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Will large department stores kill national brands?

A highly informative debate between brand professionals and retailers hovered around the topic of co-existence between established department stores and national brands at the recently concluded Images Fashion Forum. There has been a concern that having established store pull with the strength of national brands, large department stores copy what sells and introduce the same merchandise at a cheaper price under the store label.

Looking at the emerging scenario brands are left with no choice but to focus more on on their exclusive outlets and smaller MBOs. With participation of Mr Adarsh Gupta, executive director of Liberty, Mr Akhil Chaturvedi, director of Provogue, Ms Neeta Narula, managing director of Ebony, Mr Hem Chandra Javeri, president of Madura garments and Mr Chetan Shah, managing director of Pepe (India) as the moderator, the debate discussed the impact of private labels on national brands, and on the relationship between the brands and the department stores, came under scrutiny. Mr Adarsh Gupta of Liberty, said, “To kill a national brand, we will need not just one store brand, but hundreds of them. This is because the share of chain-store business is hardly 10 per cent in the total sale of a national brand.” Mr Gupta, however, assured that the share was growing rapidly.

Three possible ways of dealing with this conflict of interests, according to him, are:

• Brands allow extra margin from their manufacturing margin by cutting down the supply-chain cost and improving efficiencies;
• Brands increase MRP percentage for all retailers, which, though, carries the danger of the brand getting discounted by street retailers, a higher incidence of government taxes, and resistance from customers; and
• Brands develop special line for chain-store requirement.

“Brands express and reinforce certain values and opinions that the customer has. But in an environment where the customer’s needs are constantly in a state of flux, like it is happening in India at the moment, deciding on a branding strategy can become a real mind-boggling issue,” conceded Mr Gupta.

The high cost of sustaining retail operations means retailers are putting pressure on brands to increase retail margins. The national brands spoke out about the cost squeeze driven by the retailers’ need for higher margins, saying that they may be forced to compromise on the product and quality, which would kill their brands. Top management from the department stores highlighted their initiatives on private label for achieving higher margins, as an alternative to squeezing the national brands. The panel agreed on the fact that retailers and brands need partnerships rather than adversarial relationships, since private labels could themselves be a threat to the national brands on the basis of a price advantage.

Experts however commented that all brands are not equal. “Power” brands which have very strong customer loyalty are at lower risk from store brands, rather than the multitude of wannabe national brands, which are largely undifferentiated. Likewise, brands which successfully create a lifestyle/image appeal are less susceptible to competition from store brands than those whose appeal is only product-led, since product differentiation can be sustained only by very highly innovative brands. The examples quoted included Levi’s and Wills Lifestyle.

Store brands, typically not being promoted outside the store, gain share by offering product comparable to brands, at better prices (not cheap). They thus benefit from the customer making tangible product and price comparisons with national brands in the store. Only when ‘national brands’ truly become brands - i.e they deliver the intangible/emotional benefits along with tangible product attributes, will they be able to sustain themselves against store brands. Product differentiation can be sustained only by very highly innovative brands.

Talk shows at Lycra Rendezvous

LYCRA Rendezvous, the international LYCRA event that has emerged as the vital source for both trends and innovations for the fashion fraternity worldwide, held its Indian edition at the Images Fashion Forum (IFF) 2004 from February 11-13, 2004 in New Delhi. One of the important attractions at the event was the talk shows, which elaborated on the various issues of branding.

‘Today exporters are best equipped to create brands!’

A major issue of concern at the IFF was that while there was an aggressive expansion on the retail real estate front with over 40 million sq ft of quality retail space getting ready by the end of 2006, India did not have enough brands and retailers who could take up that space in the next three years. “Fashion being the primary driver of this retail boom, it is extremely important to excite the corporate houses and export organisations to take a plunge into the domestic market,” felt the mall developers.

Giving wholesome information and an insight into current trends, the Images Fashion Forum had some of the key people from the export industry coming along and sharing their views in the panel discussion ‘Today Exporters Are Best Equipped To Create Brands!’

The panelists present at the event were Mr Rajender Mudaliar of Color Plus Fashion, Mr Sunil Sethi of Alliance, Mr Harkeerat Singh of Woodland and Mr Sumant Diwan of LI & Fung (India). The session moderated by Dr Darlie O Koshy, executive director of NID, initiated with, whether major exporters are equipped to promote their own brands? He also observed that many apparel exporters to Germany and UK have been promoting trade brands successfully and they are aware of merchandising requirements of brands. Speaking on the issue Mr Sethi said, that though exporters have good quality products, correct pricing and updated promotional and marketing skills, they need to emphasise more on manufacturing and export fronts. The brand should not stress at increasing numbers, but creating a niche market for itself among its consumers. On the other hand, exporters should not look at creating, but at catering to the brands. Moreover, to comply with above requirements, exporters need to keep a watch on the designs and trends going on internationally.

Mr Harkirat Singh of Woodland differentiated the market into two as per separate international and domestic needs. He said that in India, retail is really booming, and exporters should tap it, though with a different view. Retail being a distinctive, massive and demanding segment urges the brands to do their homework beforehand. For this, Woodland has adopted the franchisee network by which it was given the charge of retailing to reliable persons who feel for Woodland. Through this, the company has maintained both its exports and domestic businesses with ease. The challenge being optimistically in favour of the exporters, Mr Mudaliar mentioned Tommy Hilfiger and Nautica as brands that started from exports business. Mr Mudaliar agreed that though exporters had an inherent advantage, what was clear was that there were very different skills that were required to make a success of brand building and retailing a product in the domestic market. “And the important difference being the nature of the target audience and its diversity. It is for this reason that there are very few exporters who are brand builders/ owners in India. The average exporter has realised this and hence not taken the plunge. Only those exporters who can keep the two businesses distinctly apart can make a success of it. In other words, though there are many synergies in the two businesses, if not separated, they could become pitfalls rather than advantages,” concluded Mr Mudaliar.

Another panelist at the session, Mr Diwan appreciated ColorPlus as a brand, and said that it is still the tip of the iceberg and exporters need to prove that quality, consistency, product diversity, fabrics, design are the core competencies that will help any brand to grow. He added that things have changed tremendously and exporters need to acknowledge this. Dr Koshy reminded that few years back exporters and retailers in India were not coming face to face and it is encouraging that a dialogue which may benefit both have begun in right earnest.