1. Shoppers’ delight: Gap to Aeropostale, top global brands set to cut prices

Shoppers’ delight: Gap to Aeropostale, top global brands set to cut prices

The strategy is not a new one; Zara had done much the same when it started out in India back in 2009. Mukesh Kumar, vice-president at Infiniti Mall, Mumbai, points out the Indian consumer can be very price sensitive.

By: | Mumbai | Updated: August 1, 2016 8:09 AM
The strategy is not a new one; Zara had done much the same when it started out in India back in 2009. Mukesh Kumar, vice-president at Infiniti Mall, Mumbai, points out the Indian consumer can be very price sensitive. (Reuters) The strategy is not a new one; Zara had done much the same when it started out in India back in 2009. Mukesh Kumar, vice-president at Infiniti Mall, Mumbai, points out the Indian consumer can be very price sensitive. (Reuters)

With revenues not quite matching up to expectations, several global apparel labels are toying with the idea of dropping price points. Industry watchers say brands such as Gap and Aeropostale will lower prices for frontline products by about 15% once the ongoing sale season is over.

The strategy is not a new one; Zara had done much the same when it started out in India back in 2009. Mukesh Kumar, vice-president at Infiniti Mall, Mumbai, points out the Indian consumer can be very price sensitive. “If the price points are `2,500 for denims and about `1,500 for tops and shirts and the brand caters for well-heeled customers who have shopped abroad, it could do well. But for a first time shopper in India, prices need to be about 20% lower,” Kumar observed.

While consumers may have cut back on discre-tionary spends, shopping only on impulse or during sales and festive months,  Arvind Singhal, chairman of Technopak believes demand could be created if prices are cut by 10%-15%.

Experts said after an exuberant launch last year, demand for some upmarket brands has turned somewhat tepid, adding, Gap hasn’t met its trading density targets; three stores, sources said, are earning a revenue per sq ft of approximately `1,800, a good 28% lower than the numbers initially pencilled in.

H&M, which in the initial months, reportedly raked in revenues that brands like Puma and Adidas would report in a year, have also seen sales drop by almost 30% in the past few months, people familiar with the development said. H&M and Arvind Brands, which has the franchisee for both Gap and Aeropostale, did not respond to an emailed query sent by FE.

One mall owner, who did not wish to be named, pointed out that the strong sales, reported in the first few months, have not sustained because very few new customers have walked into stores. “Levis has been in India for decades and Gap has done nothing to tell the shopper who shops at Levis to shift to Gap,” he explained. Several experts pointed out most brands have relied heavily on the well-travelled customer and not too much initiative had been taken to as such market the brands.

“Brand building is an essential but very little of it is happening,” said Vishal Mirchandani, vice-president at Bengaluru based, Orion Mall. Mirchandani added that while sales in the leading metro cities may have been good, once the focus shifts to penetrating Tier II geographies, it could get difficult.
Among the top four — Zara, H&M, Forever 21 and Gap — the last one is the most expensive, with prices starting from `899, according to sector experts.

Denims cost about Rs 3,000 – Rs 3,500, which is 30% higher than fast fashion brand, Forever 21, which  delivers one of the most productive trading densities of between Rs 2,500 – Rs 2,900 per sq. ft in some locations.

To offer competitive prices, some of these brands may alter their sourcing hubs; more will be procured, experts said, from Bangladesh and Sri Lanka rather than from China. Moreover, if possible, clothes will be made locally  where partners have capacity.

Mirchandani believes pricing apart, products too need to be tailor-made to garner volumes. “Brands have to spend time understanding consumer behaviour, prices, product, fitting, fusion wear. While some uniformity needs to be maintained, they cannot replicate patterns and tastes in a new market because the Indian body type is different,” he added. As FE reported in July, both Gap and H&M are believed to be cutting store sizes in order to remain profitable although the companies did not confirm the development. Both mall owners and retailers confirmed that long queues for the sales and bumper debuts notwithstanding, demand is petering out. Even H&M, they said, was trying hard to balance revenues and margins. The Swedish retail giant, the world’s second largest apparel company, stocks very little of products priced below Rs 399.

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