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October 12 2020

Future of Luxury brands – Luxury ecommerce

The Next wave of Luxury eCommerce.

Last fortnight’s, the biggest headline in the eCommerce world of Amazon’s entry into luxury retail.

Amazon.com Inc. in order to penetrate the luxury segment has launched a “Luxury Stores” platform.

Oscar de la Renta is the first and only brand so far, but it is amazon’s first step to persuade other luxury retailers on its market place.

In this article, we shall review why luxury brands are slow in adapting to the eCommerce model.

I did a poll on linkedin.com to assess the respondent’s intent to buying luxury goods online, the results were really shocking and the comments revelation was really an eye-opener.

“67% of the respondents said No, to buying luxury goods online.”

The most feared reason for their reply was “Prevailing fake luxury goods” on the eCommerce marketplaces. Lack of authenticity and trust on the part of marketplaces.

I feel with more stringent laws pertaining to fake luxury goods, especially in the Middle East region, the trust for buying luxury goods online shall be more prevalent in the coming times.

Why luxury brands are late in embracing eCommerce?

Traditionally, luxury brands work on a model called “Exclusivity”;

They are exclusive in their marketing, distribution and hence they are able to impart excellent customer service which makes their customers feel exclusive and elite.

It’s all about Brand Imagery.

Secondary, the fear of “loss of control.”

Luxury brands are in love with their processes and control.

They love to stay in command when it comes to communication, pricing, visual merchandising, brand look & feel, customer engagement, etc.

When it comes to eCommerce marketplaces, all of the above tend to lose control and may hamper brand imagery.

Frankly speaking, eCommerce marketplaces are all about Prices and Discount seekers.

Hence the luxury brands have shied away from it so far.

10 hacks to kick start your eCommerce business, click here.

Disrupt yourself before anyone else does it- Luxury eCommerce strategy.

In June 2017, global luxury goods company LVMH launched its own multiband eCommerce portal 24 Sèvres, inspired by its Parisian luxury department store Le Bon Marché.

Featuring not only LVMH’s own portfolio of brands (including Louis Vuitton and Christian Dior) the eCommerce site also curates luxury fashion, accessories, and beauty products outside of the Group.

Are there any other luxury goods eCommerce platforms?

Yes, there are a plethora of eCommerce platforms selling luxury brands but the major ones are Farfetch and Yoox Net a porter (Richmont group acquired it in 2018).

Most of the eCommerce luxury platforms invest heavily in glossy editorial content and fast delivery,

24 Sèvres (LVMH group) is trying to differentiate itself by focusing on visually-led digital “storefront” windows (as we can observe from the site homepage) and interactive customer service technology.

They too have personalized fashion stylist service for the affluent customers seeking more customized options.

How do Luxury brands need to adapt to the new normal of selling?

Traditionally, luxury retailing is all about imparting experience to their affluent customers which are more personalized.

While embarking on a digital journey, Luxury brands need to ensure that their customers can get the same level of effortless ease in navigation and luxury experience on the website as in the brand’s physical shops.

User interface / User experience

Check LVMH site 24sevres, the entire experience is simple and very engaging at the same time

Augmented Reality

Cosmetic brands are already using this technology to help consumers try out products online.

Prada just published, for example, a virtual reality application that takes its customers on a tour of the latest luxury fashions.

Check out the Prada VR video of the making of Men’s Shoe. (Very interesting video)

Treat your online customers as VVIP: Luxury eCommerce.

JD.com, one of the largest e-commerce sites in China, offers ‘Luxury Express’ to deliver high-value products to customers in a special vehicle with a driver wearing white gloves (some Chinese associate white gloves with an English-accented butler).

It triggers a feeling of being treated like a VIP.

I recall one of the hi-end Jewellery retailer in India (from Gujrat) when they launched their brand and store;

They noticed that most of their online traffic was coming from search engines and not particularly from the direct source (no one was typing the brand name directly while searching them).

They came up with an interesting concept, wherein they used to approach the online customers (who pre-register or express their intent in their jewel pieces) offline and bring them to their store in a luxurious, chauffeur-driven Mercedes Benz (pick up & drop was complimentary).

