Yesterday I wanted to go to kitex agm, but couldn’t make it due to some personal commitments. But the day had some pleasant surprise for me - I accidentally found one redtape online store enroute my trip to daughter’s dance class(I am in Kochi ).
Location of the store is not an upmarket place but not too far (approx 2-3 kms)from the most happening place. It will catch eyeballs for sure. But not much signboard about the deep discounts in the store (almost all items are 50-60 % discounted) . Limited car parking space and this of course is like any other store on the high streets.
Content and Presentation : Store is not too big , may be of 1000-1500 sq ft range. Everything was neat and tidy and look and feel is excellent.
The store was not much crowded ( 5- 6 other shoppers). Employees were more in number I guess.
They had shoes and sandals for men, women and apparels(t shirt, jeans , trousers and shirts ) for men.
According sales representative sales are good(could be generic comment hence avoidable). It is a company owned store.
Had a chat with asst manager of the store. :
Store opened a month back
Has a target of 25 lakh on first month which they ll easily cover.
Usual weekday sales of 80k to 1 lakh
Weeked sales are 1.25 to 1.50lakhs
All sales guys are redtape employees. (10+)
Planning more stores in Kerala and their dgm is in town.
Forgot to check average salary of employees so that we could estimate rough employee cost / store .
Questions that come to mind are :
Is there a product differntiation between online stores and other formats ? i.e. does the company ever sells at m.r.p ?
Does these online stores sell liquidation inventory or the regular inventory ?
Usually retail fashion businesses have different format of stores
concept store ( where all new stuff are sold and those are in marquee locatios)
factory outlets ( slow moving inventory are liquidated here. Size is not huge )
warehouse store ( very big in size . Running deep discounts. )
To me Redtape online store looks a mix of second and third .
When thinking about deep discounted fashion One story which comes into my mind is Koutons. Koutons had inflated m.r.p. which were sold for deep discounts (50%+ 40% etc). They had 1000+ EBOs across the country. Deep discounting worked for them for quite a few years. But the point to be noted is they didn’t have the brand pull. Customers were pulled to the store only due to the deep discounting strategy.
So my concern is whether Redtape will end up another deep discounter ruining the current brand identity if they do not have product differentiation across the store formats ? Since they are doing expansion via company owned outlet route it is very important to keep a tab on inventory and costs per showroom.
Thanks for your observations. I think RedTape is simply following the playbook of Reebook and Nike where the prices are high and the discounts for last years models is always there. If you see these brands they are always on discount on online stores like Myntra.
The question is if the products are good enough for it to sustain. Have checked with a few users and many are saying it is value for money because it is most likely a design rip off with good quality.
The products are really good I have one of their boots bought back in 2011 from karnal. The quality of the boot is so good and I wore it near about 6 years and even after that it is in good quality. After that I have to get rid of them gave it to one of my servant. Last year I bought pair of shoes from lucknow central during August month at 2000/-(in discount original price 4000/-). They are light weight and having good quality. The same design of u buy from any other brand like vanhusen etc u ill get neat about 3000-3500 after discount(I have checked in the central same time) . These pairs are very much comfortable u can easily wear it 10-12 hours a day without any pain.
I think all time giving discount will hamper some things.:
1-margins of the company.
2-it will create an image of cheap brand in the eye of youngsters as after all they are the targetted customers.
Regards
Ashish Agarwal
Not really, if you take a look at Myntra/Flipkart, in Puma, Adidas, Nike and Rebook, you see a banner with xy% discount at any point of time, but that may not be applicable for new launches. Also, those brands won’t give 50% and above for all the products.
Probably given the aggression, we need to see the balance between growth and profitability. Such spends may hit profitability in the short term (they had spend about 18 Cr for advertising in FY18).
We also need to consider the effect on brand power given consistent deep discounts?
Thanks for this. Am seeing that they are also aggressive on the Online platforms in terms of discounts. My sense is that they need to have a clear policy that discounts will be applicable only to old stock. This is the approach which Nike/Reebok are following. In case of Red Tape I am seeing that the whole range is discounted always online. This is the same in the online-offline store. This may not be sustainable.
Need to see how much growth they are able to see on the back of this aggressive promotions.
Any idea when the results are ? I think we need a close watch on this as they may get overboard to get growth.
You are right about impact on brand’s credibility… discounts are good to draw customers towards their stores/brand but it can hurt them on longer term. So balance is the key. Lets wait and watch
Mirza got a rating update for additional Working Capital loans. The capital intensity of the retail segment is starting to show. Short term loans have increased by about 15%, although the Credit Quality has been reaffirmed.
The results today should reveal how the venture has turned out.
Sales went up by 4% but PBT reduced by 10% mainly due to 23% jump in finance cost. Segment wise breakup shows increase in domestic sales by 39% whereas exports sales drop by 17%. Severe drop n margins for domestic sales from 25% to 20% whereas improved margins in exports from 15% to 17%.
So focus on domestic sales, additional debt, increasing employee expenses, heavy discounts offered in domestic business thereby increasing sales… all getting reflected in the numbers.
Rightsly said! As reflected in numbers…Branded sales up 40% but profit for the same increased by only 10% at the cost of advertising, infact, it could well dampen the Brand image with these never ending discount SALE. Another PROVOGUE in the making?
@shyamdsundar The page is obviously right off the AR. I think the analysis was originally by @Leading_Nowhere (from his Twitter handle; I am assuming the leading_nowhere of Valuepickr is the same person)