NTRODUCTION The Indian retailing has come a long way since its roots in the traditional kiranawalas, to big

organized retailers like Shoppers' Stop, Lifestyle, Food World, etc., although the traditional retailing still holds a dominant position in the market as compared to organized retailing, which has a market share of about 3% of the retailing pie. But the positive side, which will definitively give a sign of relief for the major retailers, is that this minimal market share is growing at a healthy rate of 25-30% approximtely annually. This phenomenal growth rate is sustainable due to the change in consumer preference and the increasing customer centric focus of these major retailers, pampering the customers with convenience way beyond there expectations by giving them convenience in shopping, an array of assortment to choose from, coupled with the fact that there is more disposable income in the hands of the buyers. Industry estimates put the number of retail outlets at 12 million. A few of the major players which are in organised retailing are: RETAILER SHOPPERS' STOP PANTALOON LIFESTYLE WESTSIDE CENTRAL GLOBUS History PRIL was incorporated in 1987 with a focus on "Mens-wear Retailing" in the small store format. This was through franchisee outlets, Pantaloon Shoppes, with an average area under operation of less than 1000 sq ft. n late nineties, the company changed its focus to "Family Retailing" in the large departmental / megastore format (greater than 5000 sq ft). Thus, the company has continuously evolved itself to fulfill the shopping aspirations of all the major class of consumers, in order to gain higher share of their wallet. PRIL is promoted and managed by the Biyani family, with Mr. Kishor Biyani heading the operations as the managing director. Mr. Rakesh Biyani, Mr. Sunil and Mr. Anil Biyani and Mr. Vijay Biyani respectilvely head category, production and finance functions. Apart from this, the company has appointed professionals in charge of various functions like supply chain, business development, knowledge management, HR, etc. Background PRIL has developed the following models for its retail operations: OWNERSHIP RAHEJA'S BIYANI'S LANDMARK GROUP, DUBAI TATA'S PANTALOON (BIYANI'S) RAHEJHA

CASE STUDY: PANTALOONS RETAIL LIMITED

Department stores through Pantaloon Stores;  Discount hypermarkets under the Big Bazaar brand, with the Food Bazaars continuing to operate
primarily under the Big Bazaar umbrella; and

 Large format seamless malls, under the Central brand, modeled on global premium department
stores such as Selfridges in the UK and Bloomingdale's in the US. PRIL operates 13 Pantaloon stores across eight cities. PRIL has consolidated its brand equity and its early-mover advantage with aggressive additions to its retail space. Mission "Rewrite the rules, but retain the values." Vision Pantaloon will innovate a pan-Indian model of retailing, rather than copy the western model.

