Business Opportunity And Innovations From Value Retail Formats- A Case Study On F-Square

The Indian textile and apparel industry is one of the oldest and most significant industries in the country and one of the largest in the world. Other than China, there are very few countries which can match the size, spread, depth, and competitiveness of the Indian textile and apparel industry. Moreover, the global elimination of quotas at the end of 2004 has greatly enhanced the opportunities for India to showcase its inherent strength and become a top sourcing and investment destination.

Today the industry contributes around 14% to industrial production in the country, 4% to the GDP, is estimated to directly employ approximately 35million people apart from the indirect employment in allied sectors, thus making it the second largest employer after agriculture. It accounts for about 15% to the country's exports, and is, in sum, an important economic engine for the nation. In part, the very diversity, scale and spread of the industry which has been its strength, has also been its weakness. However, in the past 10 years, the industry's actions, government policies as well as market events have begun to converge, providing several growth and business opportunities for the sector domestically as well as in the global market.

Indian Textile and Apparel Industry: Current Size

The present size of Indian textile and apparel market is US$ 62 Bn of which US$ 22 Bn is exports while the rest US$ 40 Bn is the domestic market. The Indian domestic textiles and apparel market is one of the fastest growing market in the world. It is expected to become one of the major consumption bases in near future. Out of the total market size of US$ 40 Bn, clothing contributes US$ 30 Bn, while the remaining US$10 Bn is contributed by textiles (home textiles, technical textiles and other textiles end-uses). The domestic market has shown a significant growth in past few years registering a CAGR of ~18%.Though men's wear is the largest category with a value of US$ 10.3 Bn, kid's wear and women's wear are the fastest growing categories. The textile industry plays a significant role in getting the foreign exchange reserves into the country as it contributes to approximately 15% of the total exports from the country. Exports in textiles and apparel have registered a strong growth in last few years – 11% CAGR from 2004-05 to 2007-08. The single largest category is woven apparel followed by knitted apparel, made-ups and cotton based textiles.

Challenges:

• Un-organized apparel retailing

• Regulations restricting real estate purchases, and cumbersome local laws.

• Taxation, which favours small retail businesses.

• Absence of developed supply chain and integrated IT management.

• Lack of trained work force.

• Low skill level for retailing management.

• Lack of Retailing Courses and study options

• Intrinsic complexity of retailing – rapid price changes, constant threat of product obsolescence and low margins.

Prateek Apparels - F-Square: An Introduction

F-Square is value retail outlet from Bangalore based Prateek Apparels. It is a new lifestyle experience for men. From clothing to accessories, it is the first of its kind store in India which is positioned as the ultimate fashion destination for men. It has emerged as the country's largest fashion value chain that targets youth and offers fashionable clothing ranging from Rs 100 to Rs 799. This makes the price affordable to all the sectors of the society. F-Square sells the company's private labels without any big brands in its product portfolio. It is famously called as local neighborhood family store. Unlike big box retail formats which goes up to 70000 sq ft F-Square is a smaller format ranging 800-1000 sq ft. F-Square is present only in Karnataka and has made its presence feel among the masses with its constant discounts and special offers. It's interesting to note that one of the top Kannada cinema actor Puneet Kumar is the brand ambassador for the F-Square brands.

F-Square is the concept from Prateek Apparels which is one of India's largest design companies with over 15 years of vast experience in delivering quality solutions for domestic branded retail industry. Prateek Apparels is a popular name in the retail fashion industry as it is one of the earliest organized players to offer integrated design, sourcing and manufacturing services to domestic branded apparel industry. Prateek Apparels with its 5 state of art manufacturing facilities employees over 3000 employees. The manufacturing facility has an incredible capacity to produce over 6 million pieces per annum. Prateek Apparels known for its exceptional quality and high manufacturing capacity is the preferred vendor partner for most of the top national and international brands in the country in addition to large format national chain retailers, discount stores and hypermarkets.

Prateek Apparels Pvt Ltd Retail Division established in 2007 exclusively concentrates on the value retail segment of the Indian market. Prateek Apparels has an admirable name in the retail segment and currently operates 7 Coupon stores at the following locations Bangalore, Chattisgarh, Hyderabad, Calicut, and Faridabad and will be adding 2 more during this fiscal. A full-fledged apparel manufacturing unit, begun in 1995, Prateek Apparels now boasts of clientele of leading brands including Westside, John Players, Levi's, Dockers, Lee, Wrangler, Van Heusen, Cottons by Century among others. From concept to design Prateek Apparels provides value-adds at every stage. Taking on a comprehensive approach, the company's services include brand research, fashion forecast, brand communication, design and product development, merchandising client interface, sourcing, production, planning and control, manufacturing and quality assurance. Coupon stores were started with an exclusive idea of providing a wholesome shopping experience to the entire family. Coupon stores are the large format stores (10000-45000 sq ft) capable of housing over 200 national and international brands offering a discount of 10-60% throughout the year. Coupon is hugely popular for its wide assortment & variety of brands, departments, categories, and products altogether providing a complete family shopping experience. With a view to further strengthen and to expand the horizons in the value retail market, Prateek Apparels has launched the concept of small format value fashion stores in 2009 under the name FSQUARE. While Coupon features well known brands, F Square will only sell the company's private labels and will be positioned as a local neighborhood family store.

