Not cut or not to cut!

International brands are changing their pricing strategy and reducing their prices to reach a larger chunk of the price-sensitive Indian. Kunal Majumder reports.

It is no secret that foreign brands are going gaga about India. The last few years have seen the entry of a large number of foreign fashion brands into the country. News and views about leading brands and their fascination with India keeps flashing in front of our eyes every other month.

Recently Gucci’s chief executive Mark Lee forecast India as a very important market in future. A few weeks later, Versace boss Giancarlo Di Risi pointed out, “Today China, and in future India.”

Most of the international brands have positioned themselves at the higher end. Even the general perception is that of associating the international brands with luxury. However, certain brands have taken the initiative of breaking away from their mould and expanding their customer base to reach the price-sensitive consumer in smaller towns.

International brands such as Mango, Guess, Marks and Spencer and Puma are changing their pricing strategy and reducing their prices on an average of 10-15 per cent at the entry price point.

Mango, retailed by Major Brands in the country, has slashed its prices by about 15-20 per cent on the overall collection. Suresh D Bhatia, country head and director, Major Brands (India) Pvt Ltd says, “When Mango entered the Indian market in the year 2000, there were hardly any international fashion brands. At that time, considering that India is a price-sensitive market, Mango had the positioning of a luxury brand. “With time, people who travelled often became loyal customers to Mango and the perception slowly changed. Mango having reduced its prices, it’s become affordable for a lot more people.” Bhatia blames the duty structure for the higher prices. “The prices are about 10-15 per cent higher than Dubai and Spain.”

Entry of international brands is also giving competition to the existing foreign players. Apart from lowering prices, the other option is to move towards newer markets. More and more international brands are entering the tier II cities to expand their consumer base. “We are introducing cheaper footwear and apparel as we increase focus on the bottom of the pyramid. These products, however, will not be sold through our standalone stores; they will only be available through our distributors. A basic t-shirt will start at Rs 499, compared with Rs 599 in our stores,” said Rajiv Mehta, MD, Puma Sports India.

Sanjeev Mohanty, MD, United Colors of Benetton, adds, “Lower entry price points also help in roping in new consumers in metros, who can then move up the value chain within the brand. Considering all our manufacturing is done within the country our price positioning has been sharp from the beginning.”

Certain foreign brands like Esprit, Calvin Klein and Homme Shoes have not changed their pricing strategy, and in fact insist on having a uniform price range globally. “Calvin Klein is a global brand with a global image. It is not part of the strategy of the brand to cut prices when they enter a new market,” asserts Nick Smith, head, merchandising, Calvin Klein.

Arun Kumar Vajpayee, director of the French footwear brand Homme Shoes, points out, “We do not cut prices for the Indian market because our products are of the same quality as is being sold elsewhere in the world. Therefore, same product price for the same product quality. For cost-cutting, we do not want to reduce the quality of the product.”

On the challenges faced while introducing the brand in the country, Smith reveals, “Calvin Klein has received a very positive reaction since its launch here. The launch of the brand has given the Indian consumer the chance to buy Calvin Klein here, rather than having to travel to buy.”

Vajpayee, however, agrees that Homme Shoes faced price challenges. He admits, “The prices were slightly higher than what most customers are used to seeing on average shoes. However, over a period of time, Homme has established its brand image and customers are very happy with the product quality and style. So, they don’t mind paying a bit extra for a much superior product.”

Even if it is not price cut, brands are offering sales and free goodies to attract the customer. Homes Shoes offer a free pair of slippers with every pair of shoes, while Calvin Klein offers summer and winter sales as promotion.

Published in  IMAGES Business of Fashion, February 2008

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