Product The basic products they keep ranges from being a men's wear - shirts and trousers - company, Pantaloon Retail has added to its credit several of branded ladies and kids wear. The women's brands are: Annabelle (western office / casual wear), Srishti (ethnic wear - salwar kameez, ready-made blouse) and Bare (casual wear for children / men / women). On the anvil are Agile (sports wear), AFL (a budget product) and Scottsville (winter wear). Apart from stocking their own brands, Pantaloon Retail outlets also stock other readymade garment brands and fashion accessories. Promotions Since PRIL's core agenda is to try and build a fashion brand for the people, which is wearable, celebrity endorsement didn't feature into their scheme of things. However, PRIL has had some cricketers like Steve Waugh, Mark Waugh, Hansie Cronje and Sanath Jayasuriya in ads. In Pantaloons, they want to continue to focus on fashion and apparel and therefore build imagery, which is fashion oriented. Keeping this in mind, the vision ahead for PRIL is to look at products and innovations that give the company an edge in the consumer mind space. According to Pantaloon officials, the total advertising budget (for the year July 2004-June 2005 was Rs. 35 crore. (However, an isolated figure for the creative business alone is not available.) Price The desire is accentuated by the hugely popular promotion, which ensured a high brand recall in the minds of consumers. The overall initiative of price, distribution and promotion resulted in number of customers going up by over 50%. Even as the roll out of low price point across all products in the portfolio resulted in rise in volumes, by 2004, the strategy started affecting the margins. The company has assured avoidance of every possible occurrence of roll back on its price as high input costs made the price point unsustainable. They move according to the current market reality as the price is still competitive, and the objective still is to increase the pie. The price point has moved, but it's still affordable, and they are at it when it comes to other aspects of penetrating the market through innovation, distribution and creating occasions. Positioning Customer demands have changed with changing lifestyles. Like in clothes, casual wear is now divided into party wear, outdoor wear, and sportswear and lounge wear, something that wasn't there earlier. That's why, after nearly two decades, the flagship Pantaloon store has been repositioned. It has dropped its earlier "family store" positioning to don "the affordable fashion" tag. In keeping with its new positioning, it phased out its Pantaloon trousers and replaced it with a mélange of private labels including licensed brands. If we look at some of its launches in the last couple of months, last month it launched UMM, a licensed brand from Italy. It has tied up with Arvind Mills to sell its jeans exclusively in Pantaloon stores. By 2004, it had lounge wear named Leone and another one for kids. (The store has 30 private labels by this fiscal end). People RPG group has taken initiatives in developing in-house training facilities to upgrade the skill levels of the workers. For instance, the RPG group has a in-house retail institute which has trained over 1500 customer sale personnel; the Narsee Monjee. Thus, growth of the organized sector would improve the skill levels of workforce and consequently, their earnings would also increase. Store Planning Today, Pantaloon Stores across the country are one of the favourite shopping haunts of the people, who recognize that shopping at Pantaloons provides great and real value for money. They offer the widest and the most trendiest choice in self service family shopping and a friendly and beautiful ambience. Now, shopping also has a delicious end at Pantaloons, Café Bollywood opened in the store.

Store Process & Operations Pantaloon Stores are managed by professionals and state-of-the-art technology is used to run the operations across the country. Baan ERP Systems and Category Management are all functional and the Visual Merchandising Pantaloon Retail is ensuring it stays on top: it recently launched Springboard, a designer prêt gallery for established and upcoming designers, in its well-located stores. It has invested about Rs. 40-50 lakh in the merchandise, provides space, and creates advertising, and is open to a manufacturing alliance, or providing access to its production facilities. The Rs. 400-crore company has taken a `fashion forward' stance, which is enhanced by designers such as Rohit Bal, Priyadarshini Rao and Anita Dongre - who also makes an exclusive line, AND, for the commercial floor. Pantaloon works on a 50 per cent margin, and provides feedback on price points, sizes and styles, and hopes designers will develop exclusive lines. This way, they also provide a value-add to the customers, take them a couple of notches above the levels they are used to, and make it an aspirational experience for them. Distribution & Logistics They are doing quite well considering that, despite the drastic pruning of its franchisee network over the last three years; the company has stopped appointing new franchisees. Further, the company took a recent decision to stop the supply of its ready-made garments to other outlets. In 1995, Pantaloon Retail had about 72 stores, many of them franchised. Now the company has around 40 outlets of which 14 are company-owned in order to have alignment with the company's vision of creating its own brand equity. The route for the same was chosen by the management was to have its own outlets. Pantaloon has decided to open up regional warehouses in the four major metro cities of the country. The retailer has a central warehouse in Mumbai. As the officials think that Warehouses are getting important as they increase the number of outlets. There is need to monitor inventory movements, and to manage them efficiently. However, at present, this does not seem to be the norm in this industry. They are among the very few retailers who make serious and optimum use of barcodes and ERPs. Buying & Merchandising As resources for their dresses they have firms like: Anna Sui, Betsey Johnson, Co. of Unorganized People, Donna Karan, Helmut Lang, Hugo Boss, Jared Gold, Kate Spade, Kenneth Cole, Lloyd Klein, Marc Jacobs, Michael Kors, Oscar de la Renta, Patricia Field, People Used to Dream, Ralph Lauren, Sean John, Tommy Hilfiger, Agnes B.A.P.C., Balenciaga Bless, Bruuns Bazaar, Celine, Chanel Christian Lacroix Christian Dior Givenchy, Jean Paul Gaultier, Kenzo, Louis Vuitton Lucien, Pellat-Finet, Sonia Rykiel, Yves Saint Laurent. Pantaloons have jeans from Bare at Rs. 695 and above. Newport, priced at Rs. 599, was the cheapest pair of jeans in the market. So, they contacted Arvind Mills and asked if they could give jeans at Rs. 299, if we were willing to take 100,000 units a month. That is where Ruf-n-Tuf came in. The brand had been discontinued when Pantaloon first contacted Arvind. From now on, it will be available only through Pantaloon. There is a similar deal for T-shirts.

