Change in strategy is inevitable for survival & growth of fashion brands and retailers. The last two decades have been highly volatile with rapid changes in customers’ preference and economics of profitably running a brand. Let’s take a look at the quick actions needed for all to recalibrate and adjust to the present need.
The journey of fashion retail in the last two decades was filled with hopes and surprises. On one side, consumerism and easy money pushed growth and on other side, technology and online business added a new dimension to the industry. Many rst mover retail houses remained stagnant while some late entrants grew to a great extent. Meanwhile, the debate on pro tability versus expansion continued in fashion forums – much like the chicken and egg discussion.
Fast Fashion, Shorter Cycle
The consumer is evolving and is demanding something new every week. Not just the likes of Zara and H&M, but neighborhood stores too are being saddled with the responsibility of bringing fresh and innovative fashion to the new-age consumer every week. Fashion has thus, become a perishable commodity. Brands are registering close to 55 percent – 60 percent of their sales during Friday-Saturday-Sunday, i.e., the weekend, putting immense pressure on the supply chain and the buying cycle.
Fashion retailers are getting a reality check in the form of the drastic dip in buying quantity by consumers from 12 weeks to 6-8 weeks. Their success now rests on buying for a shorter cycle, close to the season they are selling the apparel for – basically in getting the fashion matrix right. Newness is the only season, week after week.
Large Size Stores Not Viable Anymore
Just a few years ago, the size of a store was indicative of the strength of a brand/retailer on merchandise offering. The concept was copied from western countries where, unfortunately, customer buying patterns and per capita income vary vastly when compared to India. Wide assortments, long tail SKUs, creation of multiple zones and event areas were being offered in these stores to create differentiation. Retailers grossly looked to the availability vs affordability matrix to choose the store size.However, they soon started trimming their stores coming to the realization that large sized stores were non-viable and did not necessarily guarantee high sales. The last decade proved that it was too costly to operate big stores and that there was no incremental benefit in sales per square foot. Aside from this, rising real-estate costs, combined with interest rates that are the highest among the 10 largest Asian economies, make India a challenging market for retailers to operate large stores in. Along with lower rents, small stores require less staff and lower of amount of electricity resulting in reduced expenses. This allows them to match the prices being offered by large-format stores and retain customer loyalty. Smaller stores are also able to customize and personalize better for their consumers.
Online Not an Option Anymore, You Are Living It!
According to a recent study by KPMG, e-commerce, social networking and digital payment platforms top the list of most disruptive business models. With global e-commerce spending expected to increase from US $3.5 trillion in 2019 to $6.5 trillion in 2023, according to eMarketer, the growth prospect of this medium of retail is no less than dramatic. But, until a few years back, the digital medium was ignored by Indian retailers and brand owners for decades for their firm faith in traditional retail. But all that has changed now. Looking at the success of e-marketplace players, an increasing number of brick-and-mortar retailers have joined the online bandwagon. This has enabled them to become more visible, and brought them closer to the consumer, something that no business can do without today.
However, reaching here was no easy ask. Retailers needed to reorient their organizational strategies, processes, structures and even manpower. New skills needed to be acquired to integrate omnipresence commerce. They also needed to keep abreast of new technology to serve the modern customer. They adopted the click-and- mortar model of retail, where the store became the warehouse for the online consumer as well as a retail playground for the offline consumer. This, in turn, threw up new challenges in terms of exactness of in-store inventory and tracking the movement of merchandise in the four zones of a store, viz., backend, frontend, trial room as well as the billing counter.
Retailers have realized that being online is mandatory and is the minimum qualification needed for brands today. In addition, brands need to spend their time, energy and money to find an optimum solution to sell to the new age customer.
Discounting is the New Festivity
Till a few years ago, Diwali in north India and Onam, Pongal in south India used to be largest festival seasons for retail consumption. However, over the years this festival buying has been diluted by discounts/flash sales and end of season sales by brands. Discounting, which was earlier used to liquidate leftover stock at the end of every season, is now used as a strategic tool to maximize sales and margins. Over the years ‘discounting’ has become the festival of the year attracting customers to store and/or online.
Brands are caught up at the crossroads of brand value erosion versus enhancing sale, but most of them are taking the sale route to enhance profits. Like all other social changes, it seems that discounting and bargain hunting are here to stay, and retailers need to find a route for profitable discounting without brand value erosion.
India is Not One Country
India is not a single country in terms of fashion requirement and buying power. This is something that is grossly overlooked by most brands. We think of our population as 130 crore but in reality, only 30-40 crore matters, which can be profitably targeted in terms of modern retail. It has been observed that beyond the spread of cities and towns, per store profitability shrinks. Small towns which have a population of lower that 5 lakh cannot promise profitability to multiple retail players in the same space and the possibilities of upscaling are narrow. Also, national brands find it difficult to plan their merchandise in the face of regional preferences and the zonal festival calendar throws out challenges to the supply chain in terms of peak load management. Retailers need to be mindful of this and strategize accordingly.
What a Brand Stands For
The character of a brand has become more important than ever before. Product USP is no more considered as the only strength of a brand. Brands need to reinvent their relevance and reposition themselves in socio-economic shifts. Their presence on every social platform is mandatory for recall value. In the last two decades, fashion retail has gradually moved to a faster and wider organized commerce and retailers have tried to reinvent their business models for profitability and sustainability. In the coming years, we will see many more disruptions in both buying and selling of products. Brands will be compelled to stay young, stay trendy and stay relevant to social forces. Fashion retailers need to be mindful of the changing matrix of customer choice and technology breakthrough. They need to welcome the change and evolve.