Expansion to the Indian Market

Merchandising/ Marketing

International expansion has become increasingly prominent for brands today.

Through the digital world and technological advancements, brands can easily reach different markets, bringing in new customers. India has one of the world’s largest emerging markets because of the country’s fast growing economy and population. Therefore, there is a great opportunity for fast fashion brands such as Bershka to expand into the Indian market to grow their customer base.

Comparison of successful retailers internationally

Zara and H&M are leading fast fashion retailers that have successfully expanded globally. Zara has stores located in 88 countries, with around 6,500 outlets around the world

(successstory, 2018) while H&M has 4,393 stores in 69 markets (hm, 2018). Zara and H&M offer a variety of trendy products, at a low cost (Appendix A). Although the brands are quite similar through its affordable fast fashion offering, they have their own distinct strategies within all their sectors including retailing, marketing, product offering as well as the shopping experience (Smith, 2014). Moreover, Zara offers higher quality at a higher price for its products compared to H&M offers which lower quality at a lower price point. For example, an average price point for H&M is $21.40 while an average price point for Zara is

$48 (Smith, 2014). Moreover, H&M and Zara have different product segmentations. While

H&M’s product range consists of mostly womenswear, Zara divides its assortment equally between the men’s, women’s and children’s section, thus showing their difference in target market (Smith, 2014). (Appendix A) Lastly, the way both companies communicate differs highly, H&M collaborates with celebrities and designers to create its products while Zara utilizes fashion insiders in order to endorse their products to attract its target audience (Smith,

2014).

Who is Bershka?

In a world where fast fashion brands have a high level of competition and have taken over the

1 market, consumers are willing to purchase trendier products at cheaper prices. There was a rapid increase and development in the rise of fast fashion, where consumers had a high regard for low-priced garments and accessories by mass- market retailers (FashionLaw, 2017). In order to provide consumers with trendy, yet low priced products, Bershka aims to reach out to a different market with new customers.

All Bershka’s stores are located in strategic areas with intriquite architecture. The company puts emphasis on location as they understand the importance of store experiences for millennials. Currently, Bershka’s stores consist of music, screens, graphics, fashionable colours, contemporary furniture, projections, art lighting that comes together to maximise the shopping experience. (Bershka, 2018). The space is entirely designed for the comfort for younger people, creating an entertaining shopping experience (Bershka, 2018).

Bershka was founded in 1998, and was developed as a new brand of the Inditex group that consists of Zara, Pull&Bear, Massimo Dutti, Stradivarius, Oysho, Zara Home and

Uterque. (Inditex, 2018). 20 years later, Bershka has more than 1,000 stores in more than 75 markets around the world, representing 9% of sales of the total revenue of the Inditex group.

(Bershka, 2018). Bershka is segmented into 5 main product categories: the womenswear section has two lines, Bershka and BSK, from which Bershka focuses on latest fashion and leading trends while BSK focuses on the basics, providing consumers with a wide range of jeans, casual and evening wear. The menswear offers fashionable jeans for younger consumers, offering casualwear, fashion, and sportswear. Lastly, both the womenswear and menswear sections, offer a wide variety of accessories and footwear (Bershka, 2018).

Bershka’s expansion to new market

Recently, Bershka has expanded into the United States through a popup store in New

York along with launching their e-commerce website. This expansion was late in comparison to other European fast fashion brands that have already established themselves in the U.S

2 (Shobert, 2017) (Figure 1). Therefore, an expansion to India would be extremely beneficial for Bershka because of the growing need for fast fashion brands in the market growing at a yearly pace of 25- 30%. (Tandon, Agarwal, 2013) Due to Zara’s success in India has encouraged a large amount of fast fashion retailers to invest in the Indian market (Tandon,

Agarwal, 2013).

Figure 1: Brand Positioning

Bershka’s expansion to Indian market

India is one of the world’s biggest markets. As of 2017, the retail market in India is worth over $600 billion according to a report conducted by consultancy PwC. It is predicted that Indian shoppers could spend almost up to $1 trillion each year (Iyengar, 2018). This is primarily because the number of middle class consumers and consumers’ spending has been increasing, which leads to a growth for brands (Govindarajan, Bagla, 2016) (Appendix B).

According to Business of Fashion, India is one of the most prominent growth opportunities for brands to expand and invest in (Young, 2016). The United Nations has revealed, India’s market is likely to overtake the Chinese market within the next six years (Young, 2016). Not only that, there is a noticeable change in consumer behaviour, as more urbanised Indians are wearing Western clothing rather than Indian on a daily basis (Young, 2016). Due to an increased access to affordable Western clothing, an increase in disposable incomes and a

3 growing change in societal behaviour the Indian consumer’s preferences are changing.

(Copyright Research, 2018). Moreover, the entrance of international retailers such as Zara,

H&M and Gap, is capturing the attention of the Indian community (Copyright Research,

2018).

Why Mumbai?

