Case Study: Raymond’s Mall Centric Plan

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 Case Study: Raymond’s Mall Centric Plan

1) Critically evaluate the mall based retail expansion model of

Raymond’s.

Pros:
• Raymond needs the retail expansion model to meet its target of 15 to
20 TRS outlets every year.
• Investments done by franchiser results in higher expansion rate
• Higher per capita disposable income results in people looking for an
overall experience in malls
• Higher exposure to Raymond brand with an increase in number of
people going to malls
• The new model can be dismantled and rebuild in a new palce
whenever required. This allows Raymond to recover at least half of its
capital.
Cons:
• Malls have higher investments compared to other forms of retailing
options
• Raymond will move away from its core business of selling fabrics with
retailers trying to sell more apparels
• Malls are not yet so popular in India

The pros and cons of this model are:

Pros:
 Mall is very popular mean of entertainment; they attract middle and high income level
people who also buy Raymond apparels and fabrics.
 The numbers of customers opting to shop in a mall are many and this audience can be
targeted.
 Even if the sales are not high in the mall it contributes a lot to creating a brand value of
the product to the audience.
 All competitors are also entering this form of retail expansion so it is keeping up with
pace and not lose out its customers to their competitors.
 Cost and time on setting up an outlet for Raymond can be reduced.
 Case Study: Raymond’s Mall Centric Plan

Cons:
 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.
 The rental cost of hiring a shop in a mall is very high and does not suit the company’s
franchisee model distribution channel.
 The lower income level is ignored by this type of model.
 There are many customers in mall but potential buyers are very few.
 Mall in a city are omnipresent and it is not possible to set up shops in each mall and so
many customers are divided and only a few people are targeted.

Ans. The mall based retail expansion model of Raymond can be evaluated on the following
points:

• The target consumer of Raymond’s apparel is salaried upper middle income class living
in urban areas. Besides formal wear the purchase is also done for family ceremonies or
festive occasions. The mall based expansion will help in reaching its target customer base
which mainly resides in urban areas.

• Some of its main competitors are S kumars, Zodiac, Bombay Dyeing, etc. The company
will also face competition from the unorganised sector. The malls have not been
capitalised very much till now so Raymond might have an edge as the first mover.

• 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.

• Costs involved in mall based expansion will also be higher as the outlets will be company
owned.

• Mall based expansion might result into higher sales of apparels than fabrics which is
consistent with the observed trend of consumers shifting towards apparels from fabrics.

• Risks are minimised to a certain extent as the dimantable mall model is being adopted
which will help in recovering the costs.

Ans: there are many points that has to be considered in the case of retail expansion model of
Raymond’s:-
Pros:
• Motive of this model is to exceed customer expectations by increasing quality,
delivery & customer satisfactions.
• Ambition is to retain market leadership.
• there has been considerable change in the consumer behavior.
• This model is to increase the presence of Raymond and help it in exploring new retail
formats by establishing presence in malls.
• It adds brand value as mostly high profile people go to malls.
Cons:
 Case Study: Raymond’s Mall Centric Plan

• Mall is a very expensive place to open a shop for example mall rentals is an estimated
Rs200-220 per square feet at Delhi’s ansal plaza.
• Mall rentals account for ten percent of the revenues earned.
• Raymond shop in mall takes greater time to break-even.
• Since investment is high any changes made will be very high.
: Pros:
✔ Faster rate of expansion as investments are done by franchiser.
✔ More exposure of Raymond brand as people going to malls have increased as
it provides complete entertainment.
✔ With the increase in disposable income people are looking for complete
experience which malls can provide, so Raymond’s would be ready when
organized retailing becomes a prominent pay-back option.
✔ Raymond has added only one company owned TRS( The Raymond Shop) in
last 5 years. So, to achieve its goal of 15-20 TRS outlets every year
Raymond needs the retail expansion model.
✔ Dismantle mall models can help recover at least half of the capex if it were
to relocate to a new place.
Cons:
✔ The investments are comparatively higher for malls more than 10% of
retailing revenues which make this model infeasible.
✔ The retailers will try to focus more on apparel sales than fabrics while
Raymond’s sales are more from fabrics and less from apparels.
✔ In India most of the people do not shop from malls. Mostly they shop in
local bazaars so availability of Raymond’s there too is necessary.

