In the process, Max, which entered India in 2006 through a store in Indore and currently has 120 stores across 50 cities, did business of around ₹ 1,400 crore in 2013-14, is challenging two widely held beliefs—that the future of apparel retail in India is online, and that what offline component there is will need to be focused around malls and high-streets (or what pass for them in India’s bustling cities).
Max plans to open 30 stores every year. One-fifth of them will be in neighbourhoods without malls, starting this year, in an attempt to tap into populated but under-served catchments in urban India, according to Vasanth Kumar, executive director of Max Fashion India.
Kumar is a veteran of the apparel retailing business, and worked for Madura Garments, before joining the Landmark Group in 2005.
“Mall saturation over the past year has been a big challenge," said Kumar.
“We want to grow at least 35-40% per annum and if new shopping centres do not come into the market, then we have to find our own solution," added Kumar. “At this point, a neighbourhood store is our solution."
Max, owned by the Dubai-based Landmark Group, is targeting the so-called popular (or middle) or mass segment of the fast fashion market in India. Most global fast fashion brands that enter India end up serving the premium end of the market.
Fast fashion is a term that refers to garments based on the latest catwalk trends, but don’t cost as much. Indeed, brands such as Uniqlo have made their inexpensiveness and technology (the Japanese brand, owned by the aptly named Fast Retailing Co., differentiates itself by offering low-priced basics, some-times in hi-tech fabric) their main selling point.
Max’s shift in strategy comes after months of research when it studied the demographic profiles of shoppers and the retail ecosystem of local markets such as Sarjapur and Banshankari in Bengaluru. It also comes in the context where mall development has hit a wall over the past two years. New mall supply in 2014 was sluggish, with just about 1 million sq. ft of organized shopping space across Bengaluru and Chennai becoming operational, according to a report by real estate consulting firm CBRE South Asia.
“The supply side for malls can be a constraint," said Vivek Kaul, head of retail services India at CBRE South Asia, adding that retail development could take anywhere from three to four years to complete.
Given that, Max’s strategy seems well thought through, he added. “It’s a smart move for any retailer who is willing to expand and service heavily dense catchments where access to retail is very limited."
For Max, this is the first time it has decided to venture beyond malls and traditional retail hubs.
“We’ve never ventured into the neighbourhood space," Kumar said.
The retailers’ choice of neighbourhoods is based on data, including real estate prices, car ownership and existing retail profile (including restaurants). The presence of supermarkets, electronic stores, salons and restaurants is a good indicator, Kumar said.
“We believe that apparel can now fit right after grocery," Kumar explains, saying that shopping for apparel is becoming a part of “normal consumption basket", as opposed to being something restricted to special occasions.
The Indian apparel, shoes and accessories market is worth ₹ 2.8 trillion, the company said, citing market data. But per capita consumption of apparel in India remains low, with the average Indian in its target segment buying only five pieces of apparel a year. The number was four till three years ago.
There’s more awareness of fashion trends, too, and not the least because of e-commerce retailers such as Myntra and Jabong. Indeed, such retailers will pose a significant challenge to Max.
Ankur Bisen, senior vice-president, retail and consumer, Technopak Advisors, said: “For fashion as a category, shoppers still shop online, driven largely by the brand and the relative discount. While Max has entrenched itself as a value retailer and heavily built its private label—a feat that online retailers have started to pursue very recently—consumers will still invest in the core proposition of Max as a brand. Threat for Max from online retailers is still very limited."
Max expects to grow by expanding its business in so-called tier-II cities, or cities such as Kota in Rajasthan, Rajkot in Ahmedabad, Rajahmundry in Andhra Pradesh and Rourkela in Odisha.
“We’ve shortlisted 25 small cities where we will open our second or third stores, especially in satellite markets such as Ghaziabad and Meerut in Uttar Pradesh," Kumar said.
As for other cities, “we will address (them) rough e-commerce", Kumar said.