EBOs V/S MBOs: Which side do the scales tilt?
Decoding the EBO V/S MBO Tussle
There is indeed no definite answer to the question of which retail format brings in more profits. Even as Zara is opening exclusive outlets to deliver high merchandise visibility and customer experience, Raymond and Siyaram’s are moving to selling their merchandise through multi-brand outlets.
Time and again, retailers and brands have hopped on to new-fangled bandwagons and newer retail distribution formats when it comes to pulling in customers and increasing sales. It is true that consumers are no longer only price conscious; rather, they look for convenience, time saving methods, trends, varieties, good discounts and a one-stop-destination kind of shopping concept.
“Where once, single-brand retailing was typically dominated by categories such as luxury goods, apparel, accessories and footwear, changing consumer demographics have made even brands like kitchen appliances, accessories, toilet accessories, apparel basics, etc., find a place in multi-brand outlets today,” opines retail expert Nishank Jain. Be it a brick and mortar space or e-commerce portals, a majority of retailers are looking for presence via MBOs.
Currently Titan, Helios, Raymond, Titan Eye+, Mahindra First Choice, Carnation Auto, Kapsons, Van Heusen, The Mobile Store, Skechers, Sangeetha Mobiles, Promart, Urban Shore, Kimaya Kitsch, Siyaram’s, OfficeYes.com and Planet Fashion are operating via the MBO format.
THOUGH OPENING EBOs WILL IMPROVE VISIBILITY OF THE BRANDS, TO MAKE INROADS INTO VARIOUS TOWNS AND CITIES WHERE THERE IS A HUGE POTENTIAL MIDDLE AND UPPER MIDDLE CLASS POPULATION RESIDING, MBOs ARE THE ONLY OPTION.
MBOs v/s EBOs - Which format is mightier? Monte Carlo directly approaches their customers through their distribution channel which comprises a mix of Exclusive Brand Outlets (EBOs), a network of National Chain Stores and Multi Brand Outlets (MBOs). There is no preferred format. Though opening EBOs will improve their visibility, to make inroads into various towns and cities where there is a huge middle and upper class population residing with increasing disposable incomes, MBOs are the only option. At present, they have 150 EBOs and more than 1,000 MBOs all over India.
“You need the right product at the right price to set up an EBO, especially in non-metros,” says the spokesperson from Arvind Brands. It is not easy to tap small markets as big brands may not have access to the innermost channels. So, there is an MBO thrust, lower price points, and more fashionable products to suit the aspirations of a person. While a metro consumer is slightly more evolved, the small town guy doesn’t mind wearing rip-offs and imports.”
Small time apparel manufacturer and retailer Tarun Jain of Brooks International feels, “Apparel is more product driven and less brand driven and hence, the MBO route proves to be more profitable. Though, on one side, exclusive brand visibility has to be compromised, but on the other, small retailers get to spread their costs evenly by supplying their products to various stores.” KOUTONS is an example of the change from a MBO to an EBO format.
THE DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION HAS CLARIFIED THAT GLOBAL RETAILERS PLANNING TO ENTER THE MULTI-BRAND RETAIL SECTOR IN INDIA WILL HAVE TO MAKE FRESH INVESTMENTS IN BACK-END INFRASTRUCTURE, AND ACQUISITIONS OF SUPPLY CHAINS OR BACK-END ASSETS FROM EXISTING ENTITIES WOULD NOT BE ALLOWED.
Inflexible Govt. Policy structure The Department of Industrial Policy and Promotion (DIPP), has clarified that global retailers planning to enter the multi-brand retail sector in India will have to make fresh investments in back-end infrastructure, and acquisition of supply chains or back-end assets from existing entities would not be allowed.
The guidelines also say that both the back-end facilities and the front-end retail entity would have to be completely separate and the multi-brand retail trading entity will not be permitted to undertake any wholesale activity. The front-end stores set up by the multi-brand retail trading units would have to be ‘company-owned and company-operated’ only. These restrictions, thus, potentially limit the retailers’ flexibility to structure his franchisee arrangements or otherwise, online channels, supply chain, distribution networks, etc., and hence, we are seeing an increase in EBOs today, especially in the consumer durables segment, with Sony and Panasonic being the leaders.
Both these retail concepts have their own pros and cons. At some point of time, the retailer benefits from exclusive outlets, and at another time, he may benefit from multibrand outlets. While EBOs are important for branded apparel makers to establish a market presence, and create an impression in the customers’ mind, MBOs offer a pragmatic approach for the success of a retailer as they offer a wide variety to shoppers under a single roof. From any business perspective, the model that leads to the bottom line strategy depends on different aspects, such as, is the individual brand strong enough to survive with the EBO format? How do the brand want to be positioned? Are we looking at the long-term or short-term strategy and the strength of finance on the marketing side? What is the acceptance of the brand in the eyes of the customer? etc.