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VOLUME 03BEACON ISSUE 10OCT 2015

ContentsABOUT US

OUR TEAM

INDUSTRY ANALYSIS

COMPANY ANALYSIS

BRAND ANALYSIS

CONCEPT OF THE MONTH:SIMULATION ADVANTAGE

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OUR PRESENCE

ABOUT US

VISION

The SIMCON - SIMSREE consulting club is an initiative started in 2012 for those students in pursuit of excellence in management consulting and strategic management. Aimed at creating awareness among the students about consultancy as a discipline, the club strives to maintain strong relations with top consultancy firms and provide platform to craft highly skilled & competent consultants from SIMSREE. The club is a resource for information about consulting and a place for students to obtain real-world consulting experience.

SIMCON provides an avenue of interaction among faculty, students and alumni through competitions, live projects, guest lectures, and conclaves. For this purpose the club has also been publishing its monthly newsletter – BEACON (BE A CONSULTANT) and maintains a FACEBOOK PAGE where latest news and development in the consulting industry are posted.

MISSIONTo create awareness amongst the students about consulting industry & its latest trends.

To maintain strong relations with top consultancy firms.

To provide platform to craft highly skilled & competent consultants from SIMSREE.

To provide exposure to students via competitions, live projects, guest lectures & conclaves.

Contributions invited:To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your entries to simcon.simsree@gmail.com.

Best Regards,SIMCON - SIMSREE CONSULTING CLUB

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`

OUR TEAM

SANANDAN DESHPANDE

NIKHIL RAO

AMEYA MAHABAL

CHITRA WANI

DEEPESH JETHWANI

PRATHMESH INDANI

SUSHIL GURAV

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OUR TEAM

ARPIT AGARWAL

ASHAY DHURI

HUZEFA BODABHAIWALA

KARAN CHOPRA

NAMAN CHANDAK

PRACHI KORE

SARANG KULKARNI

YOGESH MOHATA

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RETAIL INDUSTRYINDUSTRY ANALYSIS

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RETAIL INDUSTRYINDUSTRY ANALYSIS

Industry OverviewThe retail industry in India is one of the fastest growing industries in world. The retail market in India is considered to have high market potential, moderate political risk and low economic risk. As per a report by AT Kearney in 2015, India is ranked eleventh on basis of market potential of the retail industry globally. According to the same report, India is ranked third after China and Brazil in terms of net retail sales. As a result, the sector has been attracting attention of foreign investors.

Retail is one of the most dynamic and fast paced industries due to the entry of several new players. As per a report published by Boston Consulting Group and Retailers Association of India, the retail market in India is expected to nearly double to reach US$ 1 trillion by 2020 from the existing US$ 600 billion in 2015. The report adds that retail spending in top seven cities in India was US$ 57.6 billion. It is also expected that online retail will be at par with physical stores in next five years. The online retail segment in India is growing at an annual rate of 35% which is a good sign for retail sector when growth of physical stores is diminishing.

Market Size Over The Years

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2020E20152012201020082006200420022000

204238

278321

368424

518600

1000

Market Size (US$ Billion)

Segments

Store FormatRetailing Based On Merchandise Offered

Retailing Based On OwnershipIndependent retailer:When a retail store is owned or operated by the same person. A chain retailer or a corporate retail chain: A chain retailer is one who owns has 2 or more outlets.Franchises:When franchiser and franchisee have a contract between them which allow franchise owner to conduct a business under famous name in return for certain compensation.Leased Department: When a section in retail store is rented to another party, it is called Leased Department.Consumer co-operative: When a retail institution is owned by customer who is member of it, it is called Consumer co-operative. Non-store FormatNon-store formats are the ones where end users are served without meeting them in the physical store. They are represented by catalogue retailing, e-tailing, telemarketing, television home shopping, and vending machine selling. Service Based RetailingService retailers provide different services to customerse. g. Car rental, banks, service contracts

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Market Share

Unorganised retail penetration

Organised retail penetration

Organised Retail Penetration (2015)

92%

8%

Major Domestic Players1. Future Retail

Future Retail was established in 1987 and is involved in multi brand retail trade. The current market capitalization of future retail is Rs.6473 crores. It has around 400 stores in 122 cities. The stores are operated under various names such as Big Bazaar, FBB, eZone, Foodhall and Hometown. The company has operations in various areas such as fashion, food, electronics, and homeware.

