For the exclusive use of A. Chauhan, 2019. saree weer eer aR Si | NOUN INSTITUTE OF MANAGEMENT Semen | BANGALORE IMB 699 ARVIND LIFESTYLE BRANDS LIMITED: FROM CONCEPT TO SHELF ANSHUMAN TRIPATHY, ANUPAM SHARMA, AND SRIVIDYA GANESAN Anshuman Tripathy, Professor of Production and Operations Management, and MBA students Srividya Ganesan and Anupam Sharma prepared tis ease for class discussion. Ths case isnot intended to serve as an endorsement, source of primary data, or to show effective or inefficient handling of decision or business processes Copyright © 2018 by the Indian Institue of Management Bangalore. No part of the publication may be reproduced or transmuted in any form or by any means ~ eletronic, mechanical, photocopying, recording, or otherwise (including, internet) without the permission of Indian Institute of Management Bangalore. ‘This documents authaized fr us only by Aya Chauhan in OPMT 620 Weer 2010 taught by LARRY EARNHART, Unversity Canada West fom Dec 201810 Jun 2010For the exclusive use of A. Chauhan, 2019. S&% Arvind Lifestyle Brands Limited: From Concept to Shelf Ra It was a breezy November evening, and the Arvind Lifestyle office at Bangalore was bustling with activity. Alok Dubey, CEO of Arvind Lifestyle Brands Limited (ALBL) was sifting through the design samples for retailing as part of the Autumn-Winter 2018 Season. He had ambitious plans for United States Polo Association. (USPA / U.S Polo) — the brand which had primarily driven the growth of the Lifestyle Division at ALBL. U.S Polo had experienced tremendous growth from INR" 6 billion, 2 years earlier in 2015, to an INR 10 billion brand in 2017. However, with the fast-changing consumer lifestyle and trends, it was getting increasingly difficult for the styles, The Lifestyle business also boasted of many other well-known domestic and intemational brands such as Flying Machine, GAP, and Arrow, which magnified manifold the challenge of being profitable. Dubey and his team had been relying on historical retail trends to make design choices for the current ssigns to be relevant and aligned with current season. New difficulties had also arisen from hitherto unexpected dimensions. With the emergence of e- commerce, growing at a healthy CAGR of of 31.2%, customer expectations from physical retail stores had changed ~ they were doubling up as entertainment destinations, providing an experience that transcended shopping. In the face of all these challenges, remaining profitable was becoming increasingly difficult. Dubey was aspiring to take the U.S Polo brand from INR 10 billion business in 2017 to INR 20 billion business in 2018, He wanted to generate more value for the customers; not only through product variety but also through impeccable customer service. He also wished to imbibe the latest design trends into the planning cycle without inereasing the time to market. But how could he do that while staying profitable in the changing fashion retail landscape? Was there a need to redefine their strategy? Should he outsource the design function altogether for faster launches? Could current supply chain be restructured to make it ‘more responsive to changing trends? These were the fundamental concerns that kept him awake at night. GLOBAL FASHION INDUSTRY Apparel not only comprises clothing, but encompasses a wide range of products, right from garments to footwear, jewelry, bags, perfumes, and even cosmetics. The industry caters to the complete spectrum of ‘consumers through its product offering of basic garments, fashion, and super premium luxury dressing. ‘The market size of apparel and footwear was USD 1941 billion in 2017 (Exhibit 1). Typical value chain in the apparel industry comprised design, manufacturing, marketing, sales, distribution, and retailing. However, facilitated by globalization, fashion industry networks have become widely dispersed across geographies. In 2005, trading quotas were removed, facilitating the formation of several manufacturing clusters in developing countries like China, Bangladesh, India, Korea, and Vietnam, Companies with ‘manufacturing facilities or suppliers located in South-Asian or East-African countries enjoyed @ cost- advantage while those in America or Europe had more control over quality and practices in their facilities. ‘The World Trade Statistics report 2016 (WTO) (Exhibit 2) indicates China and European Union to be the "approx. INR 6660 =| USD foe 2015, and INR 64.85 ~ | USD foe 2017, 2 bps orglndustrylecommere aspx ; Revived on March 25,2018 Page 2 of 28 ‘This documents authaized fr us only by Aya Chauhan in OPMT 620 Weer 2010 taught by LARRY EARNHART, Unversity Canada West fom Dec 201810 Jun 2010For the exclusive use of A. Chauhan, 2019. S&% Arvind Lifestyle Brands Limited: From Concept to Shelf c European Union and the United States have emerged as the leading exporters of clothing. Similarly dominant markets for apparel Most fashion companies in the industry have diversified to be present across all product lines, capitalizing ‘on their existing brand value. As such, any player in this industry functions in a highly volatile environment with competition from multiple fronts and varied, short-lived consumer tastes, giving rise to ‘a myriad of challenges from all dimensions — consumer demand, supply chain, and retailing. Demand prediction is the most daunting task faced by fashion companies duc to high volatility in trends. Fashion products are short-lived, requiring extensive di ‘companies cater to a wide range of consumers, from mass-market to high luxury. Consumer demand also varies with changing economic conditions and the disposable incomes of the consumers. In periods of ‘economic boom, consumer demand may sharply increase and ability to respond to such peaks in demand becomes a key differentiator. However, in periods of recession, entire supply chain may be clogged with unsold inventory and may lead to its liquidation at low prices by offering deep discounts. Agility becomes imperative in these instances. jign changes every sales season. Fashion Complexity to operate at a global level is very high owing to diversity in culture, societal norms, demographics, and even environmental factors. This leads to trade-offs between creating fashion suited to local needs, or getting intemational fashion to diversified geographies. Most actors in the fashion industry have diversified into multiple categories, some capitalizing on their brands (like Nike for fashion from sportswear) while others using the strength of their distribution networks (like Walmart), and some even leveraging their size for cost-competitiveness (like Big Bazar getting into apparel). As such, competition is high in fashion industry, not only due to incumbents with high brand value, but also coming from unanticipated participants like BigBazaar or Myntra. In addition to design, distribution capability is a significant factor contributing to success. The industry has seen an influx of mass retailers in essential clothing like Walmart globally, and Big Bazaar in India, that enjoy a cost advantage owing to their scale Even major players have just a small share of the pie. The perishable nature of demand for fashion products make fulfilment a key differentiator for success. This makes it necessary for the apparel industry fering to seasonal uncertainties. and_—changing —_trends. supply chain to be responsive, Consequently, a myriad of factors influences the operational strategies, including the nature of the product, seasonality, trend, manufacturing cost and time, brand premium commanded by the company, and replenishment times. Even the rise of technology has changed the apparel industry significantly. Technology and fashion are becoming more intertwined with innovative products like biometric smart shirts by Ralph Lauren, phone~ charging pants from the collaboration of designer Adrien Sauvage and tech-company Microsoft, and reactive, anti-injury clothing for sports.’ Due to these complexities, most of the well-known companies in the industry have a variety of product lines. Competition is fierce on all fronts and from a range of brands, like Nike which dominated the sportswear category, and Zara which led in fashion in 2017. ® pir comple, om/tyle2015/the-het tech innovation in-fshion soft! Retrieved on March 28,2018 Page 3 of 28 ‘This documents authaized fr us only by Aya Chauhan in OPMT 620 Weer 2010 taught by LARRY EARNHART, Unversity Canada West fom Dec 201810 Jun 2010