F-Square Brands

There are 4 brands which are available in the f-square outlets. The names of brands are coined in such a way that it attracts especially the youths. The brands are

1. Locomotive: My style

Locomotive fashion for the young gun includes fashion polos, round neck fashion T's, stylized shirts, denims and jackets.

2. Highlander: Easy confidence

Highlander includes stylish business casuals: chinos, polos, washed shirts and trousers. These are the best chill pills for today's man.

3. Mark Taylor: Buttoned up

Mark Taylor is a range of formals for the man who needs to make the right impression.

4. Black Coffee: Big business with style

Premium formal trousers and shirts for man in command

F-Square Operations

F-square operates under the value retail format. Value retail is the recent buzzword with many established and new players adopting the model. Value retail format is a type of retail format where customers can buy products at lower prices with better quality. The main aim of F-square is to come out with combo price offers to create complete wardrobe solutions and offer unbeatable value and create the concept of pocket money shopping. The F-square customer is a Mass Indian male, 18 to 30 years seeking fashion at value. The customer seeks attractive price point and F-square merchandise is affordably priced in the range of Rs.99-Rs.699 with almost 80% of the merchandise under Rs.499. F-square has its own outlets and also follows franchisee model. It is present only in Karnataka and has not penetrated into other markets still. There is terrific competition in this segment and the stores competing with F-square are Megamart from Aravind retail, Brand factory from Pantaloons retail India Ltd, Big bazaar, Star bazaar and Trent from the Tata group and other regional players. Many customers have started preferring value retails compared to other retail formats which is the reason why the competition is increasing day by day. The company takes lots of measures to increase the visibility of the stores. The choice of location for F-square is linked to the core objectives of brand building by reach and market potential. Hence the stores are generally located in prime localities like near bustling street markets and shopping streets, value for money environments, hypermarkets, high streets & swank malls where there are large footfalls. Currently there are more than 100 stores in Karnataka in all prime locations. Visual merchandising plays a very important role in retailing and this is carried out by F-square in a very well planned manner. The store also comes out with lots of special offers and discounts regularly to attract more customers. Regional and National newspapers serves as an important media vehicle to communicate the offers to the customers along with local celebrity endorsement. The store also comes out with sudden offers with attaching a time period to it. For example it comes out with 50% off for 48 hours, Buy 1 and get 2 free in 24 hours etc. The store gets its inventories directly from its parent company- Prateek group. The store also provides training to the employees joining them to better serve the customers. The company is in the rapid expansion mode with a plan to open 100 F-square stores in this fiscal. It's planning to double its turnover to touch Rs 700 crore with 240 F-square stores by the end of year 2014.

Conclusion

There is a bright future for the value retail format with rising middle class and high disposable incomes among the customers in India. More than metros the Tier-I and Tier-II cities are developing at a faster rate especially with respect to apparel retailing. Many malls are under construction in all the metros and other important cities which gives a great scope for value retail formats like F-square to expand. Even though the steps taken by F-square to attract customers to their stores are mind blowing, will their expansion only in Karnataka be a hindrance to them in the long run? There are more chances of F-square messing up like Subhiksha (even though it was not in the apparel segment) which concentrated only on one market with very few stores outside the base till the end before it collapsed (Subhiksha has messed up not because of concentration on one market or location, but due to slowdown in sales, rapid expansion leading to operational issues and unavailability of funds major reason was ICICI Ventures that backed out, therefore this sentence is not a fit here). Rapid expansion is also in one way very dangerous if it concentrates only on one market. Being a new entrant and only one year old will it be able to compete with the big players in the market which are well established? Even though there are more than 100 stores in Karnataka most of them remain empty with no customers and also many customers feel that the collections are not as attractive as available in the stores of other players. In addition to that Innovations are also not up to the mark. Will the lacking innovation weaken its power in the competitive race? Will the stores be able to maintain the reputation of Prateek group? Only the future has to answer all these questions!!!!

Compiled By - Prasanna K.S.