The Concierge service was unheard of in the early 2000’s in the Indian sub-continent.

This innovation gave their online customers a feel of excellent customer service.

Covid19 accelerating the eCommerce shift – luxury eCommerce.

Luxury consumer behavior is changing.

A Vogue Business poll of 700 Chinese consumers in March showed luxury consumers picking mono-brand e-commerce platforms as their primary shopping channel post-Covid.

We all have read the news of Hermes, the highest single-day turnover in Guangzhou post reopening of their store, for instance.

This shows the potential that exists with luxury brands in case they embrace eCommerce in sync with their physical stores.

China is one of the biggest markets for luxury goods.

Affluent Chinese prefer buying brands like Rolex, Gucci, Louis Vuitton, etc.

As a result, Tmall (Alibaba Group Holding Ltd.’s) has lured more than 180 brands to its Luxury Pavilion platform.

Learn about Category management & how it Can Make or Break your retail business, click here

Conclusion

In conclusion, Luxury brands are embracing eCommerce platforms keeping in mind their core principles like uniqueness, Look & feel, User experience, and exclusive service.

The luxury sector is creating its own ecosystem with subscription & rental business models.

You can read my case study on Rent the Runway, click here.

Moreover, a new format is also emerging from the luxury branded goods market i.e. Pre-loved luxury retailing.

I have penned an article on this newly emerging sector for the magazine, “Retail People” (by the Middle east council of shopping centers) & shall publish the article once the magazine is released at the end of Oct 2020.

Till then stay safe and connected & keep following #retailritesh

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in the beauty, fashion, and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.

Ritesh can also be followed on Instagram as @mohanritesh & on Youtube as @riteshmohan

References:

Photo by TUBARONES PHOTOGRAPHY from Pexels

Gbnews.ch and luxe.digital, vogue business index, Bloomberg.com, hashtags.

September 16 2018

How to build a robust franchise model?

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This article is a continuation to my previous article on franchise model wherein I gave few tips in form of questions that every franchisee and franchisor need to ask prior to moving ahead with their franchising plans.

Click & Read my previous article here: http://localhost/ritesh/2018/09/09/franchising/

I was overwhelmed by the response from my connections & few of them wrote to me asking me to clarify and write another article highlighting the model in terms of margins. My article is my attempt to answer these queries pertaining to margin structure.

The most critical element for any franchise manager is to play a balancing act between both franchisor and franchisee. He/ she has to think like an entrepreneur all the time taking care of both franchisors & franchisee’s interests.

Franchising model encompasses & provides independence to the franchisee to run & operate his business but at the same time provides protocols & systems that comes by having brand affiliations or along with franchise agreements.

It is the main KPI (key performance indicator) for any franchise manager to manage interests & expectations of both parties so that the model becomes profitable.

How to play a balancing act?

Franchise managers need to spend their efforts on creating systems and process flows:

Robust franchise agreements
Detailed training manuals and its implementation with internal audit checks.
Comprehensive operating manuals, guidelines, brand guidelines etc.
Strong policies and procedures – try using automated tools here in case you have merchandise/products to handle.

From my practical experience of franchising fashion apparels and beauty brands, it is advisable to ensure that your franchise partner uses your Point Of Sales systems so that you can monitor his sales and stock levels closely and implement PUSH merchandise replenishment strategy from time to time.

It would result in faster replenishments and stock rotations thus resulting in more sales and faster break even for the franchisees.

Types of franchise models:

There are multiple ways of creating franchise models & put to test. Most common practices are:

Collection of franchise fees for territory allocation (master franchisee) on sign up and then X amount per location added in that territory, coupled with royalty i.e. % of sales on per annum basis.
Some franchisors work on X% of your gross profits.
Some franchisors sell their products to the franchisee on % discount and advise them on their selling retail prices, thus ensuring that product is sold at uniform base pricing globally.
Some franchisors help franchisee build their first store by providing them with shop fittings and furniture at subsidized rates and with longer pay-back periods.

Basically, there are multiple ways you can make your franchise model customized and suited to your requirements.

