Home Business Moguls Raymond Apparel: Asset-light, sales-heavy

Raymond Apparel: Asset-light, sales-heavy

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Mohit Dhanjal, Director-Retail at Raymond Apparel is a man on a mission – to open 1300 stores by the end of FY 2018-19. This will include 985 Raymond shops, 300 exclusive outlets for its brands like Park Avenue, ColorPlus and Parx, as well as the recently introduced asset-light Mini TRS shops.

This franchisee-focused retail format helps Raymond’s partners manage operations at almost 1/4 of the capital otherwise required. Dhanjal tells Vinita Bhatia of Retail Networks how this flexible model can evolve with consumer trends and is digitally integrated to keep enthusiastic pace set by ecommerce.

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How has Raymond managed to ensure that the essence of ‘Customer First’ is employed across your franchise-led network?

Raymond has been around for 93 years and the only reason we have been able to do that is because we are customer focused. As an organization, we have always invested ahead of the time and the reason for that is because we want to be future ready.

That is why in addition to improving our manufacturing facilities, we are rolling out a large number of asset-light retail formats. We are also upgrading our existing stores and a little bit for the omni-channel play that we need to experiment with and learn as we go ahead.

By the end of this financial year we would have about 985 Raymond shops. Apart from this we also have another 300 exclusive brand stores of other brands like Park Avenue, Colorplus, Parx and some new formats that we are experimenting with. So, all put together we should have about close to 1300 stores in India.

What prompted Raymond to opt for the asset-light retail store model?

In today’s VUCA world, the only constant is change and this is this point is more brought forth by the ecommerce business that we have really seen proliferate. I believe that what ecommerce has done is helped us expand consumption in the country. Today, we are not faced with the challenge of reduced demand by consumers – instead, we have seen new people into the category.

However, it got us thinking and one of the first things we looked at was our existing business models and structures. We needed to be completely nimble and agile and move with consumer preferences. We figured that while in the past 90 years we have set up 700 stores, in the next two years if we want to set up 300 stores how do we do that. If we were to look at the same manner of expansion, it would have again taken us if not 90 years, then at least 10 to 15 years and a lot of cash.

That’s why we came up with this new asset-light and investment-light model, which is franchisee-focused. It helps entrepreneurs start the business at 1/3rd or 1/4th the capital otherwise required. It is a flexible model so that as consumer trends evolve, they can evolve the portfolio in their stores to meet those needs.

These stores are also digitally integrated so if a consumer doesn’t find a product in the store, he can then search for it on the online kiosk and place an order from our website at the offline store and get it delivered either at the store or a place of his choice.

What are the key elements of the Mini TRS stores?

Before we piloted the project in September 2016, we spent about a year looking at our 700 stores. In around 100 of those stores operating in tier 4 and 5 cities with population of less than 2 lakhs, we were able to figure out certain dynamics essential for a successful business.

Based on these hypotheses, we built a retail business model, which has four pillars. The first one was that it had to be asset and investment light. If you are looking to enter a town with 50000 population, you can’t go with the traditional retail model of INR 1.5 crore or INR 2 crore investment. So, we developed a model where the franchisee needed to invest only fill up to INR 50 lakh, which includes inventory and shop fit out.

Secondly, we needed a design that caters to evolving customer needs. So, currently, our stores sell 80% fabric and 20% apparel, but these preferences might change and tomorrow consumers may want more apparel. Or it might shift towards customization, where customers may want only fabric. The store design should be flexible, so that each time there’s a change in consumer demand, one is not tearing down the store and building afresh. We use the same fixtures and elements irrespective of the product category, so our franchisees can move products around as they expand categories.

The third one was speed of execution. Earlier, it typically took around 90 to 120 days from identifying a location to opening a store. Today, we can open a store in 15 days flat. This is because we took global supply chain lessons and implemented them in India. There are vendors who manufacture our complete fixtures and store interiors off-site; all retailers need to do is ensure that the store is ready in terms of the flooring, ceiling and walls and these fixtures can be installed. Similarly, we have franchising workflows, so within of ordering the goods, the merchandise is at the store.

The fourth element is about being customer centric and leveraging technology in these stores. That is why all our stores are digitally integrated with interactive kiosks. With these four pillars, an 800-sq feet Mini TRS store can deliver the same kind of superior experience as our regular 2,500 sq ft store.

You piloted this Mini TRS project in 2016, so why did it take you two years to roll it out in a full-fledged fashion?

We wanted to test these hypotheses and the lessons we learned in the first six months helped us finetune the model. For instance, we realised that a shop needs at least 15 feet of frontage to be attractive in smaller markets. We then streamlined the model for our franchise partners before launching the first Mini TRS store in March 2016.

It took us six months to open five stores, and in the first year, we opened close to 91 stores. In the following six months, we launched 100 stores.

What are some standout points that you have witnessed at the Mini TRS in the past few months?

Initially, we assumed that we would sell about 80% fabric and 20% apparel. In the first 100 stores, we noticed that the contribution of apparel, at almost 25% to 30%.

We also realised that we need to have a stronger tailoring network associated with our stores since consumers expect a one-stop shop solution. When they buy fabric they want to get it tailored at the store itself. Here, we were able to leverage our tailoring initiative.

We have about 38 tailoring hubs across the country. So, whenever we open our Mini TRS, we link it to one of our tailoring hubs. Although we don’t have enough tailoring hubs for all the outlets, our plan is that in the next three months we will open 12 more.

In this journey of opening 230 outlets, half of these were with people who have been associated with the retail trade. The other half have been with people who have had no experience with business – they were either they professionals working in the medical or IT field, and some were even our employees, who left a salaried job to become an entrepreneur with this format. This shows the potential of India and the entrepreneurial mind-set. That’s why the future of India is so bright.

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