Sundeep Chugh, CEO & MD, United Colors of Benetton India
After taking the reigns as CEO and MD of Benetton India in 2016, Sundeep Chugh aims to strengthen the brand’s multi-channel presence. In conversation with BrandWagon’s Ananya Saha, he talks about the evolution of the Indian retail market, developing businesses specifically for the online channel and campaigns such as #UnitedByHalf. Edited excerpts:
Benetton had an early mover advantage in the Indian market, entering almost 25 years ago. Has the opportunity translated into a challenge with the entry of new fashion brands like Zara, H&M, etc?
Benetton India is the company’s number one subsidiary outside Italy. When the landscape of the market changes with so many brands coming within a span of two to three years, the customer would like to experiment. As a brand, we believe in offering the right product to our customer despite the challenges you see in the market. The idea is to stay focussed. The one big advantage is our multi-channel presence, and the other is our network which is helping the brand grow every year. Yes, there could be some years where you suddenly see so many changes happening, like digital disruption, but that’s the time when you have to change your gears.
Benetton India’s profits fell a sharp 79% to `2,300 crore in FY 16 with sales rising by just 2.2% to `735.3 crore, data from Registrar of Companies show. In 2015-16, Benetton shut 98 stores in the country. How is the company planning to up its game and revenues?
You have picked up one year. For a brand which has been in the country for more than 20 years, there could be one or two years where a re-look at the strategy is required. It was not only Benetton which decided to close stores in a year that saw digital disruption; a lot of other brands also took that conscious call. With the evolution of digital, brands now have customers from tier 3 and 4 markets. So it becomes important to decide whether to present the brand through a store or whether e-commerce as a channel is good enough. In the evolution of India as a market, before offline could evolve, the online channel evolved. In international markets, offline channels had a good 20-40 years to settle down. In India, the brand awareness or the concept of shopping from a branded store happened around 15 years back and before it could settle down, we had e-commerce.
When you have a multi-channel presence, there could be a time when you have to look at one of your channels in a different way. So that’s what we did in that particular year wherein we realised that because of the new emerging channel, brick and mortar has to be looked at in a different way. The idea was not to look at one year’s performance, but instead, to set the benchmark for the coming years. So rather than correcting it in phases, we corrected it in that year. Revenues for Benetton India have been growing by 14-15% each year, in the last five years. We aim to have a double digit CAGR for this year as well.
How much do online channels contribute to sales?
We are looking at launching our own shopping portal either by the end of this year or the first quarter of 2018. We are present on all major e-com portals, which contribute about 15% to our business. We have a multi-channel approach which includes exclusive stores, large format stores, our distribution channels and e-commerce. Franchisee-led exclusive stores contribute close to 25-40% to our revenues. It’s an overall growth strategy wherein we are trying to leverage the potential of each and every channel.
Online is the fastest growing channel and we have gained from it in the last two to three years. Specifically for the online business, we are targeting categories like footwear and are close to selling one billion pairs by next year. We are looking at possible business verticals that we can develop only for online.
How have campaigns like #UnitedByHalf added to Benetton India’s topline revenues?
When it comes to marketing, being socially responsible is paramount. With these campaigns, we do not look at the kind of revenues we are targeting or the growth that is going to happen on the back of a campaign. The idea is to remain a socially-relevant brand, and that is something which has been factored into the brand journey from day one. We are already working on another campaign under the women empowerment umbrella. For us, marketing strategy is more about connecting with the customer and ensuring that we talk about issues, while product strategy is more about being brand-right, trend-right and giving the right value for money.
With the rollout of GST, how do you see the branded apparel segment being affected? How will things play out in the unorganised sector which is suddenly rather taxable?
GST is a very positive move and will benefit India. There could be some short term impact, more to do with changes in compliance or changes in your software. Considering our big country, the way the tax structure has been defined is worth appreciation. I expect the festival season to be very good. The unbranded segment will now have to comply. The objective of demonetisation and GST is to convert a lot of the informal economy into the formal economy, which is very important for our country. In India, the tax to GDP ratio is around 16%. For the country to grow sustainably and comfortably, it should be at least 22-23%. With demonetisation, there was an upside to the tax collection and with GST, it will grow further.