BUSINESS LAW: MAKING GST WORK FOR SMALL BUSINESS
The now independent company will cover white spaces and leverage a wide offline network to chart its own course
SANGEETA TANWAR
Arvind Fashions, an independent branded apparel and retail firm post the demerger of the parent conglomerate Arvind Limited, is eager to go beyond being the second fastest business segment of the erstwhile group. With its sights set on doubling its current turnover to ~7,500-8,000 crore by 2022, the company is hedging its bets on identifying white spaces to enter new and fast growing product categories while making power brands grow through distribution and category expansion.
But such an aggressive push will also need heavy investments and Arvind Fashions is not shying away. It believes scaling up will only help it to rise above competition in the organised fashion retail market which only has a handful of players but each has a firm grip on it, according to Kulin Lalbhai, executive director, Arvind Limited.
“India is the most concentrated market when it comes to organised apparel industry. Five to six companies control large part of the market. A lot of value is created when you scale up. When you are a ~100 crore brand, you cannot create value. One needs more of ~500 crore brands in the portfolio to make an impact. That’s where huge leverage comes in terms of cash flow, share, return on capital,” says Lalbhai.
For now power brands — the likes of US Polo, Flying Machine, Arrow, and Tommy Hilfiger — all ~500-crore plus businesses — drive the business for Arvind Fashions. Among them US Polo, Arrow and Flying machine contribute about 55 per cent to the company’s revenues.
But even for a category doing well, product innovation is a must and the company says that new launches by these top brands have also provided the much-needed impetus of late. For example, Arvind Fashions’ largest brand US Polo recently launched denim products and now 40 per cent of the company’s business comes from denim. So the brand which was already clocking sales worth ~1,000 crore, continues to grow at 18 to 20 per cent. The company sees the next wave of growth coming from the portfolio that
includes Calvin Klein, GAP, Arrow — brands that clock less than ~500 crore in sales. It recently launched its inner wear and shoe collection. Inner wear as of now is a ~100 crore business which has the potential to turn into ~1,000 crore business in a short period of time.
Drawing upon its past track record of getting global brands into India, Arvind Fashions is upbeat about growing its beauty brand Sephora. The company claims, Sephora is the second most googled brand after Victoria’s Secret.
Arvind Fashions is leveraging its wide retail footprint to boost visibility and sales of its wide portfolio of brands. At present, its distribution network consists of 1,300 standalone stores in 200 towns, 1,800 to 2,000 shop-in-shops in departmental stores and 2,000 multi-brand outlets.
According to industry estimates, the Indian fashion retail market is worth ~2.97 trillion ($46 billion) and is expected to grow at a promising compound annual growth rate of 9.7 per cent to reach ~7.48 trillion ($115 billion) by 2026. As a subset of the parent, Arvind Limited’s brands and retail business had revenues of ~3,850 crore in 2017-18.
Besides the two major categories it has been dabbling in, the company is bullish about its move into value retail space through its brick-and-mortar family stores Arvind Unlimited. The stores under the format are spread across 10,000 square feet and offer products priced under ~1,000 for kids, men and women. The idea is to break into more segments at low price points.
“Amongst Madhura Fashion and Lifestyle, Raymonds, and other competitors, Arvind Limited is uniquely positioned to accommodate the emerging trends. With globally accepted product lines, the brand is one of the fastest growing textile brands in the world,” says Swati Nathani, co-founder, Team Pumpkin, an advertising and marketing agency.
“As of 2018, the consolidated revenues of Arvind Limited have increased by 10 per cent. That was mostly because of their branded apparel business which continues to deliver reliable performance. Favourable demographics, affinity for branded merchandise and shift towards casual apparels has driven their international brand’s portfolio across price points and categories. In a race against its competitors, it has a robust distribution footprint across multiple channels to ensure expanding margins,” points out Nathani.
No matter how strong one’s offline presence is, no major player in the retail segment can afford to not raise its e-commerce game and the same holds true for Arvind Fashions which expects the share of online sales to grow significantly from current 15 per cent. The numbers have been encouraging because online as a sales distribution channel is growing more than 50 to 60 per cent for the company and this has paved the way for more resource allocation towards it.
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