Various pros and cons of the mall based retail expansion model of Raymond’s are:
• A step forward to attract a lager customer base.
• Major sales expected from apparels.
• Spatial convenience.
• No parking hassle, especially in cities like Delhi, Mumbai.
• Better margins because of company owned stores.
• Celebrations in malls attracting larger number of customers especially during festive
seasons.
• Mall model is dismantable.
• Mall model will improve brand presence
• Raymond’s will have to develop a different marketing strategy for mall based retailing to
convert fabric buyers to apparel buyers.
• Requires a high amount of capital investment.
• Currently mall based retail expansion applicable only to tier I and tier II cities.
• A larger management team required.
 Case Study: Raymond’s Mall Centric Plan

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

TRS.

No it is not justified to benchmark TRS sales for mall based TRS.

There will be an automatic rise in the TRS sales due to:
• Increased number of consumers becoming more brand conscious with
better visibility and presence in the malls
• Game theory states that for a better brand presence and higher
esteem of the brand, Raymond will have to follow the mall based
model due to the risk of competitors grabbing the opportunity
• Any companies are persuing the franchisee model for expansion and
higher profits
• There is a trend towards organized retailing co it gives a complete
entertainment experience

It is not justified to keep TRS sales as benchmark for Mall based TRS. This is due to the
following factors:
 Mall customers usually buy more of Raymond apparels than fabrics unlike in TRS, so it
will not be justified to compare the sales of the two.
 Both models are different and the cost of setting up units at both places also varies so the
sales and revenue also varies.
 Malls may not give consistent revenue to the company but it also creates brand value for
the company. It does not contribute directly but it does play a significant role in sales of
TRS, an own benchmark should be set for mall.
 Mall is a new addition to the Raymond expansion model and it will not achieve the same
amount of success as a TRS which is established from many years.

. No, it is not justified to keep existing TRS sales as benchmark for Mall based TRS because:

• The nature of sales in malls is expected to be different from existing outlets as the
consumer buying behaviour differs in the two cases. In case of malls, it will be more
towards apparel than fabric.

• Moreover, the 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
 Case Study: Raymond’s Mall Centric Plan

to be established. Hence, the volume of sales is also expected to be different in both the
cases.

So, the sales at malls can not be compared with the existing outlets. The closest point of
reference could be the existing company owned stores of Raymond.
No because the cost involved is much higher the rents, maintenance cost, etc is much higher.
And in order to break-even earlier and to remain competitive the shop needs to sell more and
fast to earn higher revenue.

No it is not justified to benchmark TRS sales for mall based TRS.

TRS sales will naturally increase as:
✔ As visibility and presence increases consumers become more brand
conscious and brand awareness increases.
✔ As can be seen in game theory as competition increases Raymond will
need to follow mall based model as the competitors may benefit if
Raymond does not enter organized sector.
✔ There are many examples like Living Mall Co who are entering as
franchisers to be more profitable and to expand.
✔ The future trend is towards organised retailing as it provides
convienence shopping and great overall entertainment experience.
✔ Siyaram clothing one of the major competitors of Raymond is planning
to open 200 shops in India thus forcing Raymond to go for more
expansion.
✔ The cost of setting up at both places differs.
It is not justified to keep existing TRS sales as benchmark for mall based TRS because of the
following reasons:
• Raymond’s is well known for its fabrics. Currently two thirds of sales in exclusive retail
stores come from fabrics. Whereas in malls two third of the total sales is expected from
apparels.
• Margins are more for apparels than the fabrics and apparels would constitute the majority
of sales in malls.
• TRS would have to pay a higher rent and maintenance charges for space in malls than
what they pay for their exclusive retail stores.
• TRS in malls would be company owned, whereas most of the exclusive retail stores
follow the franchisee based model. So, there is a definite difference of margins between
the two models.
• So, Raymond’s should not compare the existing retail stores sales revenue with the mall
based one rather it should follow the competitors like S Kumars, Reid & Taylor, Louis
 Case Study: Raymond’s Mall Centric Plan

Phillip, Van Heusen, Blackberries, ITC Wills etc who are already following the mall
based retailing plan and keep their sales as benchmark.

3) Discuss the risks and reasons for success & failure of this model as
you see it.