Foremost point to remember, “Always think from franchisee’s perspective and ask yourself, will you buy this franchise yourself with these commercials?”. If the answer is yes, then you are on right track.

Profitability varies from business to business, and industry to industry. How well a business is managed by the owner will have a significant impact on how profitable it ultimately is.

I’ve seen 1 million dirhams businesses that don’t generate any profits – or worse, are losing money.

I’ve also seen smaller businesses that generate only Dhs100,000 to Dhs 200,000 in gross sales, yet turn a net profit of 40 percent.

The key is to not let big top line numbers blur your judgment. The bottom line of a business is much more important.

Work out your COGS (cost of goods sold) ratio or % so that it gives enough space to your franchisee to sell and make some decent net profit post incurring all the expenses (rent, salaries, equipment, taxes, depreciation, operating costs etc).

Remember: Your franchisee’s success would determine your success as a franchisor.

Case study: Wow momo by Sagar daryani

This video would give you some inspiration to start up your business and for your information, wow momo is one of the fastest growing franchise in India.

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region.

He specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.[/vc_column_text][/vc_column][/vc_row]

September 2 2018

How to say “No” in order to keep focus in your business?

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Do you know as to how many thoughts does a human being gets on an average in a day? The answer is approx. 50,000 to 70,000 thoughts i.e. 35-50 thoughts per minute. Some thoughts are negative in nature and few positive ones convert into Ideas. So how do we keep focus?

The complexity grows when you are running or about to begin your startup company. The foremost thing that you need in any business or profession is FOCUS.

We need to train or code our mind to say NO to many thoughts/ ideas in order to keep progressing on one particular idea or goal and remain focused on our goal.

We get ideas for new features to be added to our product or new product development, on top of it, we also get dozens of good ideas from our customers too. But if we keep chasing on these wonderful ideas, we shall not reach anywhere. (It’s like a treadmill wherein you never get anywhere.).

So what do business owners do in such cases?

a) Stay Calm:

Don’t get excited in the heat of the moment with a great idea, instead, write it down and park it for a couple of weeks and revisit them with a calm mind and see if it really make sense to add this idea in your current product in order to add value to its customers. How much additional resource would new idea take in order to execute? Analyze the cost-benefit aspect and then decide.

b) Believe in your Goal/ Business Model:

You as an entrepreneur or business owner has to believe in your business model more than anyone else. You need to have a faith in whatever you are doing. If you don’t believe yourself, no one else would.

Learn to say “No” is a truly a quality that we need to learn in order to stay focused towards our goals.

Case study: ING Direct

ING Direct has built the fastest growing bank in the US by adopting to this principle of saying NO. When their customer asks for credit card, their answer is No; when they ask for an online brokerage account, their answer is again No.

ING direct wants to keep things simple. That’s why the bank offers just a few saving accounts, certificates of deposit, mutual funds and that’s it.

Going with limited product features or offerings will help you to scale up your business without adding any cost overheads.

I hope my article would help my readers to focus more on their projects, businesses, and career. You know who your “Go To person” is in case you need any advice or help pertaining to your business or startup.

References: Book Rework by Jason Fried & David Heinemeier Hansson.

About the author:

Ritesh Mohan is a passionate Retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion, and fragrances Retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development and Brand management, Retail Operations, Sales Management and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.

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July 29 2018

‘Jugaad’ – India’s answer to Minimum Viable Product (MVP)

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Jugaad- India’s answer to Minimum Viable product

Recently, I was attending a webinar highlighting the importance of “Design thinking” for start-ups. One of the panelists mentioned Jugaad’s philosophy and it inspired me to re-write my previous article on “Jugaad – a frugal & flexible way to innovate” with the context of the current pandemic of Covid19.

As most of you are aware that I always touch upon topics that relate to either Entrepreneurship, Retailing, Brand management & Leadership. I feel, my current topic would help upcoming entrepreneurs to start their ventures in the most economical way.

What is Jugaad?

Jugaad is a Hindi word that loosely translates as “the gutsy art of overcoming harsh constraints by improvising an effective solution using limited resources.”