Category Management In case of Pantaloon, it has come up with some sort of implementation of category management principle. Pantaloon has four categories - Men's formal, Men's casual, Men's Knitwear & Ladies & Kids wear. Each category manager operates like a CEO of his category and is given a quantum of showroom space, and his objective is to maximize contribution after meeting the variable cost and fixed cost (including rental cost) for the space under his management, category manager with the help of 6 to 7 executives pores over the sales data of each of the stores and tries to figure out the trend of sales. On the basis of this extensive analysis, he draws out the plan of procurement and negotiates with various brands (Say,

color plus, Levi's, Lee, etc.) as to how much space and at how much cost such rental shelf space is available to them. To give an example, as the Begumpet's Pantaloon real estate space is expensive and the customers are more up market, the category manager has given space to some brands. Such a local flavor and variation is possible as the category manager is fully empowered to increase the sales per square feet and his pay packet is structured in consonance with the target achieved within the category. To cite another example, initially Pantaloons was not selling men's shorts, except that of some local brand. The category manager of men's casual identified this niche and started stocking Men's shorts, and in the recent festival season Pantaloon could sell 13000 men's shorts. Hence, unlike other retail players who work on the pull of brands, Pantaloon shops do not have any particular allegiance to brands. The category managers work out the optimum mixes of brands for each of the stores that can maximize sales. They specifically follow the following model: -

Business Model Certainly, there are many models to choose from: manufacturing only, retail only (through 60-odd MBOs like Ensemble or Ffolio), retail and manufacturing, or finance only (investment in the brand by a partner). Then there's Victoria, a seamless mall, where Pantaloon will take care of the front end, and designers can lease space. But a `retail only' model is a low-risk model for the retailer, without much investment in the brand, or involvement by the designer. Financial Planning Each outlet would break even at sales of Rs. 10,000 / per sq.ft / per annum. Despite a fairly high stock turnover of 8 to 10 weeks, the company is working hard towards bringing it down further. They do have a margin of 25-30% in their apparel & non-food segments. The reason for going in for mega stores in contrast to several smaller franchised outlets is the company's expanded product portfolio. Range Planning The Stores have entire range of Menswear, Womenswear, Kidswear, Activewear, Accessories, Cosmetics, Fragrances, Homeware, Jewellery, Toys, Books, Music, Stationery, Gift & Novelties. Brands like Pantaloon, Bare, John Miller, Colorplus, Levi's, Pepe, Adidas, Reebok, Lee Cooper, Lovable, Jockey, Yamini, Dreams, Estelle, Gili, Spectacular, Zodiac, Revlon, Lakme, Maybelline, Chambor, Baccarose, Woodlands, Nike, Rayban, Parker, Espirit are available. Ordering of Products Around 5% of the merchandise is imported from Hong Kong / the Chinese mainland and Bangkok. They think that there is a need for importing apparel as some of the innovative fabrics are not available in [this] country, or even if these are available, they do not come at competitive prices.

