Raymond Casel

8/8/2019 Raymond Casel

1/5

Marketing Management II

RAYMONDS MALL CENTRIC

EXPANSION PLAN

Faculty In-charge:- Submitted by: -

Prof. Nalin Jain Group 9, FMG19B

DIVI AGARWAL (19084)

MAHAK KHEMKA (19094)

SAHIL SETHI (191110)

SHILPI JAIN (191112)

SHREY GUPTA (191114)


2/5

INTRODUCTION TO THE CASE

The Raymond Group is one of India's largest clothing and apparel companies, with over 60% market

share in India. Established in 1925 it has a net earnings of Rs. 2,100 crores. It sells textiles, readymadegarments, engineering tools, prophylactics and toiletries. Raymond manufactures some of the finest

fabrics in the world. They have an expansive retail presence established through the exclusive chain of

'The Raymond Shop.

The Raymond Shop is a premium retail store offering complete wardrobe solutions to the discerning

man through its range of fine fabrics for suits, jackets, trousers, shirts & finely crafted garments from

Raymond, contemporary range of readymades from Park Avenue, stylish casual wear for occasions

beyond work from Parx, smart casuals from ColorPlus and luxury formals from Manzoni. It also offers

Made to Measure a unique offering for a perfect comfort fit. Added to this is quality Custom Tailoring

services which makes The Raymond Shop an ideal destination for anyone to look good and feel great.

The Raymond Shop has been customer oriented right from the beginning. The Raymond Shop has

always taken great care to build excellent customer experience and ensures that it stays contemporary

and fresh to its customers. They use franchise model along with company owned stores. In total, there

are 290 TRS stores in the country(120 cities), out of which 20 are company owned. However, in the past

few years, only 1 company store has been set up.

With shopping malls coming up and taking customers away from the local markets, Raymond intends to

shift focus towards them. For this, they have developed a mall centric expansion plan. Here, they wish to

open retail stores in popular malls of the country. These stores would be fully company owned, since,

Raymonds feel that it is not feasible to include franchisee in such a system.

This case deals with above stated issue that whether Raymonds mall based expansion model is justified

or not. We also discuss the various risks involved and the reasons for success/failure as perceived by us.

EVALUATION OF MALL CENTRIC PLAN

Raymond needed the retail expansion model to meet its target of 15 to 20 TRS outlets every year. This is

a step forward to attract a lager customer base.

It had decided to open up its retail centers at various malls all across the country, basically urban areas.

The company believed in higher exposure of Raymond brand with an increase in number of people going

to malls. Higher per capita disposable income with a constantly growing middle class of the society

results in increase in number of people looking for an overall experience in malls.

Since Mall has become a very popular mean of entertainment; Mall based expansion might result into

higher sales of apparels than fabrics which is consistent with the observed trend of consumers shifting


3/5

towards apparels from fabrics. Also, rapid expansion of malls in cities will help Raymond in achieving its

target of 1 million square feet of space which might be difficult if expansion is not through malls.

Risks are minimized to a certain extent as the dimantable mall model is being adopted which will help in

recovering the costs.

The company also needs to follow the trend that some of its main competitors are Siyaram, S kumars,

Zodiac, Bombay Dyeing, etc have started or it will become difficult to survive in the market. As more and

more consumers entering into the mall now, dont just move around but they also do shopping and look

at the available brands which was not the case 2-3 years back. Moreover, it adds brand value as mostly

high profile people go to malls. Celebrations in malls attract larger number of customers especially

during festive seasons.

Apart from all the advantages this mall based expansion plan also has got its own shortcomings. First of

all, it is a very expensive to open a shop in a mall, for example mall rentals is an estimated Rs200-220

per square feet at Delhis ansal plaza. Thus, Malls have higher investments compared to other forms of

retailing options. This rental cost of hiring a shop in a mall is very high and does not suit the companys

franchisee model distribution channel. Mall rentals account for ten percent of the revenues earned.

Thus, a Mall based retail expansion will not be preferred by franchisee because it reduces the profit

earned by them, with franchisee out of contention the whole investment has to be done by the

company which is not easy.

Moreover, it will take long time to break even and if the shop failed it will cause a huge loss. Malls are

still not very popular in the whole India, except for some urban cities (tier1 and tier 2) like Delhi and

Mumbai. It is not possible to set up shops in each mall and thus in all cities and thus, not able to target a

large population. Malls are still not common as the local Bazaars in the nooks and corners of the cities.

