After Raymond shifted from a made-to-order (MTO) business to a made-to-assemble (MTA) business and reduced the number of SKUs from an approximate 82,000 to 2,300-2,400 and making them available all year round, the brand has been able to achieve an amazing turnaround. Sudhanshu Pokhriyal, President – Textile Division of Raymond, reveals to Ganesh Kalidas the strategies that have worked in the company’s favour
The textile industry in India remains one of the largest in the world and continues to grow due to an ever-increasing domestic demand. The competitive nature of the suiting textile business in the country has seen considerable change over the last few years due to changing business strategies and optimal use of digitization. Raymond, one of the leading textile and fashion retailers in the business, recognised the need for a sale and supply chain transformation, which they have successfully inculcated, gaining a dominating position in the sector. Raymond’s basic form of commercial transaction is business-to-business (B2B) and business-to-consumer (B2C).
However, by shifting 80% of their transactional focus on B2C fabric conversion, it has established a unique position within the industry, with an approximate turnover of up to Rs. 3,700 crores. Sudhanshu Pokhriyal, President – Textile Division, Raymond, informs that this may be largely due to the fact that even though the worldwide B2C fabric conversion has come down substantially, it still remains a large market within India. He also mentions that 3.5 years ago, the business was growing only by 1-2% with strong conviction that the business would further decrease in numbers. However, by changing the overall strategy, the business was able to attain growth.
One of the major strategies was to induce triggers, which involved inducing consumers to buy more products through product innovation and communication. This involved a shift from focusing on fabric blends and the making of the fabric itself to talking about fabric characteristics and features such as its techno-smart qualities, including techno-stretch, anti-wrinkle, water-resistance, etc., which drew the consumer’s attention towards the brand. In addition, new products such as ‘khadi’ were also introduced, which in turn led to an increase in the consumer base.
Another core contributing factor to the growth of the business was the customisation of apparels rather than the ready-made apparels available in the market. The image of Raymond as a custom tailoring brand was established through advertisements and an online tailoring forum. The brand also initiated a strong tailoring ecosystem by using a tailoring hub concept and centralising workshops. Through such tailoring upgradations they were also able to ensure standardisation of their products while maintaining their customised tailor-style campaign.
Beefing up institutional business
Raymond, as a business, has also shifted its attention towards institutional business. Around 10 years ago the institutional business within the company was considerably low, generating an output of approximately Rs. 50 crores. However, presently it is an Rs. 350 crores business with a clientele of up to 200 corporates, accounting for almost 10% of the overall business. Raymond supplies to various airline and automobile companies, which include Mercedes, BMW, Maruti, IndiGo, SpiceJet and GoAir, among others.
Pokhriyal points out that Raymond, as a brand, was always well-known by the general public. However, while competing in the garment business, its market share may have been lower due to the lack of availability. “One of the key reasons why someone is not buying your products despite having such high mindshare or awareness is because you are not adequately available. This is the hypothesis we went by,” he says. By hiring external consultants, it was found that Raymond’s meaningful reach was only at 41% in comparison to an expected 50-60%. This led to the organisation of a sale and supply chain transformation project known as LEAP.
As a result of the transformation project, Raymond began expanding its exclusive retail stores which have increased by 300 over the last two years, raising the count to a 1,000 stores around the country. Even though no syndicated research provides accurate data on the number of stores selling fabric in the market, there could be an approximate 100,000 to 200,000 in operation. About 3.5 years ago, out of these stores, only around 3,800 stores were under Raymond, including their wholesalers and distributors. Presently, the numbers have increased to almost 10,000 to 20,000.
Even though the number of stock-keeping units (SKUs) was ranging from 80,000 to 82,000 in comparison to other retail stores with only 500 to 1,000 SKUs, a lack of accessibility was noticed. Therefore, one of the major challenges the market scan suggested was the huge gap between the existing supply and the availability to consumers. Since in a textile business there is no ‘end-of-season sale’ concept, the surplus was sold to channel partners at discounted rates which would further be sold to end consumers at whatever price the stores quoted. Based on such analysis of the excessive surplus and restrained accessibility, strategies to change such operations were initiated through LEAP.
From MTO to MTA
Last year, Raymond shifted from a made-to-order (MTO) business to a made-to-assemble (MTA) business. By reducing the number of SKUs from an approximate of 82,000 to 2,300-2,400, and by making them available all year round, Pokhriyal and his team were able to tackle the barriers in profitability due to this surplus. They further created sample cards in both physical and digital forms which are now made available through a mobile application – Raymond MIDAS. This allows ease in speedily distributing their products in case of B2B transactions. Raymond has been able to notch sales up to Rs. 100 crores through such digitization and the use of the Raymond MIDAS app.
Therefore, MIDAS has acted as a major enabler of LEAP, which is essentially the change in Raymond’s supply chain process from being a 100% MTO business to a 50% MTA business. This has led to a definite minimisation in the restrictions to availability. While presently the 2,400 SKUs are contributing to 50% of the business, it is estimated that in the future this contribution may go up to 60-70%. “This also reduces huge complexities in the manufacturing set-up. When we were making 82,000 SKUs, we had to do 82,000 changeovers. Now we don’t have to. Our runs are far larger, the number of inventories we have to keep of yarns and raw materials have reduced substantially, the capital blocking has come down substantially, and there is no surplus,” Pokhriyal points out.
As all the operations of the company have now shifted focus from MTO to MTA and it has become open to dealers, Raymond is now moving from market to market. Presently it covers only two markets – Maharashtra and Karnataka. The dealer numbers in both the markets have increased by five times within the span of a year. Pokhriyal concludes with a probable future roadmap, estimating that within the next two years, Raymond expects to increase its availability from 3,800 outlets to 50,000 outlets and it is estimated that there will be 100,000 outlets by the year 2022.