Bershka would expand to Mumbai first as it is a cosmopolitan area that values fashion trends. Other fast fashion retailers have already opened in Mumbai such as Forever 21, H&M and Cover Story. Initially, Bershka will open a store in the Palladium mall, in Lower Parel, which mostly consists of more high-end brands than fast fashion brands. This is because

Bershka would promote a more luxury status without a luxury price tag, and it would showcase the brand as cheaper as well as trendier. Later, Bershka will add other locations as stand- alone stores. Mumbai is one India’s most fashion conscious and is considered to be

‘modern’ in comparison to most areas.

Foreign brands use the franchise model in India as the country is allowed a 100% of foreign direct investment (FDI) in a single- brand retail store (Agarwal, 2016). As a result, it avoids a large amount of tax that foreign brands would originally have to pay in order to bring their company into the country. As the culture is extremely diverse in India, brands target to a larger audience, who are young and evolving customers. The relaxation in the economic policies from the previous years has highly relieved the opening of international brands in India and has made it easier (Copyright Research, 2018).

Competition comparison

Competition is getting more intense in the Indian market because of the entrances of newer stores such as H&M and Zara as they provide cheaper prices and there is easier access to their online products (Tandon, 201&). The market in India tends to favour brands that believe in a higher value for the amount of money spent as well as the stores that provide the

4 latest styles. Zara, opened in India in 2010 and now has 18 stores nationwide while H&M opened in 2015 and has become one of the fastest growing global brands as it has opened 16 stores in 18 months (Doshi, 2016). Bershka, considered the younger sister of Zara, also a part of the Inditex family, has recently expanded to New York and is offering more affordable and youthful products in comparison to Zara (Minton, 2017). The expansion also suggests the success and opportunity of the company to grow. Moreover, it represents the assortments of the product categories of Bershka, H&M and Zara in the U.S market. (Appendix C) All three brands focus on selling tops within the men and womenswear sections because of its higher demand and in fast fashion (Shobert, 2017). Figure 2 shows the comparison of the three brands in terms of their quality of products, latest trends, number of products and price.

Figure 2: Brand Comparison

However, their pricing strategies differ greatly. (Appendix D) H&M is the cheapest at

$28-$32, followed by Bershka at $31-$33 and then Zara at $48-$55, being one of the higher priced fast fashion brands (Shobert, 2017). Moreover, Bershka is doing well in the market mainly because of its offering of mid- priced products, that are of a similar quality to Zara, but at a cheaper price point. Although the merchandise at Zara and Bershka are not too of different, Bershka is known to provide a cooler and ‘chiller’ vibe to its customers, along with lounge areas in their pop-up stores (Anderson, 2017).

5 Target Market The ideal target market is adventurous young customers at the age of 18-34.

Figure 3: Target Market

Young adults are usually updated with the latest trends and have an interest in social media, music and new technologies (Bershka, 2018). (Figure 3) Specifically, consumers in India are showing interest in Western brands. They are ‘willing to spend beyond basic needs and on a broader set of occasions’ (Young, 2016). The target consumers are trendy and fashionable, who look to follow the trends in the market.

Omni Channel Launch Plan Strategies for the new market

Initially, Bershka will open one store in Mumbai in order to test the market before branching out further. In order to successfully launch the brand and sell the products, Bershka would need to adapt to the needs of the Indian market. Indians prefer the western look however; the clothing would be more intriguing if the product selection caters towards to the more conservative Indian audience (Figure 4). The product selection would begin with just womenswear in the beginning, then slowly expanding to menswear depending on the success of the store, which results in saving the brand initial costs. Moreover, the brand would have more low-priced products compared to higher priced products because the middle class and

6 the consumer spending in india is rapidly growing, marking themselves as first for the GRDI ranking in 2017. (ATKearney, 2017) (Figure 4).

Products % of Total Price % of Total Blouses/ Tops 30% Skirts 15% $7.9 - $29.9 50% Bottoms 25% $29.9 – $55.9 20% Dresses 15% $55.9 - $69.9 15% Outerwear 5% $69.9- $89.9 10% Jewellery/Accessories 15% $99.9 - $129 5%

Figure 4: Product Assortment by Product and prices

Also, the store and online purchases would add points to the account, from which the customers receive giveaways once they reach a certain number of points. This would allow the store experience to be more seamless, making it smooth and memorable.

Online presence

An online presence is much more accessible compared to physical store locations.

Bershka already consists of an e-commerce platform, however, does not deliver to India.

Therefore, an addition of having a delivery service in India for e-commerce purchases would be highly helpful because the Indian consumers enjoy the physical shopping experience as well as the convenience of online shopping. Moreover, e-commerce allows brands to target niche customers who are particularly interested in the brand (Young, 2016). Moreover, India has a large number of social media users such as Facebook and Instagram (Govindarajan,

Bagla, 2016). Therefore, by creating a specific online presence through social media for India such as creating an region specific Instagram page, as well as having a India based website will allow them to reach a wider market and test out the market preferences and decide the products accordingly for their stores. As a result, allowing the growth of the brand and changing the way Indian consumers tend to buy from just one click from home. (Young,

2016).

