Mumbai: It seemed like a clever marketing gimmick when Levi Strauss (India) Pvt. Ltd offered an instalment plan in September for people buying its jeans and other products.
But the move has worked well enough to be emulated, as leading apparel brands explore ways to make products more affordable to drive up sales.
Exploring options: The Levi’s showroom on Bridge Road in Bangalore. Hemant Mishra / Mint
Last week, Provogue (India) Ltd announced a tie-up with HDFC Bank Ltd for an interest-free equated monthly instalment (EMI) scheme. Under the offer, customers who purchase merchandise of at least Rs1,500 from any Provogue Studio outlet using an HDFC Bank credit card will be able to pay the bill in three equal monthly instalments. The Levi’s programme in association with HDFC Bank and Axis Bank Ltd has been popular with users of their credit cards.
As many as half of them have availed of the facility, said Shyam Sukhramani, marketing director, the Levi’s. “The average bill size has increased by 60%,” he said.
Single brand retailers such as Marks and Spencer Reliance Pvt. Ltd, Spykar Lifestyles Pvt. Ltd and multi-brand and category retailers such as Shopper’s Stop Ltd are considering similar offers. In a value-conscious market, the facility will make brands more accessible to consumers, said Nandini Sethuraman, head of marketing at Marks and Spencer.
Shoppers Stop had launched an instalment offer three years ago on bills of at least Rs10,000, but withdrew it due to a tepid response from consumers.
“Three years ago, market sentiments were good and interest rates were low. There was not much need felt for EMIs,” said Govind Shrikhande, customer care associate, president and chief executive of the retail chain. “This is a good time to launch an EMI facility as liquidity is tight, interest rates are high and market sentiment is low.”
EMI facilities at the low end for organized apparel retail will work in India, say sector experts.
“I have not seen EMIs being offered at the mass end and this can surely uplift apparel retail in India,” said Anand Raghuraman, a partner and director at Boston Consulting Group (BCG).
Raghuraman said an annual BCG study of consumers above the so-called bottom of the pyramid—who earn between Rs80,000 and Rs2 lakh annually and have a bank account and credit card—shows they are ideal customers of EMI programmes.
The profile of consumers being targeted by such EMI schemes also includes 20-35-year-olds who are fashion-conscious, said Ameet Panchal, head of sales at Provogue. “We have noticed that during sales our average bill size is 20-25% higher than the norm (which is) Rs1,600,” Panchal said. “Consumers come to the store to buy and with EMIs they can spend up to three times more in one visit.”
Not everyone is convinced about instalments. Rajiv Jain, chief executive officer, Bajaj Auto Finance Ltd, India’s largest consumer finance firm, also does not see the business as viable. “The ticket size is too small. It’s a tough business to crack,” he said.