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Answer the following questions straightway on the basis of the facts stated in the case
study ‘ABC Textiles’.

C1 What are the key success factors (KSF) for being effective in the premium and
mid segments of Indian readymade shirt market? 6

C2 Should ABC Textiles enter the premium segment or the mid-price segment of
the men’s branded shirts market? 14


ABC Textiles, part of an Ahmedabad based Rs.600 crore group, is a major player in the
Indian textile industry. The company has two main business divisions: polyester and
fabrics. It manufactures PFY, cotton fabric and denim fabric. It supplies fabric to brands
like Marks & Spencer, Levi’s, Gap, Haggers, Louise Philippe, and Van Heusen, besides
Indian brands like Colorplus, Allen Solly, Blackberry, Pepe, Zodiac and Park Avenue.

After establishing in the global cotton fabric market, the company started producing
branded fabric for the domestic market. The first fabric basket – Euro Soft Collection –
has four different products in 12 shades. The company has three design studios in
Manchester, New York and Ahmedabad. The Euro Soft Collection, a 100 percent cotton
product from the company’s Manchester studio, is wrinkle resistant and requires only
rinse wash.

One of the group companies is ranked in the top five dye houses in the world. It is
accredited with the ISO 9001 certificate. The product range includes Denim, yarn-dyed
shirting, piece dyed shirting etc. It also has Marks & Spencer accredited laboratory and
design studio for testing purposes.

The group is currently in the process of setting up a garment washing plant at

Ahmedabad at a cost of Rs.5.25 crore. The plant is a joint venture with ALT group of
Germany, the largest multinational garment washing company in the world. The plant will
offer garment finishing including washing, dyeing, sandblasting, coating and wrinkle free
facilities. The company is also planning to come up with another washing plant in
Bangalore in the next one year. After this, the company wants to set up a third plant in
the north but has not finalized the location as yet.

The company now intends to enter the readymade garments business. This is part of the
company’s plan in moving up the value chain that would enable it to utilise its excellent
brand equity and a fairly strong distribution network built over the years. The company
has already 85 showrooms and plans to increase its number over the next few years.
The company has decided first to enter the men’s branded shirt market and later to other
readymade garments.

Mr. Nitin Parikh, Managing Director of the company, had been mulling over this entry in
men’s branded shirt market for the past one year (2000-2001). He had studied the
history of the branded shirt market in India and followed closely the strategies of the
major players in this market. He is aware that this market is growing at a healthy rate of

15 - 20% over the last few years. He is confident that with the retail boom in the offing in
India the growth of the readymade garments would get a strong boost.

According to a study by McKinsey, the domestic clothing market is estimated at

Rs.87000 crore, of which 22 percent comprises readymade garments. Of the 22 percent,
only 20 percent belong to the branded apparel market. This means in a market worth
Rs.20000 crore, only Rs.4000 crore is catered to by branded apparel. The men’s
clothing segment accounts for the largest share, at 70 percent. In the men’s clothing
segment, the maximum share is accounted by readymade branded shirts. The market
for ready-made branded shirts is estimated at about 60 million pieces worth about
Rs.1900 crore. Though multiple price points exist, yet the market can be demarcated at
three distinct price levels: below Rs.350, Rs.350 up to Rs.550, and the Rs.550 upward
range. The latter, of course, the premium category and is currently estimated at 5 million
How the Market Stacks Up

Segment (Retail Price) Volume (No. of pieces) Value (in crore)

Economy 34 million 700
(Below Rs.350)
Medium 21 million 850
Premium 5 million 350
(Above Rs.550)

Premium and super-premium shirts priced at over Rs.550 such as Arrow from Arvind;
Allan Solly, Louis Philippe and Van Heusen from Madura Garments; Park Avenue from
Raymond; Zodiac: account for a mere 5 million pieces.

Mid-priced segment is cluttered with local and regional brands. In this segment Peter
England is leading the pack. There are other brands like Raymond’s Parx, Arvind’s
Escalibur, Bombay Dyeing’s Vivaldi, Mafatlal’ Trendz, Pantaloon’s John Miller,
Cambridge that operate in this price segment.

Peter England has scored over other mid-priced shirts by positioning itself as a shirt with
a premium look and a style like Van Heusen or a Zodiac but affordable. The other big
advantage is Madura Garment’s distribution network. Peter England has been able to
piggyback on the network of 800 multi-brand outlets for Madura Garments’ Van Heusen
and Lois Philippe brands. Currently, the company has 22 distributors and its shirts are
available in 180 towns through 54 exclusive outlets and over 3300 multi-brand outlets.
This is the largest distribution network of its kind in India. Pantaloon’s John Miller is
available in just 60 company owned outlets throughout the country while Bombay
Dying’s Vivaldi is sold through 550 exclusive outlets.

According to ORG-MARG’s estimates, the branded shirt market is growing at 20% a

year with most of the growth coming from the mid-priced and economy segments.

Broadly, the corporate hierarchy is split in the 22-28, 28-35 and 35-plus age groups. The
first group is a fresh entrant into the corporate hallway and has a high entry-level salary
and no dependants. The individual in the last group holds a senior managerial position,
has a family and other obligations but earns a high salary. Roughly, these two groups
are at parity in terms of disposable income levels.

The 22-28 age group has large disposable income and a more adventurous mindset. As
a result, this group is susceptible to trying out new brands. By the extension of the same
logic, they are not brand loyal. They prefer to be with the new kid in town.

The 35-plus age group is in the select category that has arrived. Therefore, this group’s
wardrobe comprises the premium brands like Arrow and Louis Philippe. But it does not
believe in showing off the label.

The middle manager is the most brand-conscious. He is under constant pressure to

keep up with his junior colleagues in almost all spheres, including his attire. But his
disposable income is not as high as the other two groups. Most of it might be spent as
down payment for a house or a car or some such white good. So his wardrobe has
space for a slightly cheaper shirt but of near-premium brand quality. This he can use for
his daily attire, while wear the more premium brands for presentation etc.

The drivers of demand in the shirt market are peer pressures and discernible difference
in design and styling as compared with tailored shirts. As the income levels have
increased, a certain amount of impulsive buying of shirts also takes place. Advertising
creates this demand, though only about 20 per cent of buying takes place this way.

In the premium segment, however, there are additional factors that are work namely,
formal or classy look, showroom ambience and fashioning, which vector the final
demand. So image attributes become most important.

The economy segment of the market is more pr occupied with functional attributes rather
than by image. The buyer of these shirts is not trying to make a statement through what
he wears. He is only interested in fulfilling a basic need. Branded and unbranded
products both cater to the segment, but since the demand here is so high survival is
easy for a brand if it keeps its overheads low.

The mid-price segment is the toughest to operate in. It is sufficient price-sensitive; brand
awareness is there but is diffused due to lack of brand building efforts by marketers in
this segment. While the consumer here responds to aspirational communication, he
seeks to balance the value for money equation almost all the time.

Medium price category is also tricky because investment in brand building is only
marginally smaller than the premium brands, the distribution width needs to be much
more wider. And that is a balancing game – of margins and volumes.

But for most branded shirt marketers, this is also the most attractive segment to attempt
entry because of high volumes. The medium-price segment is more than four times in
volume and about thrice in value of the premium segment. The margins are of course
different; whereas the premium segment margins are about 55-60 per cent, the mid-
price delivers 35-40 per cent.