To B or Not to B

Just about a decade ago as department stores like Lifestyle and Shoppers’ stop began their expansion to spread across India, they faced a problem - finding the right brands to partner them. The inadequacy and the non-availability of a wide choice of brands in India to retail restricted them from having their own desired brand mix. These multi-brand stores almost housed the same brands save a very few to express each one’s differentiation besides their humbly commissioned in-house brands. Active followers of retailing in India may remember the degree of brazenness a few brands exercised: a particular brand dictated such terms that it would supply to the department stores only on consignment basis at very restricted margins and the choice of SKUs was purely at the brand’s whim. The brand offered a slim extra margin linked to a hefty quantum of sales. Another organization which had the rights to sell a set of men’s brands, fought with a reputed retailer only to part ways for a few years until relationship was restored. In the meantime the retailer considered it a golden opportunity to build own brands – christening one even with a name boisterously sounding Italian! This has become history as retailers have now learnt the trick to excel and brands came into the country soon through whatever route available for them to explore and succeed. Whatever one may call it - retailer power or brand’s desperation, the situation is different now. Alternatives are available so much in the food and grocery sector that many retailers are said to charge a listing fee!

A friend of mine recently threw a poser to me – as FDI in single brand retailing is allowed upto 100%, many brands may explore the opportunity to enter the Indian retail market soon and this may give rise to the establishment of new multi-brand department stores that may house these international brands alone sidelining the natively nurtured ones. A department store may have only global brands. They have also learnt the trick to exist in the Indian market – a UK based retailer operating in India has slashed prices as a strategy to grow here. And the company sources garments from India for their international markets as well. Re-strategizing their business, many brands like this retailer have adapted to the needs of domestic customers. The products sourced from India are sold at almost double the price in the Asian markets, proving that a penetration pricing strategy is adopted in India. The mid segment of customers is quite affluent too and these brands with their adjusted price points have become the mainstay in customers’ wardrobes now! Products like Axe and Pringles in the convenience goods segment are typical examples of adopting a steadily collapsing pricing strategy for India over the last decade and becoming successful. Today’s news scorns the high import duties on imported luxury brands in India citing the example of China, which has been bringing down duties on luxury brands. But China is a manufacturing country and it exports a great deal to other countries. The strategic approach of India is right to the extent that it encourages domestic sourcing and domestic consumption. As customers gain exposure in all the market tiers, brands may assume larger significance and luxury brands may fall within the reach of the common man soon. Yesterday’s luxury brands may become today’s run-of-the-mill ones in India!

The brand mix of multi-brand retailers may soon change in the apparel segment with many more global brands trying to find their way to India. On the other hand one may find very ‘desi’ department stores in the tier two and tier three towns and the same department stores may have an additional brand portfolio for the urban consumers – more like a differential merchandising strategy! Or we may see a different genre of department stores emerging with a global brand mix in India –a version similar to Macy’s or Robinson's!

The other extreme trend in India could be a new 'swadeshi' brand movement, given the high degree of patriotism in India. We have seen in the USA customers boycotting stores like Walmart for importing majority of merchandise it sells. An acquaintance does not wear a garment if it visibly carries any logo. His argument stands on the premise that no brand pays him to carry its logo but instead he pays to carry it! But some need to sport a logo - for their own reasons!

Dr. Gibson G. Vedamani