There is no shying away from the lingerie business given the fact that it is one of the fastest growing segments in the apparel industry. Pankaj Vermani, founder and CEO of brand Clovia, talks about the innovations, strategies and growth plans to find a niche in the USD 4 billion lingerie market in India.
How was the year gone by for you in terms of revenue?
Clovia is a lingerie brand with a strong focuses on fashion and solutions. We are available through both online and offline channels. The brand has posted eight-fold growth in terms of sales in the last three years. The growth continues to be on a strong trajectory on the back of the industry’s lowest inventory holding, styles that are continuously refreshed and a reach via both online and offline formats that is pan-India. At present, Clovia ships over 3,50,000 items per month. Eight months ago we launched our offline stores and saw phenomenal traction from an age group and audience complementary to the online channel.
Given the success in the short span of these stores, we have quickly scaled and now have seven exclusive brand outlets and 50+ multi-brand outlets, including chain retail. These numbers will double over the next two quarters. Our offline business is growing profitably, and is registering an extremely strong repeat business. Each outlet we open has turned profitable within 30-45 days.
Are women spending more on lingerie these days?
Lingerie for the longest time was a staple product with hardly any innovation. Over the last few years we have seen an unprecedented growth in awareness – both from sizing/hygiene as well as fashion perspective. Women are now more aware and open to exploring their choices in lingerie. They realise that lingerie is a critical part of one’s wardrobe and it doesn’t need to be a drab and boring affair. Besides, with new entrants in the category with both online and offline channels of retail, lingerie buying has become more convenient for women. The category is growing at almost 22% CAGR, which is almost 2.5 times the standard apparel growth. Clovia provides high-fashion solution with affordable pricing. Our range of bras starts from Rs 149 to Rs 1,299; panties start from Rs 250 to Rs 1,299. That apart, our other products also start from a mere Rs 50 and go up to Rs 1,500.
So what innovations have you introduced into this space?
Clovia has been built on three important pillars: In-house designing and production leading to strict control on quality + smart technology + improvising basis customer feedback.
We are a full stack mind-to-wardrobe business, where we design in-house, procure our own raw material, work with exclusive facilities which we have incubated, ensure the quality at four levels and then sell through controlled direct channels to our customers. We have incubated multiple factories to build a supplier/job-worker network, creating almost 2,500 jobs in the process.
Our skillful use of technology helps us ensure the industry’s most efficient mind-to-market and extremely tight inventory management. On the online front, we have innovated to deliver some of the best sales conversion rates. These innovations have ensured the company is operationally profitable since inception.
Our use of smart technology and analytics – monitoring sales trends and customer feedbacks to guide designing, production plans and inventory management decisions, thereby optimizing operational costs – has been a game-changer.
We currently boast of industry-leading sales-to-inventory ratios – at least three times better than our nearest competitor.
Which retail formats are working well for Clovia and why?
As a brand we want to be present at every customer touch-point. The intent is to make product touch-points that can be brand-builders and self-sustaining at the same time. While online continues to grow profitably, offline has helped us capture a completely complementary user base, while continuing to build the brand. The unprecedented traction at our exclusive stores has led us to scale them faster than we initially anticipated.
Where do you see the next opportunity coming from?
Tier 2 is a phenomenal opportunity. Up until two years ago, only 30% of our sales came from Tier 2 or Tier 3 towns. The same is now 60%. Tier 2 and Tier 3 cities are where the next wave of internet growth is happening. The aspiration for brands and the unavailability of high-fashion products gives a perfect reason for mass premium focused brands to reach these pockets.
What are the profit margins in the lingerie business?
Lingerie is a highly technical product. While the perceived value is high, the production costs, if managed well, can be tightly controlled. A strong unit-economics brand in super-premium can sell its products at a mark-up of almost five times while premium brands can do anywhere between 3.5 – 4.5 times.
What made you enter the franchise model? What kind of franchises are you looking to partner with?
As the product-market fit has been a roaring success for us and the feedback and customer response/retention is epic, the focus now is primarily to meet demand and ensure growth on all channels of distribution. Clovia has always thrived on partnerships. Our entire production eco-system is built on strong partnerships with our production facilities. When we decided to go for exclusive outlets, taking the franchisee route was the obvious choice. For us a franchisee will be exactly like all our other partners, i.e. highly entrepreneurial. We believe a prior background in retail will be extremely helpful.
What’s the key to succeed in franchising business?
Strong processes, working closely together in partnership and good personal synergy with the brand will be highly critical. The franchisee should be aligned with the brand’s vision and ethos. Also, as the franchise is closer to the business, his ideas on promotion and marketing are highly valuable for the brand’s marketing teams. The bottom line is about finding the right location relevant to the brand. Plus, having highly efficient operations targeted towards high EBITDA margins for the franchisee partner and focused branding to increase footfall are important ingredients for the franchisee play. Beyond that, it will be the power of your product that decides the customer’s loyalty.
What was your turnover for FY17 and what are the growth projections for the ongoing fiscal?
Clovia is now one of the fastest growing brands in a 4 billion market where the top 10 players are still holding less than 8% of the market. The lingerie market in India is growing at over 22% CAGR while we grew 30%+ over the last year. The growth projected is upwards of 50% for the coming fiscal. Also, Clovia has set shop in one international territory and we are planning to enter two more markets soon.