Raymond has signed MoU with Khadi & Village Industries Commission (KVIC) for a strategic joint initiative for marketing Khadi. This is an initiative to position Khadi as a fashion fabric globally. Under the agreement, KVIC certifies Raymond to use Khadi Mark, while its outlets across the country will be offering exclusive space to the products of Khadi by Raymond to be released by February 2017. Hence, while briefing about the partnership to Retailer Media, Sanjay Behl, CEO- Lifestyle Business, Raymond Ltd. spoke about the impact of demonitisation, distribution model and the outlook for the textile industry on the sidelines of announcement of joint strategic initiative.
What is the commercial aspect of the agreement?
It’s a commercial engagement between Raymond and KVIC. There will be commission for us to put Khadi trademark on fabric and apparels and we will increase certain volume of Khadi, depending on the demand. There are 2300 clusters of Khadi, of which we will engage with some and will increase it with the forwarding relationship. We will also work very closely in partnership for designing of fabric and apparels. Overall this partnership is to position Khadi as a fashion fabric globally.
What will be the positioning of Khadi by Raymond products in KVIC stores and its upcoming Khadi lounge?
We definitely will be participating in their lounges. In the lounge, KVIC will give fairly premium positioning to Khadi. As Raymond products, we will also do the same, so the lounge will become exclusive outlets for Raymond. In other KVIC stores, we will have exclusive space for the collection which will be developed by Raymond with Khadi and simultaneously our collection of Raymond Khadi will be displayed in our stores. The partnership makes it open for every outlet for the Raymond Khadi products or Khadi which is marked by Raymond. Currently KVIC have 26 exclusive outlets and presence across 7000 MBOs.
By when will you be launching Khadi by Raymond collection?
By February 2017 the collection should be ready and it will be placed across all Raymond and KVIC stores. Raymond Khadi will cover all our brands including Raymond, Park Avenue, Color Plus and Parks. It will be slightly premium priced to current Khadi prices as the spectrum is very wide. Initially we are looking at about 200-300 designs of fabric and garments, each along with number of man hour deployment. All our Khadi collections will have Khadi trademark.
What are your retail expansion plans?
Presently we have 1060 outlets in 400 towns and we will be adding about 150-200 outlets every year till 2019. We are almost doubling our MBO presence every year and growing 100 percent with it. In our stores we receive around 20 mn consumers a year.
What is your manufacturing capacity?
In fabrics for suiting, we make 40 mn meters, in shirting 25 mn meters and in denims we produce around 50 mn meters. In actual if we talk about garments, we make around 3 mn suits a year.
What is the distribution model that you have adopted?
For apparels instead of going through direct distribution, we have gone through distributors by state. We have 16 distributors for apparel brands, which supplies to MBOs and it has led to dramatic growth. Other than that, we are making some exclusive private label collections for some of the large online and offline retailers. For example Parks Express is especially done for Amazon and it’s already 15-20 percent of our brand. All these strategies like differential product strategies, product innovation, retail expansion, channel expansion through multi brand distribution set up are contributing to the fairly aggressive growth of Raymond.
How has demonitisation affected Raymond and what is the outlook for next fiscal?
Demonitisation has had immediate impact, post 8th November, we have seen dip in demand. The impact is largely not by the consumption coming in, but actually by the liquidity shrinking over the consumer household as well as in trade channel. In the ongoing wedding season, reduction in expenses by the consumer with liquidity crunch will have direct impact in the last three to four weeks. Going forward I see the situation is easing down and as the liquidity gets restored, both with customers and trade channels, we should have the demand restoring back.
Have you cut the production with impact on demand?
Not yet. We continue to make as much as we have inclined and forecasted. We have confirmed orders, which we are manufacturing. At this point of time we will not immediately cut any production. But, going forward we are assessing the situation and if the demand continues to suppress, we may have to do something.
In your stores 90 percent transaction is being done in cash, so how are you coping up with note ban?
It’s not that the cash is completely dried down and we do not have any cash, it is just that the sentiment is preceding than the actual liquidity, but the situation is improving at this point of time. Given that we are driving through the wedding season from November till May next year, so I think that could be the huge catalyst for Raymond to actually overcome these immediate sentiments we have and get back to normal situation. We have already seen positive signs from wholesale, despite wedding season there is still a demand and footfall.
Give us an outlook for the textile industry from Raymond perspective?
There will be two fundamental triggers shaping the industry, one is cash demonitsation, which will lead to dramatic levels of inclusion of unorganised sector into formal economy. It’s a good move for the larger industry and specifically for our industry, which has a large unorganised base. The second impact will come from GST and we are really looking forward to GST getting formalised in the system because again there will be the dramatic formalisation of an unorganised sector like textile and clothing. With these two interventions in medium to long term, there would be tremendous boost, especially for the organised branded players. We may see some initial firming up and some dense coming up with demonitisation, but on a stable basis both of these triggers will help the entire industry and Raymond in particular.