Search Business Opportunities
Business Categories
Sep, 10 2010

Profit is in Style

A shirt is no more a shirt as today's buyer perceive it. The evolution of retail segment and growth of the Indian consumer by being fashionable and stylish has given way to the emergence of various apparel retail brands, which are looked upon much more th

A shirt is no more a shirt as today's buyer perceive it. The evolution of retail segment and growth of the Indian consumer by being fashionable and stylish has given way to the emergence of various apparel retail brands, which are looked upon much more than a cloth shop.

The retail market per se has set itself free from the clutches of selected few brands and witnessed transformation in the way apparel is looked upon. A style statement, a brand to relate with and endless variety has given a new meaning to the experience called shopping. Now, customers are pampered by offering what they want rather than just offering what a brand can make.

This revolution has given rise to retail points with exclusive stores taking over Multi-Brand Outlets (MBOs) and other sales points. This has further given way to franchising, where an entrepreneur in a region knows how to sell the brand to his customers in the best possible way. This amalgamation of retail sector and entrepreneurs doubbling as franchisees has made way for impressive apparel franchising growth.

Segments' seam

Notably, what has been observed over the years is that most of the men's wear concepts are franchised, as they contribute to maximum retail activity. This is followed by women's wear segment, while kid's wear segment contributes only 25 per cent to the franchise activity, though it is expected to increase soon. The franchise sector as a whole continues to expand while the apparel franchise market has been growing at the rate of 10 per cent. There are approximately 30,000 franchised apparel outlets.

Talking about evolution of men's wear market, Atul Chand, Divisional Chief Executive, Lifestyle Retailing Business, ITC Ltd, says, “Men's wear has truly come of age. The main rationale for this evolution is that men have become increasingly fashion conscious over a period of time. The levels of interest are only growing by the day. The potential is tremendous.”

On women's wear, Siddharth Bindra, Managing Director, Biba Apparels, states, “We see huge growth potential in women's wear sector. This growth has been fuelled due to rise in demand, thanks to a growing economy, creation of new retail spaces and malls providing better distribution and reach to the consumers and also, the constant shift from unorganised sector to the organised.”

Sharing his views on the same, Saurabh Agarwal, CEO, Ashika, says, “I see FDI in retail opening up more in the years to come and owing to this, not only the textile industry but also complimentary sectors like jewellery and accessories will grow majorly.”

Men's wear majors

Madura Garments is a leading player in the men's apparel sector with premium in-house brands like Louis Philippe, Van Heusen, Allen Solly and Peter England. The Wills Lifestyle product portfolio caters to both men and women with men's wear contributing a significant 65 per cent to the overall sales as compared to 20 per cent a couple of years ago.

For mass segment apparel player Koutons, 90 per cent of its stores are operated by franchisees. Only 10 per cent are company-operated. Reid & Taylor, India's leading luxury suiting brand has been franchising since 2000. Established in 1981, Kewal Kiran Clothing  owns four of the finest apparel brands for the youth, Killer, Easies, Lawman, Integriti. Today, KKCL manufactures nearly 3 million pieces of apparel and has a net worth of Rs 170 crore.

Turtle India, the leading men's wear brand from Kolkata, has been operational since 1993 and had been franchising since 2001. With 36 stores in 25 cities, the brand has been leveraging on franchise route. Pepe Jeans started franchising in 2000 and today clocks a turnover of Rs 350 crore. The company's more than 155 stores are operational in 81 cities.

Weaving success in women's wear

Women's wear franchise holds the most important share in the apparel sector followed by men and children's wear franchise sectors. Presently, the women's wear industry is spread across large range of brands in ethnic wear and only a few in western wear. The traditional ethnic wear market has a huge scope in India, primarily because majority of women in India still wear only traditional ethnic clothes.

BIBA, which caters to the women's ethnic wear market, came into existence in year 2000. It presently retails through 70 exclusive stores. SNG Fashions has been operational since 1996. It launched FI, a women's wear brand in year 2004. According to Sharad Navalgaria, Managing Director, Fi, “We were earlier opening our own stores, now that the brand has become a favourite, we have forayed into franchising.” Western women's wear maker Madame's nearly 40 per cent of the stores are franchised and 60 per cent company-owned.

No kidding, it's high growth in kids wear

Over the past three years, kids' wear sector has experienced considerable growth with a high level of new openings. The market for kids' apparel in India exceeds Rs 13,000 crore, of which around Rs 3,000 crore is constituted by branded kids' wear.

Catmoss has been thriving on the franchise mode since 2005. As per the company spokesperson, “In 2004, we started with our own exclusive stores in metros and other major cities. The brand today has more than 165 stores operational in 74 cities.

