Hidesign not only wants to maintain its above-average growth rate in India but also increase it at 25 per cent. The dilemma lies in who to target — the bottom of the pyramid, with a large audience but slim margins, or the top, with a small audience and large margins. We propose the company create clear demarcations in terms of sub-brands, distribution channels and serviceability.
Aarushi
Rahul Menon
The first table clearly depicts Hidesign’s reliance on exclusive brand outlets (EBOs), with a mammoth 65 per cent of revenue coming in from this channel. EBOs are those stores that attract the most elite and high-end customers. The luxury product for them is a package of the service assistance provided at the store along with the tangible product.
Understanding the customer
There are two categories of customers:
1. Those interested in self-expression: Core customers who own other similar products and believe in spending on them for self-expression.
2. Aspirational customers: They look for social expression through products. These are the customers that can be lured through the development of a low-priced brand in conjugation with the e-commerce website.
Understanding the customer segment is key for the company. Hidesign bags and the Atelier collection broadly cater to the luxury and premium luxury segments. The expectations of these customers from the entire product package is starkly different from that of the target segment of Holii and the new brand being developed along with the e-commerce platform. The entire experience and the brand imagery around Hidesign and Atelier should focus on the perception of effort that goes in making of the product through marketing and positioning. For example, focussing on the intricate details of the centuries-old skill of tanning with natural seeds and barks. This, in turn, adds cultural legitimacy, which goes a long way in establishing the story behind the luxury product.
Hidesign should keep the EBOs only for bags with a price tag of ₹6,000 and above (Atelier collection). This would help the sales person give undivided attention to customers, bringing in a sense of exclusivity. Customers buying products with a higher margin demand more personal attention. They wouldn’t want to be irked by the sheer number of aspirational customers venturing into the store and hampering the quality of service.
Multi-brand outlets (MBOs) can have a portfolio skewed towards brands such as Holii, which come under accessible luxury and often entice customer to experiment, acting as an introduction to Hidesign. This introductory phase needs to happen in a casual and open atmosphere that is provided by MBOs as they do not intimidate the aspirational customers. Also, the shift in trends needs to be taken care of — with time, the core segment of Hidesign will age, and there is an inevitable need to gain foothold among customers who might become the core group at a later stage.
Sales model
With the growing interest in eco-friendly products and keeping in mind Hidesign’s existing eco-friendly product portfolio, the company can go for labels such as Ecomark (India), Leather Label by OEKO-TEX (Australia), and Blue Angel (Germany). In addition to providing a sense of legitimacy, these labels will also help Hidesign gain a foothold in the export market.
MBOs amount to wholesaling for Hidesign as they are responsible for sales. Instead, a store-within-store concept can be tried out. Retailers receive rent or a commission for a brand’s in-store sales, while brands have access to a retailer’s foot traffic and can control consumer experience. This popular concession model differs from MBOs in the following aspects:
1. Companies can hand-pick and create boundaries when it comes to employees and their training and retention strategies.
2. Higher investment in branding and outreach activities.
3. Have a say in what other brands surround you.
4. Establish guidelines about sharing consumer data with the retailers and vice versa.
This strategy may let Hidesign customise their positioning geographically.
Flanking strategy
Given the huge growth in the e-commerce sector, of around 93 per cent, venturing into the lower segment of synthetic bags makes sense because of the vast, untapped potential. The Holii brand of synthetic bags should be aimed at teenagers and young adults, especially those going to college. The products are already colourful, so people can make an association between that and the wonders of life. Influencer and affiliate marketing can be explored as the target segment is tech savvy. Metrics such as share of conversation and share of influence can be studied to understand individuals with an influential social network.
Hidesign should have a flanking strategy, with different brands for different markets, so that each brand can successfully cater to its target segment. Customer looking for luxury products, in particular, require a sense of ‘uniqueness’ and ‘exclusivity’ in the products they purchase. Having a separate brand also reduces the risk associated with the product not being well-accepted by the market. This shields the main brand from the ripple effect.
(The first runners-up are MBA students from IIM Indore.)