A cut above home-grown

It started off as a white-cream-and-blue wholesale brand in the Nineties but today Van Heusen — which has fashioned itself as a ‘fashion formal' brand catering to all kinds of consumers — is all set to breach the Rs 500-crore retail turnover mark. While last year, it clocked Rs 440 crore, this fiscal, the apparel brand from Madura Fashion & Lifestyle is looking at a quantum jump to Rs 650 crore, placing it among the elite apparel brands such as Benetton, Levi's, and Louis Philippe.

As it braces for the next phase of growth, Van Heusen seeks to compete with international brands. Says Ajay Ramachandran, Brand Director, Van Heusen: “Our future competition is with strong international retail brands, we are not competing with small, home-grown brands. We have the product and manufacturing capability to compete with the Zaras and Massimo Duttis of the world. We will fight for space with them. If a mall has 10 big stores, they will go to brands that will add traffic and give them profits. We want to be in that set of brands …”

More from Ramachandran…

While the apparel market has grown 28 per cent in 2010-11, Van Heusen has seen a 70 per cent jump in turnover. What are the factors that led to the growth?

When most retailers were scared of recession, we were advertising and getting prepared for better times. Even during the recession, we did not let up on advertising. When the better times came by, we were best prepared in terms of stocks, readiness, availability and stores. When most brands were cutting down on inventory and playing it safe, we were clear the situation would end sometime. And when the tables turned last April, our stores were choc-a-bloc with new merchandise, not old.

We were also prepared in terms of the number of stores. We never cut down on store expansion during the recession. Van Heusen currently has 120 stores. Last year, we added 40 stores and the recession year saw 30 new stores. We will add 45-50 this year, in tier-2 and -3 cities as well.

The benefits of post-recession walk-ins and the general upbeat mood in India have helped us the most. We are targeting Rs 850 crore next year at MRP.

Also, we have been incubating our brands since 2004 with new launches and lines, be it our expanded suits line with ceremonial and leisure suits, or the launch of V. (for youth) and womenswear. And these categories have zoomed since 2010.

The womenswear business has doubled, V. has grown by 75-80 per cent, while the suits business has grown 60-70 per cent.

Today, of a turnover of Rs 650 crore, Rs 150 is from V., Rs 50 crore comes from women's wear; mainline formal wear accounts for Rs 450 crore. And wow, we have a new baby — Van Heusen Sport — which was launched in March. Sport is already contributing 5 per cent to overall sales.

Would you say the branded apparel market has come of age today — that is what the Finance Minister said during his Budget presentation?

The apparel industry is currently in the toddler stage in India. Unborn till two years ago, it was virtually still-born. No international brand had an established presence in India till five years ago. The arrival of international brands has opened up the metros and mini-metros to different kinds of merchandise. The IT boom, with people travelling around the globe, understanding brands, and expecting that kind of merchandise in India has also aided the growth story.

But domestic home-grown brands, which were growing at 10 per cent in the Nineties, can no longer exist in the current, volatile market if they remain the way they were. If you need to exist in this market, you need to be available in large-format stores, you need to stand for something and give the consumer what he or she wants. You should also be able to stand up to these international brands. If Indian brands can provide quality and sartorial heritage and fashion solutions, consumers will opt for them.

Have marketers failed to understand consumers for long?

Well, it is only in the last five years that the apparel retail industry has gone out to attract true marketers. Till then, it was mostly run by small-scale players. Marketers are just beginning to corporatise the segment. But has enough work been done in the 4Ps of marketing, other than product? No. Not enough work has been done on penetration, understanding consumers, distribution strategies. These are the key things Madura will focus on over the next three-four years.

Can you elaborate on these strategies?

We are too big to operate like entrepreneurs; it's time is to look at bigger things. From ‘I like blue, let me make a blue collection next,' we are likely to adopt a research-based approach in the future. We have institutionalised ‘Brand Track' which tracks, on a quarterly basis, how our brands and brands from the competition are faring on benchmarks such as top-of-mind recall, advertising, retail ambience, quality, fashionability, fit and perception. There is a move to bring in seven-eight companies into Brand Track. We will talk to Arvind, Levis and Benetton.