There are many customers in mall but potential buyers are very few. The trend is shifting towards

shopping in a Mall but still, the number of potential buyers in a mall is less compared to those in RTS

shops. Mostly the consumers still shop in the local Bazaars , the presence of RTS there is also of utmost

importance.

Is it justified to keep existing TRS sales as benchmark for mall based TRS?

According to our group we would not suggest them to benchmark their new sales according to existing

TRS. It is found that there will be an automatic rise in sales of upcoming mall based TRS due to the

following reasons:

Mall based customers buy usually more of Raymond apparels unlike fabrics in TRS, so it will not be

justified to compare the sales of the two. This is mainly because consumer buying behavior changes.

Both models have different cost of setting up. As malls based TRS would have high rented shops as

compared to existing simple TRS stores. Due to high rent the profit margin would also be under high

pressure. Also, maintenance charges in malls are much higher than that of exclusive retail stores.


4/5

Although mall based TRS may not give consistent revenue to the company but it also creates brand

value for the company. This is mainly because more and more people today are becoming brand

conscious and like to associate themselves with a good brand. Malls give them a better visibility and a

chance to do so.

Also mall is a new addition to the Raymond expansion model and it will not achieve same amount ofsuccess as a TRS which is established from many years. Moreover existing TRS is primarily a Franchisee-

led business run by old trading families whereas company owned outlets at malls is a relatively new

concept which is yet to be established. Henceforth the sales of both would vary.

Also mall based TRS would be company owned while most of the exclusive retail stores follow the

franchisee based model. So there is a definite difference of margins between the two models.

Reasons for SuccessThis model could be successful because of many reasons of which some are listed below :-

Brand visibility of the company would increase - Due to opening up of outlets in the mall, the marketpresence of the company would increase and also higher brand awareness due to the exposure would

bring Raymond in this consideration set

Attract High End consumer - Better services and convenience attract high end consumers whore willing

to pay extra for such value added services.

Change in Indian Shopping culture - Culture of Indian consumers is changing from shopping from shop

on road to shopping from mall.

Shift towards Apparel business - The company would be able to capitalize better on the observed trend

of shift in favor of apparel business from fabrics.

Integration of outlets through IT The IT systems would make the operation more efficient. The

forecast trend predicted with the software would help the company in monitoring the performance of

each of its plans and plan accordingly.

Reasons for failure of this model :

High costs involved might make this project unviable. High costs would be due to company owned

outlets (higher investment) and high rentals of malls. The company is already trying to minimize this risk

by adopting dismantable mall model so that it can recover half of its investment.

TRS will have to remain upfront with latest designs to appeal to customers as there will be many other

brands competing in malls. Moreover it faces competition from its own traditional outlets too as

customers still trust the traditional outlets more than any new stores. And as Raymond is marketing its

company owned TRS to be apparel based. So fabric customers will remain inclined to old traditional

outlets.


5/5

Though trend is changing, still very small percentage of consumers in India shop at malls. Not all

customers come for buying many come for window shopping only. So for malls to be very profitable in

near future is unlikely.

Another factor affecting sales can be the high prices. People have preconceived notion that still this

shop is in a mall, so prices will definitely be high. Thus they refrain buying from malls. This notion ofIndian consumers will take time to get changed. But till then , sales of TRS at mall will may suffer.

These exclusive stores will not provide the customers with much variety. A consumer might prefer a

store which offers more options in terms of brands as well as prices.

Suggestions:

As a group we have come up with following suggestions:

Instead of comparing the sales revenue of malls with the revenue of existing retail stores ,it should

follow the competitors like Reid & Taylor, Louis Phillip, Van Heusen, Blackberries, ITC Wills etc who arealready following the mall based retailing plan and keep their sales as benchmark. Or it can observe the

sales of its various outlets and can set its own benchmark for mall.

According to Mr. Aniruddh Deshmukh, Vice President of Raymond, malls will be more geared towards

Apparel sales. This might harm the existence of fabrics. Thus Raymond should pay proper attention that

fabrics shouldnt get treated as their secondary item else it itself will be giving chance to competitors to

come in this segment i.e. production of fabrics

The lack of variety in exclusive retail outlets is one of the major factors affecting sales. The risk can be

minimized by providing all the brands of Raymond group under one roof in order to offer more variety

to the customers.

Documents

Raymond Casel