7 Marketing Campaign

Brand influencers and celebrity endorsers are extremely popular in the market today, about 78% of brands have executed influencer marketing campaigns, which is an increase from 65% in 2016 (Berezhna, 2018). It would really benefit Bershka to work with micro- influencers in order to target the customers that are highly likely to buy their products.

Firstly, the opening of the store would be celebrated with a runway fashion show in the Palladium mall, where VIP guests would receive a goodie bag (Figure 5) that would contain a small accessory from the brand and a coupon mentioning the first 100 people

Figure 5: Goodie Bag Figure 6: Coupon in the goodie Bag purchasing from the store would receive a 50% discount on the products they purchase, thus encouraging purchases in the store immediately after the show. (Figure 6)

In order to have a successful marketing campaign, Bershka needs to use its online platform to maximize its launch and further promote the brand to all of the customers, such as using the Instagram live feed tool (Figure 7) and Snapchat stories that would be showcased on monitors around the mall, highlighting the event. (Figure 8)

8 Figure 7: Insta Live Feed Figure 8: Monitor/ Tv Screen around mall

Moreover, the crowd in the runway show will be encouraged to try on the merchandise from the store, and the first 20 people will be promised a photo on their official

Instagram account along with photos of them for ad campaigns. (Figure 9) Through these strategies, it would attract more viewers to the merchandise of the store.

Figure 9: Instagram post of customers

9 Furthermore, the ad campaigns would feature Indian models and influencers such as

Lisa Hayden and Radhika Seth, who are big fashion influencers in India, would help to ensure a succesful launch the brand in the country in order to capture the attention of the middle- class audience. The campaigns for Bershka would be shot by Dabboo Ratnani, who is one of the leading photographers in India.

In addition to that, billboards would be placed near malls and on highways because the severe traffic congestion allows people to look at the advertisements while waiting

(Figure 10) Apart from that, the ads would also be featured in local newspapers and on taxis in order to attract the middle -class audience.

Figure 10: Billboard on highway

Continuity to success

In order for Bershka to continue its path to success through an expansion to India, the brand would need to overcome a number of challenges. Firstly, India’s wealth is quite unevenly distributed, as approximately 90% of the population within adults earn less than

$10,000 per year, indicating signs of lower class audience, or even poverty. (Young, 2016).

As a result, disposable income for fashion products is highly limited. Moreover, there needs to be improvements within infrastructure to be able to provide higher quality retail spaces for brands. Store experiences are extremely crucial to millennials, therefore, making it harder for

10 Bershka to attract a greater audience (Young, 2016). In the future, Bershka could possibly expand to other major cities in India such as Delhi, which is the capital of India, in addition to the stand-alone store in Mumbai.

However, in order to remain a profitable business, Bershka needs to plan out their product assortments, buying plan (Appendix E) and their sales and strategies according to the

Indian market before the launch of the store. Referring to the buying plan, the net sales are predicted to be steady at $2,000,000 USD, similar to that of other Bershka stores as the launch event would create a buzz and encourage more foot traffic in the store.

Conclusion

Bershka can highly benefit from its expansion to India because of the growing importance of fast fashion brands and the store experiences. This marketing plan offers a new market to

Bershka in order to expand and successfully promote its products through celebrity endorsers and its e-commerce.

11 Appendices

Appendix A – Segmentation of offering at Zara and H&M (Smith, 2014)

Appendix B – Consumer Spending (%) on Clothing and Footwear

Appendix C – Assortment Mix of competitors – US Market (Shobert, 2017)

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Appendix D – Average current price in the US Market (Shobert, 2017)

Appendix E – 6 month buying plan

Bershka Financial Plan Fall 2019

(000's) Net Sales Plan $ 2000.0 The opening of one store in Mumbai Net Sales Plan units 28.6 Average Unit Retail 70 Inventory Turnover 2.3 Average Stock $ 884.9 Average Stock units 12.6 Reduction $ 300.0 Reduction % 15.00% IMU % 60.00% GM % 47.00%

(000's) February March April May June July Total Net Sales 300.0 300.0 320.0 360.0 380.0 340.0 2000.0 % Spring 15.00% 15.00% 16.00% 18.00% 19.00% 17.00% 100.00% Stock / Sales Ratio 3.2 3.2 3.1 3.1 2.8 3.1 BOM Stock 960.0 960.0 992.0 1116.0 1064.0 1054.0 884.9 EOM Stock 960.0 992.0 1116.0 1064.0 1054.0 48.0 Reductions 39.0 36.0 45.0 60.0 66.0 54.0 300.0 % Spring 13.00% 12.00% 15.00% 20.00% 22.00% 18.00% 100.00% Receipts Retail 339.0 368.0 489.0 368.0 436.0 -612.0 1388.0 Receipts Cost 135.6 147.2 195.6 147.2 174.4 -244.8 555.2

Key assumptions Net Sales Plan The Bershka Store currently produces an average of $2,100,0000 sales per store. The implementation of the store in Mumbai will likely to be about the same amount of sales. The peak season in Mumbai would be from May to June, where most sales are expected.

Gross Margin % Markdowns aim to keep the inventory open or newer styles and fashion according to the customers of India as their styles keep changing

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