Bangalore: They started life as stores where companies sell the previous season’s offerings, but companies here are now using factory outlets to expand their reach and make their products more accessible to customers.
According to Puma Sports India Pvt. Ltd managing director Rajiv Mehta, this is not really a unique-to-India strategy and such stores are quite prevalent in the US and Europe. “There are always people aspiring to own a particular brand at a lower price, even if it is a season old,” he says.
Factory outlets, where products are always available at a discount, are central to the expansion plans of middle-market brand Spykar, owned by Spykar Lifestyle Pvt. Ltd. The company calls its factory outlets “yellow ticket stores” in a bid to differentiate the stores from other factory outlets. It has 18 of these and will add 12 more by March, mostly in the so-called tier II and tier III or small cities such as Mandi in Himachal Pradesh and Sangli in Maharashtra.
Expanding reach: A factory outlet in Bangalore. Retailers find that such outlets could help people who may not have tried out a brand to do so. Photograph: Hemant Mishra / Mint
“These small towns are potential markets...where people may not buy today...but it is a good way to familiarize them with it,” says Amit Seth, head of marketing at Spykar Lifestyle.
A factory outlet helps a customer who may otherwise not have tried out a brand to do so.
Lee Cooper India Pvt. Ltd is one of several companies launching factory outlets in smaller cities before they do exclusive stores. “Brands are now expanding their factory outlets to tier II and III cities, where exclusive outlets may not work. The factory outlets also help the brand to reach those who aspire to wear the brand but cannot afford it,” says Ameet Panchal, chief executive officer of Lee Cooper India. The company has four factory outlets and will add one more by March.
Factory outlets have always been an important avenue for sales of branded products. According to retail consultancy Technopak Advisors Pvt. Ltd’s estimates, the size of India’s retail industry is estimated at Rs12 trillion in sales. Of this, Rs55,000 crore comes from sales of branded products. And 45% of such products are sold during discount sales or through factory outlets, which offer a 15-40% discount through the year.
Four apparel and two shoes and sportswear companies that Mint spoke to said factory outlets contribute 10-15% to their overall sales.
Apart from introducing their brands to customers, companies also use factory outlets to sell unsold merchandise; and as the quantum of this goes up with an increase in the number of exclusive stores they run across India, they feel the need for more factory outlets.
Puma Sports, which sells high-end athletic shoes and other sportswear, plans a network of 40 exclusive stores and five factory outlets by March. The company currently has 25 stores and two factory outlets. “The idea is to have one factory outlet for every five-eight stores,” says Mehta.
Peter England, which has two strategic business units—Peter England menswear and family brand Peter England People—plans to invest Rs450 crore over the next three-four years to expand its network. The company currently has 12 factory outlets, along with five family retail stores and 250 exclusive outlets. It expects to raise the number to 16 factory outlets, 350 exclusive stores and 10 family retail stores by March.
And Levi Strauss (India) Pvt. Ltd, which owns brands such as Levi’s and Dockers, currently has 55 factory outlets and plans to add a few more this year. “With brands like ours launching new designs every few weeks, expanding factory outlets have become mandatory,” says Shumone Chatterjee, managing director of Levi Strauss (India).
The growing importance of factory outlets has resulted in the emergence of malls dedicated to such stores. Such malls have already come up in Faridabad, Mathura and Ludhiana.
Raymond Ltd, which owns brands such as Park Avenue, Parx and ColorPlus, will soon launch a second factory outlet in Gurgaon, selling all its brands. This combination store is better than individual stores, says an executive from Raymond, who does not wish to be named.
And it isn’t just discounts that attract customers to factory outlets, although these are a big draw. “In a factory outlet, you can go any time of the year and can be assured of a discount,” says Titli S. Mitra, a 26-year-old content writer based in Bangalore. Some customers say factory outlets are better stocked. “My foot size is four. I can somehow never find shoes of my size in main stores; and even if I do, there is no variety to choose from,” says Rajan R., a Bangalore-based research analyst.