The imported apparel is priced at between 15% and 20% higher than regular locally produced merchandise at the store. In-season Management The management has decided to go for a new ad-line called "fashion from Pantaloons". Internationally, in this business of fashion retailing, while the margins on individual garments are high, eventually, the margins are low. That is because the unsold stocks have to be liquidated through heavy discounting. For instance, it takes 90-120 days to design and ship, say, a new line of fashion merchandise. This means two things. One, the company will always be forced to order in lots of 90-120 days, lest it runs out of stock halfway. Two, if the fashion changes, the company is saddled with inventory which then has to be liquidated. If the margins on every garment are 50%, but company is going to sell half of them after a 12% markdown, the margins are already down to 44%. And so, the company is trying to crash the time to market from 90 days to about 21 days. Pantaloon has a neat model that is trying to launch new lines in less than 21 days (Right now, the company has brought the time lag down from 90 to 40 days.). What made it possible is that it had its own factories. Faster manufacturing will let the company keep fewer inventories, which will make it more responsive to market changes while reducing the amount of stocks to be sold at a discount. At the same time, as fresh stocks hit the market faster, sales will rise. By becoming much more responsive. They can have their margins by 5-6%. In-season Brands If the year 2003 witnessed the birth of a lot of private labels, 2004 is seeing these very labels giving the brands a run for their money. These labels are the key drivers behind growth and market penetration across retail categories like apparels, groceries, etc. Further, PRL has also focused on enhancing sales of its private label products, which in turn are expected to improve margins, PRL has also used the acquisition route for expansion, in businesses such as branded garments, and India's Marks & Spencer's franchisee. The company has launched apparel categories under Pantaloon umbrella. This includes shirts, shorts under the Premium brand. It plans to launch 26 more products such as women apparel under the Premium brand. Umbrella brands for other products are also on the anvil. They already sell belts, briefs, socks, ties under Pantaloons .The company's in-house brands have garnered a market share in the range of 25-40 per cent in its existing stores. They can earn whopping margins of around 55 per cent to 60 per cent on private labels. In women's wear, it is between 48 per cent to 50 per cent compared to around 35 per cent in branded gear. The officials say that they can differentiate through private labels. They also believe that private labels give them more control over their shelves. They grouse that the big companies often squeeze supplies during peak seasons and festival time. As they compete head-on with brand manufacturers, private labels offer retailers better negotiation power with suppliers. Another reason for building up private labels is to induce store loyalty. In other words, with private labels not available anywhere else, if it clicks, then consumers return to the store. So Pantaloon is also looking at creating individual in-store brands within its existing stores for its various product segments. For instance, it has decided it spin off its watches and sunglasses under a separate store section branded as Blue Sky. Another in-store section is likely to get created for kids' products under the brand `Playground'. In-store section brands within its stores are also planned for product categories such as cosmetics, fragrances and sportswear. All this time, Pantaloon has always been perceived as an apparel-centric store. Now, they want to create separate identities for the other mix of products existing at its stores. In fact, there are plans to introduce both shop-in-shop brands and also individual stores for most of these categories. In view of space constraints, Pantaloon intends to spin off these in-store brands as independent stores later as the business expands. For this they need a minimum of 400 sq ft to create a visual identity for each of these brands to make it appealing to consumers. In the case of the Blue Sky brand, Pantaloon is already stocking international watch labels such as Esprit and Fossil. But it hopes to get exclusive licenses to sell brands such as Morgan, Sioruci and Montana in

