1.5-3 per cent of the ex-mill price. He is responsible for spotting opportunity and introducing wholesalers. That accounts for a strong grip on the trade, believes Technopaks Sahni.

But push alone doesnt get you much. Mayur realised this rather late. The trouble is, if you cant fight for the share of mind, the retailer is the king. He dictates everything, says Agarwal. Essentially, he gets all the margins to keep. The real margins are in retailing, feels Agarwal.

Getting close to customers

So RSWM is now gearing up for a big push on retailing, by opening exclusive shops. Eight are operational right now (more in Mayurs strongholds, Calcutta and Rajasthan) and plans are to take the number to 20 by 1998-99. Each shop is said to be doing, on an average, sales of Rs 10 lakh a year. These retail points will be branded as Mayur Showrooms or one-stop shops, a la Raymonds Park Avenue outlets. In the coming financial year, when Mayur is projected to touch sales of Rs 115 crore, it should stock ready-mades and accessories like belts, sourced from a third party.

Mayur is not yet considering in-house production of ready-mades. And rightly so. For one, Mayur feels no textile house, except Raymond, has had a reasonable success with a ready-made brand Vimals Legacy is said to have been a failure, Bombay Dyeing is struggling with Vivaldi; even Raymonds Double Barrel and Legwear were aborted experiments till Park Avenue picked up. Secondly, Mayur is unsure of the demand for its ready-mades. This has a direct reference to its pilot project initiated in Rajasthan in 1994-95 to make shirts. Branded Brand Equity (from Mayur), they were priced in the band of Rs 150-450. Sales were below expectations: a claimed Rs 98 lakh in the first year, Rs 124 lakh in the second year, till they were totally withdrawn last financial year.

Now Mayur is searching for a foreign partner to renew its ready-mades business as well as to provide that much-needed rub-off on both fabrics as well as its yarn. Theres a more tangible reason too. RSWM, which earned about 10 per cent margin as a manufacturer of fabric, was aware of the premiums a foreign brand could command. Its sister concern, Maral Overseas Ltd (a 100-per cent EoU), makes knitwear for many foreign labels, including Nike, Rockport, Guess and other well-known names. A high-level company official states that they have seen knitwear costing $8-9 being affixed a suggested price tag of $40.

So Mayur may be contemplating going full steam into ready-mades once a foreign tag gets affixed. Once we have about 50 shops and each having stock demand of 300-400 shirts, we can think of starting our own production, predicts Agarwal. For now, Mayur has enrolled two MBAs and opened a profit centre under ready-mades. The NCAER has been hired for a Rs 15-lakh project to study the textile market.

In the meantime, RSWM has invested considerable resources in improving the quality, finish, design and styling of its very product. Nearly Rs 1.5 crore was invested in CAD/CAM facilities in 1994. A year later, Rs 18 crore went in setting up a dyeing and finishing unit in 1995. This was quite important considering that Mayur intends to shed much of its emphasis on piece-dyed goods so as to seduce upmarket customers to high-quality fibre-dyed fabrics (in a nearly 45-day period in which finished fabric is rolled out from fibre, either you begin with dyed fibre, which is called fibre-dyed, or you spin a yarn, weave the cloth, process it and then dye the whole piece which is referred to as piece-dyed.) But a glance at the production figures of Mayur suggests (see chart) that a big leap to fibre-dyed fabric, which takes much more effort, is much high on quality and commands much more premium, is yet to happen thoroughly.

RSWMs new unit also helped Mayur launch what it called preshrunks. That is, fabric that was already shrunk once at the makers end rather than stretched and filled with chemicals as allegedly done by some of its rivals (which later resulted in cloth shrinking at the consumers end). Designs and colours of Mayur fabrics are now being tuned to trends in Paris. A team of nearly 10 young designers works on an annual budget of Rs 1 crore (excluding salaries).

Mayur is now working to introduce, on an average, 500 designs a month. A sharp contrast to the primarily grey cloth that we made for school uniforms earlier. (its share of total produce is on the decline as seen in the chart). Designers have been grabbed from Reliance. Every two years the company claims to send about 40 people to the ITMA (International Textile Manufacturers Association) held either in Frankfurt or Italy.

Some time back, the National Institute of Fashion Technology (Nift) was invited to work on a product and marketing improvement of both Mayur and its sister brand, BSL. S K Bhardwaj, associate professor, Nift, who did a review of Mayurs product range, says that it still lacks shades.

That is the trouble. Even now, the change is not coming full-force. While Mayur wants to graduate, it also wants to hang on to its middle class loyalists. That makes upgradation difficult. It wants a foreign joint-venture but also a retail place in a small hutment in Muzzafarnagar. It may be possible under a different brand that RSWM succeeds with its anticipated trouser range in the Rs 600-800 price brand, as well as Rs 400-600 for the mass market. Also, Agarwal says he is seriously considering venturing into the rural market. That again lends a negative rub-off to the brand image.

Critics say that even Chandrachur Singh, the present model (Shah Rukhs asking price had risen to crores when Mayur went to renegotiate), does not hold an aspirational value for the aimed audience. That linkage is not there in the first place, says one critic, even as he agrees that brand recall is up. But that doesnt automatically give it top-of-mind recall which a Raymond or Vimal has. Industry insiders still place the brand at No 5 in PV suitings, after Raymond, Reliance, Grasim and S Kumar.

It is learnt that the Nift project has been put on standstill for now. A company fax denied involving Nift in any way on Mayur. A highly placed source in Nift explains that negotiations on the outcome stalled the project. They are looking for a visible improvement immediately after the contract is over, which may not always happen, he says. I wish everybody there was as professional as Shekhar (Agarwal), says he, rather bemused. n

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Accurate customer data

Some questions you should ask yourself about customer data:

lDoes your company have the means to update its customer data?

lIs the data reviewed and revised by your company on a regular basis?

lAre customer inquiries regarding data accuracy answered promptly, and to the customer's satisfaction?

Customer data should be collected and used for marketing purposes only. Here are some tips:

lYour company should be collecting only those marketing data that are pertinent and necessary for marketing purposes.

lIn using data, you need to be sensitive to a consumer's reasonable expectation that some information may be considered confidential and should not be used for marketing purposes.

lIf your company contributes customer data to a co-operative database, are you satisfied about the database's security provisions to prevent misuse or unauthorised usage?

(Source: Smart Business site)