Lilliput, Gini & Jony and Little Kangaroos are other kids' wear franchise brands making a stride in this sector. Even mass apparel retailers have been cashing in on kids' wear demand. Companies like Spykar and Koutons also entered this cash-cow industry. In year 2007, Numero Uno launched its junior brand, targeted at six to 16 years of age group. These exciting products under the brand name 'NU Juniors' are retailed through existing NU exclusive stores.

International brands taking charge

Although the number of foreign brands is low, they are growing at a steady rate of around 15 per cent per year. Europe leads with maximum number of franchise concepts in India followed by the United States. Indian consumers are largely influenced by American trends, therefore, there are numerous opportunities for US apparel franchises to successfully penetrate the Indian market. International players are increasingly looking at India not only as a sourcing destination but as a consumption market as well. Many companies are extending production licensing and retail expansion through franchising. Italian kids brand Chicco was recently launched in India by Shona Taneja, the franchise owner of Chicco.

Franchising in apparel industry

Most of the brands are keen to expand and the fastest way to make this possible is franchising. Currently, KKCL has 141 retail outlets, including two in the Middle East. The company is planning to expand it to 200 by the year-end. Out of 141 outlets, 27 are company-owned while others are franchised. Currently, the company operates 92 K-Lounge stores. Kewal Kiran says they are targeting 150 stores by this year-end. Kewal Kiran is also present internationally with three operational stores in UAE.

Presently, Planet Fashion (retail segment of Madura Garments) has 85 per cent of its stores franchised. As apparel pioneer, Koutons leveraged on the concept of exclusive stores from the start following a franchise route to expand and create a brand presence. Koutons operates only through EBOs. It has 1,360 stores across India, out of which 1,336 stores are franchisee-operated.

Numero Uno, another denim and casual wear major that started in 1987, has been banking on franchise growth since 2000. With 105 stores all over India, the company clocked a turnover of Rs 140 crore.

Most of the upcoming brands are also keen to explore the franchise route. According to Agarwal, “Franchising as an expansion mode is one of the fastest ways to scale up business. Today, only few brands are not taking this route for expanding their store count and increasing their brand reach. This is especially good for companies who follow an asset-light model.” Franchising contributes around 75 per cent in the overall business of Ashika, which runs a chain of around 50 outlets

Currently there are 55 Wills Lifestyle stores in 30 cities across the country and the brand is making rapid strides in terms of expansion, doubling the number of stores over the next few years.

On expansion, Nawalgaria says, “We plan to open 100 stores across the globe and establish ourselves in the women segment.”

According to Bindra, “The company is currently in a very aggressive growth phase and hoping to double its size in the next two years. We would be adding around 40-50 standalone stores in the next 24 months.”

Numero Uno is targeting 25 more stores by this year end. Apart from its existing domestic operations, the brand is seriously looking at licensing arrangements in international markets. The company has recently started test marketing and exporting its products to UK, South Africa and Nepal.

FI has opened 20 EBOs so far in Delhi, Kolkata, Mumbai, Hyderabad, Indore, Varanasi, Surat, Bhopal, Raipur, Lucknow, Jaipur, Noida and Guwahati.

Conversion franchise

Conversion franchise is quite popular n the apparel sector, as the candidate already has the retail premises available. Ashika has seen a conversion percentage between 50-70 per cent.

Hitesh Shah, a master franchisee for Peter England in Karnataka, manages around 15 franchisees and owns one store located at Forum Mall, Koramangala. Shah started with the first biggest store for Peter England at Commercial Street in Bangalore in year 2000.

Talking about the Returns on Investment, Shah says, “The average RoI is more than 30 per cent, but generally it depends on which city or town the store is located in. In tier II and III towns, our average RoI is more than 35 per cent.” The franchise agreement in apparel sector generally ranges from three to nine years and RoI between 15 to 30 per cent.

Most of the apparel majors prefer tying up with experienced investors, who have been a part of the retail business earlier. Companies like Turtle and Numero Uno are keen to partner with investors with relevant industry experience.

Detailing the selection of franchisees, Chetan Shah, Managing Director, Pepe Jeans, India, says, “While looking at a business partner and area, we look at population and demographic profile of the city and its growth potential, comparative study of similar markets where Pepe is available, prior experience in business (similar or any other) and retail expertise.”

Target cities for expansion

After penetrating metro cities, most of the apparel makers are targetting smaller towns for key growth. They are also eyeing both high streets and malls with preference for ground floor area. Peter England franchisee Shah suggests in his case, having the first mover advantage with no competition from organised players worked in his favour.

KKCL is keen to expand in tier II cities, where there are enough buyers and people are aware of the brands. Talking about target locations, Shoaib Farooqi, COO, Planet Fashion & International Markets, says, “We see tremendous growth potential in cities like Erode, Sonepat, Itanagar, Tirupur and Varanasi.” Planet fashion has been highly successful in smaller markets, as it houses top leading brands in mens' wear segment, targeting marriageable customers.

