Massimo Dutti, the premium offering from the stable of Inditex, which also owns Zara, is in the process of finalising its maiden store in Mumbai. The retailer is scouting for space for outlets of approximately 5,000 and 6,000 sq ft, significantly smaller outfits than its average global standard of 8,000 to 10,000 sq ft. The retailer’s Delhi store is also less than 5,000 sq ft.
Massimo Dutti is the latest to join a parade of international names like American fast-fashion label Gap and Swedish multi-national H&M, which have had to adopt similar strategies. Interestingly, Zara has been the only one among international brands that somehow bucked the trend and kept its store sizes consistent since 2009, when it entered the market. “Perhaps it is the first-mover advantage it enjoys, having invested years in studying patterns of spending,” said Mukesh Kumar, vice-president of Infiniti Mall in Mumbai.
In the international premium formal clothes category, Massimo Dutti will compete with the likes of Gant, Brooks Brothers and Tommy Hilfiger.Certainly, there is a demand in the category of formal clothes that need to be filled, experts concurred but questioned whether a premium brand can address it in a meaningful manner. Domestic brands like FabIndia and AND for instance also recognise this gap and have launched lines to address the wedge at a cheaper price, which fits the sensibility and the pocket of the customer better perhaps, said Arvind Singhal, chairman of Technopak. “Indian consumers are price sensitive,” said Kumar.
Massimo Dutti’s price points are approximately 40% higher than Zara, a cursory browsing of its website revealed. Clearly, the target is working professionals, earning more than R20 lakh annually, Kumar pointed out. “In my view, Massimo Dutti is too early to the market,” said Singhal. It is an aspirational brand, with ticket size of clothes upwards of R5,000 but the brand itself does not resonate with customers unless one travels overseas on a regular basis, Singhal explained.
Inditex, Arvind Brands and H&M did not comment on the story.What has worked for the Indian customer are mass appeal brands like Zara, H&M, Forever 21 and Gap. Even with these brands, revenue from stores did not match up to expectations. Most of them, over a period of time, resorted to price cuts for frontline products by an estimated 10% to 15%. Sure, H&M and Gap started with a bang but sales have petered down after the initial months. For instance, Gap has not met its initial trading-density target in at least three stores, a good 25% lower than what it had pencilled in, one source commented. Similarly, within months, H&M raked in revenues that Puma and Adidas report annually but the gumption fatigued. Experts held a general belief that while people are willing to pay a premium for the brand name and quality of international brands, velocity of sales kick in at a certain price point, which brands have had to adjust to. Brands have to spend time understanding consumer behaviour, prices, product, fitting and 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, said Vishal Mirchandani, vice-president at Bengaluru-based Orion Mall.
One grouse that mall developers, who have a revenue-sharing arrangement with these brands, have is that almost all the global bigwigs rely so heavily on a well-travelled customer, who is already aware of these brands. They have not invested at all in marketing and new customer acquisition, one person who did not wish to be named pointed out. “Levi’s has been in India for decades and Gap has done nothing to tell the shopper who shops at Levi’s to shift to Gap,” he explained. Similarly, there has to be dialogue for consumers to upgrade from Louis Phillipe to Massimo Dutti, this person added.
Ultimately, it is about achieving a healthy rent to revenue ratio. Pedigree brands want to house themselves in over crowded top level malls, with less than 5% mall space free. Often, retailers of H&M’s stature are accommodated in these malls after hard negotiation, spanning over a year. Pressure is constantly on to accommodate highly productive brands, making brands even more cautious of store sizes because often, smaller stores might be helpful in aiding higher trading densities.