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INDIAN SHIRTS MARKET

Answer the following questions straightway on the basis of the facts stated in the casestudy ABC Textiles.

C 1 What are the key success factors (KSF) for being effective in the premium andmid segments of Indian readymade shirt market? 6

C 2 Should ABC Textiles enter the premium segment or the mid-price segment of the mens branded shirts market? 14

ABC TEXTILES

ABC Textiles, part of an Ahmedabad based Rs.600 crore group, is a major player in theIndian textile industry. The company has two main business divisions: polyester andfabrics. It manufactures PFY, cotton fabric and denim fabric. It supplies fabric to brandslike Marks & Spencer, Levis, Gap, Haggers, Louise Philippe, and Van Heusen, besides

Indian brands like Colorplus, Allen Solly, Blackberry, Pepe, Zodiac and Park Avenue.

After establishing in the global cotton fabric market, the company started producingbranded fabric for the domestic market. The first fabric basket Euro Soft Collection has four different products in 12 shades. The company has three design studios inManchester, New York and Ahmedabad. The Euro Soft Collection, a 100 percent cottonproduct from the companys Manchester studio, is wrinkle resistant and requires onlyrinse wash.

One of the group companies is ranked in the top five dye houses in the world. It isaccredited with the ISO 9001 certificate. The product range includes Denim, yarn-dyedshirting, piece dyed shirting etc. It also has Marks & Spencer accredited laboratory and

design studio for testing purposes.

The group is currently in the process of setting up a garment washing plant atAhmedabad at a cost of Rs.5.25 crore. The plant is a joint venture with ALT group of Germany, the largest multinational garment washing company in the world. The plant willoffer garment finishing including washing, dyeing, sandblasting, coating and wrinkle freefacilities. The company is also planning to come up with another washing plant inBangalore in the next one year. After this, the company wants to set up a third plant inthe north but has not finalized the location as yet.

The company now intends to enter the readymade garments business. This is part of thecompanys plan in moving up the value chain that would enable it to utilise its excellent

brand equity and a fairly strong distribution network built over the years. The companyhas already 85 showrooms and plans to increase its number over the next few years.The company has decided first to enter the mens branded shirt market and later to other readymade garments.

Mr. Nitin Parikh, Managing Director of the company, had been mulling over this entry inmens branded shirt market for the past one year (2000-2001) . He had studied thehistory of the branded shirt market in India and followed closely the strategies of themajor players in this market. He is aware that this market is growing at a healthy rate of

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15 - 20% over the last few years. He is confident that with the retail boom in the offing inIndia the growth of the readymade garments would get a strong boost.

According to a study by McKinsey, the domestic clothing market is estimated atRs.87000 crore, of which 22 percent comprises readymade garments. Of the 22 percent,only 20 percent belong to the branded apparel market. This means in a market worthRs.20000 crore, only Rs.4000 crore is catered to by branded apparel. The mens

clothing segment accounts for the largest share, at 70 percent. In the mens clothingsegment, the maximum share is accounted by readymade branded shirts. The marketfor ready-made branded shirts is estimated at about 60 million pieces worth aboutRs.1900 crore. Though multiple price points exist, yet the market can be demarcated atthree distinct price levels: below Rs.350, Rs.350 up to Rs.550, and the Rs.550 upwardrange. The latter, of course, the premium category and is currently estimated at 5 millionpieces.

How the Market Stacks Up

Segment (Retail Price) Volume (No. of pieces) Value (in crore)

Economy(Below Rs.350)

34 million 700

Medium(Rs.350-Rs.550)

21 million 850

Premium(Above Rs.550)

5 million 350

Premium and super-premium shirts priced at over Rs.550 such as Arrow from Arvind;Allan Solly, Louis Philippe and Van Heusen from Madura Garments; Park Avenue fromRaymond; Zodiac: account for a mere 5 million pieces.

Mid-priced segment is cluttered with local and regional brands. In this segment Peter England is leading the pack. There are other brands like Raymonds Parx, ArvindsEscalibur, Bombay Dyeings Vivaldi, Mafatlal Trendz, Pantaloons John Miller,Cambridge that operate in this price segment.

Peter England has scored over other mid-priced shirts by positioning itself as a shirt witha premium look and a style like Van Heusen or a Zodiac but affordable. The other bigadvantage is Madura Garments distribution network. Peter England has been able topiggyback on the network of 800 multi-brand outlets for Madura Garments Van Heusenand Lois Philippe brands. Currently, the company has 22 distributors and its shirts areavailable in 180 towns through 54 exclusive outlets and over 3300 multi-brand outlets.This is the largest distribution network of its kind in India. Pantaloons John Miller isavailable in just 60 company owned outlets throughout the country while BombayDyings Vivaldi is sold through 550 exclusive outlets.

According to ORG-MARGs estimates, the branded shirt market is growing at 20% ayear with most of the growth coming from the mid-priced and economy segments.

Broadly, the corporate hierarchy is split in the 22-28, 28-35 and 35-plus age groups. Thefirst group is a fresh entrant into the corporate hallway and has a high entry-level salaryand no dependants. The individual in the last group holds a senior managerial position,has a family and other obligations but earns a high salary. Roughly, these two groupsare at parity in terms of disposable income levels.

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The 22-28 age group has large disposable income and a more adventurous mindset. Asa result, this group is susceptible to trying out new brands. By the extension of the samelogic, they are not brand loyal. They prefer to be with the new kid in town.

The 35-plus age group is in the select category that has arrived. Therefore, this groupswardrobe comprises the premium brands like Arrow and Louis Philippe. But it does notbelieve in showing off the label.

The middle manager is the most brand-conscious. He is under constant pressure tokeep up with his junior colleagues in almost all spheres, including his attire. But hisdisposable income is not as high as the other two groups. Most of it might be spent asdown payment for a house or a car or some such white good. So his wardrobe hasspace for a slightly cheaper shirt but of near-premium brand quality. This he can use for his daily attire, while wear the more premium brands for presentation etc.

The drivers of demand in the shirt market are peer pressures and discernible differencein design and styling as compared with tailored shirts. As the income levels haveincreased, a certain amount of impulsive buying of shirts also takes place. Advertisingcreates this demand, though only about 20 per cent of buying takes place this way.

In the premium segment, however, there are additional factors that are work namely,formal or classy look, showroom ambience and fashioning, which vector the finaldemand. So image attributes become most important.

The economy segment of the market is more pr occupied with functional attributes rather than by image. The buyer of these shirts is not trying to make a statement through whathe wears. He is only interested in fulfilling a basic need. Branded and unbrandedproducts both cater to the segment, but since the demand here is so high survival iseasy for a brand if it keeps its overheads low.

The mid-price segment is the toughest to operate in. It is sufficient price-sensitive; brand

awareness is there but is diffused due to lack of brand building efforts by marketers inthis segment. While the consumer here responds to aspirational communication, heseeks to balance the value for money equation almost all the time.

Medium price category is also tricky because investment in brand building is onlymarginally smaller than the premium brands, the distribution width needs to be muchmore wider. And that is a balancing game of margins and volumes.

But for most branded shirt marketers, this is also the most attractive segment to attemptentry because of high volumes. The medium-price segment is more than four times involume and about thrice in value of the premium segment. The margins are of coursedifferent; whereas the premium segment margins are about 55-60 per cent, the mid-

price delivers 35-40 per cent.

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