Balvinder Singh Ahluwalia, President, Koutons Retail India Ltd, Says, “Koutons has its presence in 500 cities across India. Now, we are targeting tier II and III cities for expansion. Secondly, after introducing the concept of family stores, we are largely focused on consolidation of our stores. This has brought in fruitful results for the company in terms of increased revenues and increased customer base. Going forward, the company aims to strengthen its position in existing markets by introducing newer products and expand the concept of organised retailing across newer geographical territories.”

Chand says, “We are on with an aggressive expansion mode and are targeting 100 stores by 2011-2012. The immediate plans of Wills Lifestyle include adding 12 new stores by the end of this year. The new stores would come up in Hyderabad, Nagpur, Jaipur, Indore, Nasik, Bengaluru, Chennai and Mumbai. We plan to open 30 stores through franchisees by the end of next financial year. These outlets will be targeted at smaller cities like Vizag, Coimbatore, Mangalore, Jodhpur among others.”

Agarwal of Ashika says the company is keen to open stores in tier II and III cities. The low costs in such towns and cities and high sale potential is what makes it most viable.

BIBA is looking at all cities nationally where a market would exist for its products. It is also targeting tier III cities such as Yamunanagar, Kota, Jodhpour, etc. BIBA is looking for franchise opportunities on the highstreets in big metros and tier III and IV cities.

Official spokesperson of Reid & Taylor India Ltd states, “We are seeking franchisees across India to open 300 new EBOs in 2010. Internationally, we would like to expand our EBO network in the Middle East.” The company already has a strong presence in tier I, II and III cities. Turtle is seeking franchisees in Tamil Nadu, Karnataka, Andhra Pradesh, Bihar, Jharkhand, Madhya Pradesh and Maharastra.

Pepe is looking for franchisees in all cities across the country. It is present in 81 cities and planning to double its geographical presence of exclusive stores in the next three years.

Catmoss is seeking franchisees mainly in East and South India. Where as, Cotton County has 60 per cent of the outlets in tier II and III cities and is targeting 170 new franchisees. The company has not restricted its geographical boundary and is seeking opportunities pan India.

Sound back-up

Apparel segment provides greater opportunities for strong brands, who have the required back-end support. Agarwal states, “We give advertising allowances to franchisees to market the product at the local level.” At Ashika, the stock comes on consignment basis to the franchisee, but it has restrictions on the returns also. Leftover stocks, though few, are sold off through other channels.

Talking about other initiatives to help the franchisee, Farooqi informs, “Our merchandisers interact with the franchisees on a regular basis to customise our offerings as per the market needs. Also, we extend visual merchandising and marketing support. Once in two years, we hold a franchisee meet, where the whole team meets the franchisees and discusses issues and concerns.”

On stock buying, Shah says, “We need to buy the stock with full payment on immediate basis. The leftover stocks are taken back by the company after every season on a percentage calculation.

Kathak supports its franchisees through staff training, stock correction, customer loyalty benefit, help in site selection and national level advertisement support.

Reid & Taylor's give training and support to the franchisees for store layout and signage, product, sale, customer service, merchandise planning, store launch, advertising and institutional sales support.

Numero Uno provides complete marketing support, management information system of the store, point-of-sale software and assists in visual merchandising. On training and support, Amit Ladsaria of Turtle says, “New franchisees are given a brief on company values, vision, mission, brand values and product USP. Product training is given to franchisees and the sales force of the store once a year.”

“We take the franchisee through an induction process where we brief them thoroughly on the product, brand, company policies and practices and sales staff training. We assist the franchisee with advertising, public relations, point-of-sales, visual merchandising and promotions, etc,”  informs Shah.

In the words of Kewalchand Jain, “Complete training is provided regarding stock replenishment, report generation, promotion, etc. We provide advertisement visual merchandising and EOSS working support to our franchisees.”

Catmoss supports its franchisees through ERP software training, product knowledge, SOP training, etc.

A complete pre-opening and post-opening support is provided to the FI franchisee. An aggressive brand promotion, advertising and marketing campaign is taken up to launch the store. The company helps in recruitment and on-the-job training of the staff.

According to Dharmindra Batra, Vice-President, Marketing, Cottons County Retail Ltd, “Training is given in terms of garments, IT, billing, sending report to the company and placement of merchandise in shops.” Shah suggests that the three key factors that a franchisee needs to look before buying an apparel franchise are location, location and the image or value of the brand/company in the market.

The competition is increasing but the future holds tremendous opportunities. The demand in this sector is increasing day by day, which requires a strong player to meet the expectations.

Comment
Insta-Subscribe to
The Franchising World
Magazine
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities
Trending
More Stories

Free Advice - Ask Our Experts