Jugaad is an antidote to the complexity of India: a country of mind-blowing diversity; pervasive scarcity of all kinds; home to million millionaires (aims to reach by 2020, 1 million millionaires mark)

Jugaad is based on six fundamental pillars:

1. Seek opportunity in adversity

2. Do more with less

3. Think and act flexibly

4. Keep it simple

5. Include the margin

6. Follow your heart.

Jugaad during times of covid19

Looking at the positive side of the pandemic, it has made people more creative.

Check the picture of one of the elevators wherein the toothpick is being used to press the floor buttons in order to avoid surface touches.

To cater to the emergencies of hospitals in terms of beds, an Indian company has designed beds made of cardboard boxes. Watch the video here.

Jugaad innovators innovate faster:

Jugaad innovators don’t use linear, pre-planned, time-consuming R&D processes. Rather, they rely heavily on rapid prototyping techniques — i.e., they collaborate intimately with customers and use their constant feedback to zero in on the most relevant product features.

Jugaad innovators innovate cheaper:

Jugaad innovators are highly resourceful in the face of scarcity. Unlike many Silicon Valley entrepreneurs, raising capital is the least of their worries. The practitioners of Jugaad work with what they have got.

Jugaad innovators innovate better:

Jugaad innovators recognize that consumers in emerging markets are low earners, but high yearners.

To explain the concept, I would like to mention a few case studies of Jugaad innovators cum entrepreneurs as to how they have dealt with situations and innovated to make the lives of their customers easier.

Case study 1: Using adversity to own advantage:

Kanak das, a resident of North East Indian state, grew riding his bicycle on roads full of potholes & bumps, rather than complaining, he turned this constraint to his advantage by retrofitting his bicycle with a makeshift device that converts the shocks received from bumpy roads to kinetic energy which accelerates the bicycle…. Allowing his bicycle to run faster on bumpy roads.

Case study 2: Jugaad gave birth to a completely new business:

In 1980, a businessman Mr. Tulsi Tanti set up a textile unit in Surat, sooner he found himself facing the bottlenecks like power shortages.

Alternatively, He compensated by producing power through generators but resulted in very high running costs due to high fuel prices in India.

His profit margin was a mere 5% wherein his power & fuel bill used to run up to 45-50% of overall operating costs.

Mr. Tanti immediately moved towards wind power by installing air wind turbines in his unit, resulting in uninterrupted power supply and reduced operating costs. (Also the initial investment of installing wind turbines were recovered in the first year itself from the savings generated from power & fuel costs).

Mr. Tanti realized the power of wind turbines and industry in feeding the power-starved country and its rural villages.

This very thought gave birth to a business whom we have known as “Suzlon wind”.

Today, Suzlon is the world’s fifth-largest wind energy solution provider. The company operates in thirty countries over 6 continents.

Learn how to make your brand stand out from the clutter, read here.

Case study 3: Mitti-cool refrigerator:

Mitti-cool refrigerator

Jugaad innovator Prajapati (resident of Kutch region in Gujarat), post-2001 earthquake wherein his entire village was destroyed.

He noticed that they were left with no source of providing residents with cool water options.

Being a clay artisan himself, he developed the world’s first sustainable, eco-friendly refrigerator “Mitti-cool”.

Mitti means clay, his refrigerator is divided into two chambers, the water from the top chamber seeps through the inner sidewalls, cooling the lower food chamber through evaporation.

The refrigerator is 100% bio gradable, uses zero electricity… an ingenious invention.

Today Prajapati’s Mitti-coolers are available in rural Indian villages and soon it would be exported to the African region.

Simplicity is the new mantra for success.

Learn about quarantined economics, click here.

I hope my article would help in giving directions to business owners and retailers in the Middle Eastern region & would force them to think differently and innovatively with their existing businesses.

In case you want to brainstorm and understand Jugaad concept more holistically, you may reach me on riteshmohan@yahoo.com

(Reference book – Jugaad Innovation by Navi Radjou, Jaideep Prabhu, and Simone Ahuja. I thank & salute the writers for bringing out the most unique feature of our Indian ecosystem so creatively and innovatively)

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.