 "Vasanth Kumar, executive director at Max says his stores churn the stock once every two months")
It's a busy Sunday evening and most department stores at a popular mall in Thane, near Mumbai wear a deserted look. But at a Max store, the value fashion chain of Dubai-based billionaire Micky Jagtiani's Landmark group, the crowd jostles for space. "The crowd is there on most of the days and we are used to it," says a sales attendant. At Max, store sales have been growing at 16 per cent a year for the past couple of years; most fashion retailers managed 8-9 per cent last year. And despite the growing rush on India's fashion streets, Max says it has managed a CAGR (compound annual growth rate) of 35 per cent for the last ten years. Affordable fashion, smart distribution and a tightly controlled sourcing network are helping the chain build its brand as an everyday wear for women and children.
Vasanth Kumar, executive director at Max says that they have hit the sweet spot between department stores, which are high on fashion, and hypermarkets which offer value. "We give trendy merchandise and Indian fits at the right price," he says. Max is 30 per cent cheaper than the labels in department stores (Shoppers Stop, Lifestyle and others) and 15 per cent higher than hypermarkets (Future group's FBB, for instance). Prices range from Rs 200 to Rs 800 apiece. Max says it is not competing with premium and mass premium brands (Zara, H&M).
"They have understood their customers and merchandised their product accordingly. They understood that the Indian middle class, their core customer, is 'value conscious' yet wants fashionable clothes and hence have aggressively positioned themselves as a 'value fashion brand'," says Baqar Iftikhar Naqvi, business director, Wazir Advisors.
Managing the value chain
Max has about 150 stores across the country today. Kumar says that the brand is in a category of its own. It does not go up against the premium labels nor does it fit in with the cheap ones. It is positioned as a value-fashion brand.
However, this does not mean that Max is insulated from competition. Also price alone will not give it the edge, given the aggressive manner in which many of the premium chains have targeted the Indian market. Kumar says that he knows that bringing new styles and collections is extremely important. To do that the chain has leveraged its sourcing and distribution network to keep its stores well stocked with fresh fashion.
Max churns the entire store once in two months and brings about a 20 per cent change in merchandise once a month. "Once in 60-75 days, whole floor changes," Kumar says. The Landmark group has deep expertise in merchandising and operations. They are able to leverage these strengths across different formats, which provides benefits both in product range and costs says Devangshu Dutta, CEO, Third Eyesight.
An Indian foreign brand
The chain has a team of 50 designers and similar number of purchase professionals. Max has adopted the 'one-third strategy in designs' Kumar says. It adapts one third of merchandise from Dubai directly, tweaks one-third and develops one-third directly here. "We have a combination advantage. We can show a global as well as Indian face," he says.
Max has also launched a fast fashion range 'Runway by Max' in its top 30-40 stores and is setting up new stores in a new format, targeted at millennials. The new format stores an imported range and is aimed at professionals in the IT sector. Max has opened one store in Bengaluru and there are plans to open 10 such stores in key cities, which Kumar expects will provide 5 to 10 per cent of its turnover.
Sales revenues touched Rs 1,800 crore in FY16 and the target is Rs 3,000 crore by FY18 and Max expects new stores to drive sales. The chain plans to open 90 stores in the next two years.
Understanding the customer
Kumar says the store sizes will remain constant at 10,000 square feet, but the merchandise will change according to the neighbourhood. "We watch sales for a year and tweak underperforming categories to launch new ranges," he says.
Naqvi says that there is a greater focus on women's and kid's wear at Max and that has worked in its favour. "Max has worked hard on operational efficiencies right from selecting the right location without skyrocketing rentals, to store fit-outs in best possible cost, to stocking density and stock turns and so on," he adds.
Naqvi says concentration on South India, where the rent to revenue ratios are still more favourable than the North and West, catering to consumers more attuned to buying from organised retailers and penetration into Tier II and III cities have also helped. "The market for affordable fashion is not just in Tier 1 cities but also as much in the smaller cities," he says. At Max too, this is the prevalent view that is shaping the brand's plans for the Indian market.