the future. They have chosen the Blue Sky brand name due to its association with the aviation industry. After all, watches, sunglasses and aviation share the same features such as precision and quality. In the recent past, it has introduced a lifestyle retail format store - aLL - for plus-sized women under the PRIL (Pantaloon Retail (India) Ltd) brand of stores. Types of Gift Vouchers Trendsetter Vouchers: (Ideal for Corporates) These vouchers can be redeemed on Pantaloon brands only. These vouchers cannot be used in conjunction with any other in store offer. These vouchers are valid for a period of one year. Connoisseurs Choice Vouchers: (Ideal for gifting purpose) These vouchers can be redeemed on any product sold at Pantaloons. These vouchers can be used in conjunction with any other offer in store. These vouchers are valid for a period of one year. Arrangement with Vendors The kind of arrangement from suppliers makes a lean operation. Pantaloon will carry no stocks. They lie with the manufacturer and are replenished just in time. In businesses where there aren't any large manufacturers, like plastics, leather, food technologies, Pantaloon is trying to engineer its own low prices. For T-shirt, it has an in-house label for Rs. 249 as opposed to an industry average of Rs. 315 for the same size. Systems Pantaloon Retail (India) Limited will invest Rs. 100 crore in information technology over the next three years as part of its plans to revamp the IT infrastructure of the group and has entered into a partnership with business software solutions provider SAP for the purpose. To support the growth and maintain the competitive edge, a robust and futuristic IT infrastructure has been planned for the next three years with investments of over Rs. 100 crore. Their strategic partnership with SAP, a world leader in business software solutions provider is our first step in realizing their IT vision. The IT plan of the company is for its lifestyle and value retail businesses. As per the roadmap, SAP will implement its my SAP Business suite, SAP Advanced Planning Tool for Merchandise Planning and SAP Apparel & Footwear Solutions which would be implemented across the organization. The Rs. 100 crore investment for IT infrastructure revamp will be mainly in the areas of hardware, software, business connectivity infrastructure such as virtual private network, video conferencing and skilled IT manpower. RFID (Radio Frequency Identification) made its debut in India, when Wipro launched an RFID-enabled shop on its Bangalore campus in July, but now Pantaloon Retail will be the first Indian retail chain to experiment with RFID. The pilot project (worth Rs. 30 lakh) is being implemented at Pantaloon Retail's central warehouse in Tarapur, near Mumbai. It will be limited to just 1,000 tags being attached to a few selected product lines mainly from its in-house textile mills. A basic RFID system consists of a tag or antennae, which can be attached to any product, and transceivers or decoders can then track the products. Therefore, whenever a customer buys a product, the retailer can track its movement - and even generate a bill automatically, without the customer going to the cash counter. However, Pantaloon is implementing RFID technology mainly for managing its supply chain - from vendors to warehouse and then to the shop floor - with carton level tagging. In India, each tag costs Rs. 6 and with the chain stocking around 3 lakh SKUs, the entire spend is quite mind-boggling. Supply Chain Management PRIL has been awarded the ISO 9001:2000 Quality certificate by Det Norske Veritas, one of the world's leading quality certifiers, for its Supply Chain & Logistics function. Pantaloon Retail is the first company in the organized retail sector in India to win an accredited ISO Certificate exclusively for its Supply Chain & Logistics function. The ISO 9001:2000 standard, established by DNV, the Netherlands based certifying agency, is a quality management standard that establishes an international benchmark and standard for logistics and supply

chain process within the company and ensures that the practices, systems and procedures followed by the company in the above function follow defined systems and practices, thus facilitating rapid growth. To get the ISO 9001:2000 Certification, Pantaloons had to meet rigorous standards in designing the supply chain across the country, reducing lead time of delivery, resource & product management and a strict measurement parameter. The ISO 9001:2000 certification recognizes the company's supply chain & logistics functions, critical design practices, committed management focus and universal application of the quality standards across the company's locations, stores, warehouses and vendors. The initiative began in January 2004 and each and every process was scanned and major re-engineering or elimination of non-value added steps were undertaken. The Supply Chain forms the backbone for the activities along the value chain and currently handles approximately half a million units per day across the country with the quantum likely to increase to three million transactions and two million pieces per day respectively in the next two years. Today, all the SCM activities such as Supplier Relationship Management, Quality Assurance, Logistics and Warehousing and the Central Procurement Cell are geared to work as per the best global standards which the ISO 9001:2000 certificate mandates and deliver the highest customer value with increased efficiency. Reverse Logistics Pantaloon has decided to focus upon reverse logistics by sending the paper carton, polythene to a recycling centre. Also, if a faulty batch of product is received then they have thought of utilizing this kind of technique for sending back.