When Darshan Mehta, president, Arvind Mills Ltd, announced recently that his company would revive its Ruf & Tuf brand of apparel and sell them exclusively through Big Bazaar stores in India, many wondered at the wisdom of the move.
For one thing, the hypermarket has relatively few outlets compared with the large numbers of distributors and wholesalers throughout India. For another, Mehta seems to be ignoring the large number of department stores that are dotting Indian cities.
But Mehta knows what he is doing. Big Bazaar sells Ruf & Tuf clothes, which includes jeans, jackets, skirts and several other denim outfits for children and adults, in the classic to casual genre. The price ranges from Rs299 to Rs699. Kishore Biyani, managing director of Pantaloon Retail India Ltd., which owns the Big Bazaar chain of hypermarkets (as well as Pantaloons department store chain and Food Bazaar, a grocery chain), expects to sell about 10,000 pieces each month.
"The consumer can now shop at Big Bazaar and pick up jeans or tops for as much if not less than what they would in the unorganised retail sector," says Mehta. Not only is Mehta discouraging people from buying from roadside hawkers but he is also promoting his brand with the target consumer who shops at Big Bazaar.
He expects to reach far more customers through this route than the traditional one. Biyani has eight Big Bazaar outlets scattered over major Indian metropolitan towns. The readymade jeans market comprises six million pairs a month or 72 million a year. Of this, three million pairs are sold off the pavements. Mehta says most of the jeans in that market sell at between Rs375 and Rs400 each. "My jeans will sell at Rs299, which would largely expand the market," he says.
Biyani, for his part intends to offer Ruf & Tuf products to other retailers as well. "We are looking at a B2B model," he says. "This will help us increase our turnover faster." He intends to sell them to other retailers on a cash and carry basis, in which a buyer pays a price for a certain number of products and gets an even bigger discount on the lot.
Biyani reasons that if a retailer buys about five dozen pairs of jeans and other outfits in the various models in the range, the buyer could end up with a discount of between 10 and 25 per cent. Consequently he would pay about Rs260 for a pair of jeans, for instance, which would still allow him to sell the product to the consumer at Rs299 and make a profit.
Besides, Pantaloon Retail saves on distribution costs because the small retailers would come to a Big Bazaar, pick up the merchandise and pedal away. Mehta is not complaining at all. "The owner of that bicycle has buying power," he says. "And a channel like Big Bazaar address that market best."
The pact heralds the age of the private brand in India, in which a brand is sold exclusively by a store, but is not owned by it. The US-based retail giant, Wal-Mart, for instance, exclusively stocks, but does not own Levi's Signature jeans. Similarly, Big Bazaar does not own the Ruf & Tuf brand. A private label, on the other hand, is owned by a store and stocked exclusively by it, such as Trent shirts, owned by Westside or Bumble Bee, owned by Giant hypermarket.
The partnership works well for both parties because it is in keeping with the tenor of Big Bazaar's product mix. The hypermarket is driven by apparel, with food constituting between 35 and 40 per cent of the mix. "We are constantly looking for partnerships, we have to grow out of alliances and partnerships," says Biyani. Big Bazaar already has another agreement with Badshah masalas.
Arvind Mills, on the other hand, is a mass marketer at heart. producing 110 million metres of denim, it is the world's largest denim maker. "We convert less than two per cent of that into apparel," says Mehta. Now as organised retail begins to take roots in India, Arvind Mills, through its subsidiary, Arvind Brands, which owns nine brands including Ruf & Tuf, Lee, Wranglers and Arrow, intends to enhance its readymade portfolio.Recently the company opened a shirt factory with a capacity of 18,000 shirts a day. "In the next five years 80 per cent of our sales will come from apparel," says Mehta.