Ximivogue to bet on bigger 'experiential stores' to tap demand in metros The China-based company till now had been operating smaller stores in tier II and III cities
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
After tasting success with smaller formats in tier II and III cities, China-based fast-fashion brand Ximivogue is now set to enter metro cities with large format "experiential stores'. The first such store—which would sell slightly expensive products compared with the smaller stores—will be opened in New Delhi by March 2020, according to a company executive.
In total, the company will set up about seven experiential stores in the next eight months. The minimum size of these stores will be 1,500 sq. ft compared with 900-1,200 sq. ft in which the smaller stores operated. Since the launch of the first store in Jaipur in March 2018, the company has already opened around 60 stores across India.
The classic red and white interiors of the smaller stores will change into light blue and white for the larger stores to give them a different look. "We are trying to break away from the red-white colour combination to something more soothing to the eyes," said Shiven Anand, business expansion head at Ximivogue Trading LLP.
Fast fashion—which was an unexplored territory—has boomed in the last two years with a plethora of brands including Japan-headquartered Miniso and Usupso, and Malaysia-based Kioda aggressively increasing the number of stores in India. Most of these brands followed the same concept of stocking impulse-buy products in small but fancy looking red-white colored stores.
In its newer format stores, Ximivogue plans to add a few new products which would cost above INR 1,500 to attract urban consumers and recover the cost incurred in opening these stores. Typically in the smaller stores, products range between INR 50 and INR 1,500 .
A Ximivigue store retails more than 2,500 products across categories including cosmetics, household, skincare, electronics, and bags. Among these, cosmetic is the top-selling category with about 30per cent share followed by household products which brings in more than 22 per cent sales.
Ximivogue opened a 1,200 sq.ft outlet, the first, in Jaipur in March 2018. After generating about INR 65 lakh in sales from the store in the first month, India became a serious market for this fast-fashion brand. The company then went on an expansion spree opening stores across Patiala and Ahmedabad, among others. "We chose Rajasthan (Jaipur) as our first location because there the concept of all-categories-under-one-roof with a nice ambience was missing," Anand said. "Good quality products at such price points were also not available in these cities, which was a great opportunity," he added.
Operating in the tier II and III locations is also cost effective as the real estate cost is low compared with metro cities. Monthly rental in Jaipur could typically be between INR 2.5 lakh and INR 3 lakh for a 1,200 sq.ft store, which would be more than double in Mumbai or New Delhi. "It is difficult to operate in metro areas due to high rental cost. People also have many options as there are many branded retailers. In small towns, there are a few branded retailers and stores with good ambience," said Anand.
The company, which has been generating average sales of about INR 25 lakh monthly from most stores, however, saw the numbers drop. In the April quarter and July quarter of FY2019-20, the average sales of a 900 sq. ft store swung from INR 18 lakh to INR 22 lakh a month.
The overall rural consumption slowed down in the April quarter and July quarter of FY20. Market researcher Nielsen, forecasted FMCG (fast moving consumer goods) growth, which was at 16.2% in the July quarter of 2018 drop to 10% in this financial year's April quarter. The value growth further fell to 7.3% in the July quarter of FY20.
"Rural India Contributes 36% to overall FMCG spends and has historically been growing around 3-5% points faster than urban. This has been on account of increasing affordability, availability and conversion of commodity to branding resulting in higher demand. However in recent periods, rural growth is slowing down at a much faster rate compared to urban," according to a report released Nielsen in July 2019.
"These companies have entered the market at a wrong time," said Harish Bijoor, brand strategy specialist, Harish Bijoor Consultants Inc. "It is incidental that when they are taking steps forward, the market has tanked. The story would have been quite different had they ventured five years ago," he added.
Till now, these lifestyle brands have survived on dirt-cheap and affordable products. But they need to venture out into new product ranges and price points. "With the superior offerings, these brands are taking baby steps upwards because there is a market for such offerings. Going forward, these brands need to segment the market carefully," Bijoor added.
