Raymond Tailors Mall-centric Plan For ‘TRS’  ( March '9,2004, FE)

Raymond Ltd has drawn out a mall-centric expansion plans for its exclusive retailing chain ‘The Raymond Shop’ (TRS). The company hopes to bring around 1 million sqft of space under TRS in next four years — up from 7.5 lakh sqft currently. Group company Raymond Apparel Ltd has plans to develop a new exclusive retail channel — beginning with company-owned initiative— for each of its menswear brands Park Avenue (six stores), Manzoni (2 stores and also 50 shop-in-shop) and Parx (2 stores) next fiscal year.

Raymond plans to take a position with around 20 TRS stores in malls in next two years — in addition to already booked four stores. The company, however, thinks that malls would support only company-owned model and not a franchisee-led expansion strategy as the margins will be under pressure.

Out of 290 TRS stores (in 120 cities) only 20 are company-owned. Raymond added only one company-owned TRS in last five years. Raymond’s new thrust is to add around 15-20 TRS outlets a year —an increase of around 50,000 sqft of retail space a year.

Says Mr Aniruddha Deshmukh, vice president, Raymond Ltd: ‘‘Mall rentals do not justify fairly viable franchisee model. Malls will be geared towards apparel sales.’’

He added: ‘‘Around two-third of sales in malls is expected to come from apparels and the remaining from fabric. Currently, fabric account for two-third of TRS (exclusive Raymond stores) sales. There has been a couple of percentage point shift in favour of apparel business (away from fabrics) in last three years.’’

TRS sells Raymond fabric as well as Raymond group brands including ColurPlus, which is sold through 45 TRS stores besides an exclusive channel of 11 stores. Mr Deshmukh says that all TRS would be wired with a billing-cum-inventory tracking IT system in next two years — 60 stores in last 8 months already covered. The software allows Raymond to track point of sales transaction, forecast trends, plan inventory and conduct CRM.

Raymond is benchmarking its mall sales target based on TRS retail sales. Raymond’s TRS retail sales are estimated around Rs 15000-20,000 per sqft in a year. While TRS is primarily a franchisee-led business — run by old trading families which are not influenced by considerations like investment per sqft — the recent emergence of new retailing models inlcuding malls is re-defining the way retailing businesses ought to be done.

Malls rentals vary from an estimated Rs 220-200 per sqft at Delhi’s Ansal Plaza to Rs 90-85 per sqft at Gurgaon’s Sahara Malls. Raymond reckons that any retailing where rentals account for more than 10 per cent of retailing revenues makes the franchisee business unviable. Raymond is also looking at creating a conveniently dismantable mall model so that it can recover at least half of its capex if it were to relocate to a new place. Interestingly Relinace Webworld has a similar model wherein it can recover 75 per cent of the retailing capex.