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Sep, 07 2010

FOR UNPARALLELED SUCCESS

THE apparel industry is perched at the top as clothing quintessentially dominates our wardrobes. This is one industry where the number of opportunities can never run out.

THE apparel industry is perched at the top as clothing quintessentially dominates our wardrobes.  This is one industry where the number of opportunities can never run out. Available at all investment points and preferences with handsome returns, apparel retail has a lot to offer to the aspiring franchisees.

Business potential

Clothing, once looked upon as a necessity, has transformed into a lifestyle product. Subsequently, the apparel industry has been aptly termed as a potential sector poised for growth. Around 35 per cent of the industry is franchised with over 30,000 franchised apparel stores across the length and breadth of the country. Growing at a rate of about 10 per cent every year, organised apparel brands are now spreading their wings to tier II and tier III cities to get more potential franchisees on their bandwagon.  Specialty retail franchising is an offshoot of the franchise growth and has inspired domestic and international apparel franchisors to create exclusive speciality stores. These stores range over various categories, including men's wear, women's wear, traditional clothing, kids wear, lingerie, demin wear, designer wear, sports wear and luxury retail.

Loopholes

As the number of players is more, competition leads to varied pricing strategies by franchisors. Chetan Shah, Country Head, Pepe Jeans (India) Ltd, says, “The Indian apparel market is growing at a very  fast pace. All the big brands are catering to elite consumers, leading to fierce competition in the sector.”

Location plays a very potent role in the franchise success. High streets are a preferred location for an apparel store though malls have also become an important target location. In smaller towns and cities, areas with greatest footfalls are being targeted. The opening of a superior brand outlet at a wrong location will upset your profit equation.

Fashion is an ever changing industry and fashion becomes outdated very soon. So keeping up with what is in vogue is a serious challenge. Bipin Jain, MD, Madame, says, “Transformation is a big challenge and the Indian retail industry is facing the same coming from a highly unorganised scenario. The logistics and supply chain management is the most critical, owing to instability/ unorganised vendors and service providers.”

Deepak Bansal, Director, New Business Development and Franchisee, Cantabil Retail India Limited, summarises, “Decrease in footfalls due to global recession, rising real estate cost, shortage of skilled manpower and supply chain issues due to inefficiencies in transportation inventory management and IT systems are the main challenges.”

Franchisability

Apt location, regional insight, management support and financial aid are some of the benefits franchising offers. The country has witnessed growth of foreign franchises at 25 per cent per year. European brands top the list followed closely by US. Benetton, Tommy Hilfiger, Levi's Strauss, Reebok, adidas, Hugo Boss, Pepe Jeans, Mango, Etam, Triumph, Lerros, Versace and many more have already made their presence felt. Their success has inspired others across the international brands to enter the Indian market. So the options for franchisees range not only in terms of investments but also whether they wish to partner with Indian or international labels. “The future model of retailing in apparel industry is moulding into the franchising format from the old traditional methods. The obvious reasons being that the apparel industry needs more focused and specialised attention in each field, right from procurement, sales, marketing and customer satisfaction,” says Sharad Nawalgaria, MD, SNG Fashions Pvt Ltd. Cantabil, Koutons, Chabbra 555, Lilliput, Blues Clothing Company, The Sachdev Group, Satya Paul, Nalli, Latin quarters, Madame, Raymonds, Belmonte, Planet Fashion, Lilliput, Giny & Jony, Catmoss, Spykar, Killer Jeans and Enamor are few players that are bullish on expansion through the franchise route.

Financial viability

The sole reason for entering into a business is to generate profits. An opportunity should be such that attracts the franchisee at once and where he feels that the money that he will invest will pocket handsome returns from the venture. The investment begins with few lakhs and goes up to even crores as per the segment and brand worth. The investment per sq.ft for a value apparel chain is around Rs 400 whereas for a lifestyle brand, it may cost around Rs 1,000 per sq.ft. The return on investment that franchisee can look forward to vary between 10 to 30 per cent.

Exit option

The franchisees are given the option to exit the business by passing on the franchise to other potential buyers. Bansal states, “Franchisees have the option to exit only if a better franchisee is available than the existing one. All the support and guidance, which is necessary for running the business, is provided to the franchisee. The company helps the franchisee in finding potential buyer but deal finalisation depend upon negotiation between the buyer and the seller.” The industry is open to discuss and facilitate this option with the franchisees. It is easier to work when the option to exit is not binding for a franchisee.

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