Reasons for success:

• More often, customers go to the malls where the consideration set is
usually framed. Higher brand awareness due to the exposure will bring
Raymond in this consideration set.
• Better service and convenience attracts high end consumers who are
willing to pay extra for such value added services
• Being a trusted brand in India, Raymond can easily attract customers
• Raymond can have the first mover advantage as no other competitors
have yet entered mall based retailing in a big way

Reasons for failure:

• Higher investments results in longer breakeven period
• In the current scenario, malls are not very popular shopping options for
people in India

For success:
 The numbers of customers in mall are increasing and this will directly influence an
increase in sales.
 Customers of mall are usually with high disposable income so they would buy goods
from the shop.
 Culture of Indian consumers is changing from shopping from shops on roads to shopping
from mall.
 Raymond with its very brand name is enough for the products to sell and mall will only
increase the convenience for customers and availability at many locations.

For failure:
 Case Study: Raymond’s Mall Centric Plan

 The investment along with maintenance cost in mall is huge and returns are not assured.
 The risk factor is huge as the mall may close down at any time if it is not profitable. This
will lead to a huge loss for the company.
 There are very less potential buyers in malls so sales will be low and thus less profit.

The reasons for success of this model could be as follows:

• The strong brand name of Raymond will help in attracting customers to its exclusive
stores.

• Mall based outlets will help in reaching targeted customers residing in urban areas more
easily.

• The company will be able to capitalise better on the observed trend of shift in favour of
apparel business from fabrics.

• The IT systems will make the operations more efficient. The forecast trends predicted
with the software will help the company in monitoring the performance of each of its
brands and plan accordingly.

• No other brand has utilised malls to a large extent so Raymond will have a first mover
advantage.

The risks in this type of expansion could be listed down as follows:

• 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.

• These outlets will face tough competition from unorganised sector as customers trust the
traditional outlets more than any new stores.

• 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. The
risk can be minimised by providing all the brands of Raymond group in order to offer
more variety to the customer

Ans: As already discussed that it is not viable for the franchisee model to survive in the malls
because of the cost involved. Even the company owned model will find it difficult because of
competition. Other factors that affect the sales are that the pricing is very high at malls. Not
all customers come for buying many come for window shopping. Positive side of this model
is that it enhances its brand value. Also as most of the brands are opening shops in malls it
becomes almost necessary for the company to open up their stores. In order to retain market
leadership Raymond has to open their branch in malls as Most of the company’s presence is
 Case Study: Raymond’s Mall Centric Plan

already their. Reasons of success and failure are same as that discussed earlier in the first
question itself.

Success:
✔ Customers usually go to mall and consideration set is usually framed in
malls by consumers.
✔ Band awareness by exposure would bring Raymond in the
consideration set which is the foremost step.
✔ High end consumers don’t mind paying extra for convenience and
better service and they show high brand loyalty which could be
encouraged in mall based malls.
✔ Raymond is a trusted brand in India for years so it will be easy to
attract customers for Raymond.
✔ As its close competitors are planning on entering malls but have not yet
entered Raymond can get first movers advantage.
✔ Culture of people is changing in India. Trend is towards purchasing at
malls.
Failures:
✔ As investments are high breakeven to be achieved will be in longer
time period
✔ Though trend is changing, very small percentage of consumers in India
shop at malls so for malls to be very profitable in near future is
unlikely.
The services in malls are to be different than the local bazaars. As reputation of Raymond would
be at stake better service at malls have to ensured. From this perspective franchisee model may
be better

Possible reasons for success of this mall based model are:

• Since they are company owned, so a better control is expected.
• Better margins
• A larger customer base.
• Deeper market penetration.
• Improved brand presence and brand value, especially for its apparel brands like Parx,
Park Avenue, Manzoni.
• Convenience for customers.
• Higher unplanned buying in malls.
• Easy to relocate with the help of dismantable mall model.
Possible risks which can lead to a failure of the mall based model are:
 Case Study: Raymond’s Mall Centric Plan

• Larger sales expected from Apparels unlike the exclusive retail stores where the majority
of sales comes from fabric.
• Needs to change the image and marketing strategy and focus more on apparels. This
could affect the existing fabric buyers.
• A huge capital investment in terms of rent, store deposits, manpower, maintenance,
inventory, and interiors.
• A larger competition from existing brands present in the mall.