Apart from regular pre- and post-campaign research, we do what is called ‘Coffee and Conversations' where we thrash out a mass of feedback from 50-60 critical CRM members every quarter.

In the last six months, our broad findings have been that all brands are rated the same on most parameters. Madura brands score high on future potential purchases, retail ambience and supply. But in terms of positioning, it is the same across brands. Consumers are not clear about the distinctions and what each brand stands for; they have not started developing strong preferences for any particular brand.

How will you build brand perception?

In 1990, we were a white-blue-cream wholesale brand. Today, Van Heusen is fashionable formal wear. We will build that imagery through our retail experience. Today, 60-70 per cent of our business comes from retail. And retail is not just about the merchandise, but is also about the store — the air-conditioning, the music, the perfume, the sales experience. Every single touch-point will communicate what we stand for. Till now, we did not pay enough attention to display in shop-in-shops. In the future, all our stores will carry the same retail ambience and experience.

In five years, people will be able to pick up the brand value. And it is not just us, if you enter a Tommy Hilfiger or a Jack and Jones store, you will understand it. Van Heusen is clearly on the way to becoming a retail brand. Competition will no longer be home-grown brands; it is going to be the Zaras, the Benettons and Tommy. But our strongpoint will continue to be formals. Going forward, we are looking at large-format destination stores. Our largest store will come up in Vasant Kunj (Delhi) across 10,000 sq. ft. We also have a penetration plan in tier-3 towns — we are looking at a 4,000 sq. ft store in Kottayam. Around 70-80 per cent of our business comes from the top 15 towns. In two years, we want 70-80 cities to contribute to 80-90 per cent of our business. Our main focus this year is going to be on cities such as Jaipur, Patna and Kochi, apart from tier-3 towns such as Coimbatore and Durgapur.

What is your understanding of what consumers want?

In terms of colour, the story is around cobalt blue. Another trend is around eco and conversation — we have a line in which we use lesser chemicals and the cotton is naturally processed. Also, denims are becoming stylised again. During the recession, every brand played it safe and moved to a non-washed, non-stylised product. But with the recession over, style is in again and we are seeing huge amounts of tearing, washing and distressing. In our suits line, variants of gold and silver sheen are in, after Shah Rukh Khan wore a shiny silver suit in Om Shanti Om . Shiny suits account for 40 per cent of our suit business.

What about strategies around stocking and manufacturing?

Today, our stores run 90 days of stock. As we sell, we keep replenishing and ensure there is three months of merchandise available at any point in time in a store. We are trying to shorten the cycle to 75 days … whether production time can become faster and ensure that a shirt that takes 21 days, can come out in seven days and faster replenishment can happen. Work is being done on supply chain management. And in terms of colours and styles, there are regional differences within the country and our stores have to stock accordingly. All this is hard-core science, not art. Only the front face is creative.

Also, many of our factories are moving into lean manufacturing. Currently, it is like a batch procession — where 300 collars are made, then 300 sleeves are taken up. At the end, the parts come together to become a shirt. But we are moving into a different line. In this, one shirt is made by seven tailors and then the next shirt is taken up. It won't be 300 shirts coming out in 20 days but 10 shirts coming out every day. While the overall volume remains the same, there is flexibility in delivering. This way, brands can be managed with the available cash on hand, which has not gone up.

How will the excise duty hit retailers and consumers?

The problem is not excise duty as such. It is the timing. If cotton prices were stable, excise would have hit consumers by 6-7 per cent. If you were paying Rs 1,000, you would have paid Rs 1,100. You would not have minded that. But cotton prices have risen 2.3 times in the last 7-8 months and coupled with excise means a shirt costing Rs 1,499 could cost Rs 300-400 more in April. Consumers could downgrade to value brands. And the number of garments per bill, which is 2-2.1 now, could go down to 1.8-1.9. It will hit our profit margins by 2-3 per cent. There is a possibility of 10-15 per cent of manufacturing shifting to FTA zones such as Sri Lanka and Bangladesh. But to be fair, excise is there on all industries; we were getting a holiday and enjoying life.

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