2. Reliance Retail

Setup in 2006, Reliance Retail operates supermarkets, hypermarkets, convenience stores, cash and carry stores and specialty stores. Its outlets offer food, groceries, electronics, farm implements, home improvement and lifestyle. It has established partnerships with many international brands such as Diesel, Paul & Shark, Superdry, Thomas Pink, Brooks Brothers, Grand Vision, Hamleys and many others. It operates 1723 stores pan India with about 11 million square feet of retail space.

3. Trent

Established in 1998, Trent is a part of the Tata group and currently has a market capitalization of Rs.5124 crores. It operates Westside (offers clothes, footwear, accessories, furnishing and artifacts), Star Bazaar (offers staple foods, health and beauty products, beverages, fruits, vegetables, dairy and non-vegetarian products), Landmark (offers products in books and music category) and Fashion Yatra (offers low cost fashion products). The company is headquartered in Mumbai and has pan-India operations.

4. Aditya Birla Retail

Aditya Birla Retail Limited, incorporated in 1988, is the retail arm of Aditya Birla Group. It operates a chain of food and grocery retail outlets, supermarkets and hypermarkets in India. Its product offerings include bakery products, fruits and vegetables, beauty concepts, fast moving consumer goods, beverages, electronics, fitnessproducts, home decoration products, etc.

Recent M&A Deals In Indian Retail IndustryAcquirer

NameTarget Name Year Deal Type

Morgan Stanley Flipkart June

2015Private Eq-

uity

InnoVen-Capital

Sportsbi-zPrivate Limited

July 2015

Private Eq-uity

Kalyan Jewellers India Pvt

Ltd

Warburg Pincus

Oct 2014

Private Eq-uity

Celio

Future Lifestyle Fashions Limited

Oct 2014

Private Eq-uity

Flipkart Myntra.com May 2014 Acquisition

Soft Bank Snapdeal Oct 2014

Private Eq-uity

Warburg Pincus

Biba Appar-els

Dec 2013

Private Eq-uity

Hassan Food Co

Bush Foods Overseas Pvt Ltd

Apr 2013 Acquisition

Trent Ltd Landmark Ltd

Feb 2013 Acquisition

Future Venture

India Ltd

Big Apple (conve-nience store)

Sep 2012 Acquisition

Peter En-gland Ltd

Pantaloons Retail India

Ltd

Sep 2012 Acquisition

Pantaloons Retail In-

dia LtdR&R salons May

2012Private Eq-

uity

Phoenix Mills Ltd

Classic Housing

Projects Pvt Ltd

Mar 2012 Acquisition

Flipkart online ser-vices Pvt

Ltd

eTree Mar-keting Pvt

Ltd

Feb 2012 Acquisition

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Porter’s Five Force Analysis1. Threat Of New Entrants – Medium

Entry into market for a firm in the retail industry is moderately easy. But it is difficult for a newly established firm to establish favorable contracts and be profitable initially. It is very difficult for a small firm to compete with chain stores which have centralized buying. But if the new entrant has financial capacity to compete with an established firm, then it represents a strong threat as it would employ substantial resources and aggressiveness to gain market share.

2. Bargaining Power Of Suppliers – Low To Medium

There are a number of supplier in retail industry. As a result, supplier tend to have very little control when negotiating with major firms. However, suppliers can affect the new entrants. Suppliers can also threaten by competing directly with existing firms by forward integration.

3. Bargaining Power Of Buyers – Low

Customers have very little bargaining power with retail stores. These stores generally have fixed prices and hence the buyer cannot negotiate on the prices. However, if the buyer wants to buy in bulk, then it is possible to bargain.

4. Threat Of Substitutes – Medium

Retailers generally offer a wide variety of products. These products may also be available at some other store. As a result, retailers who offer unique products have a competitive advantage.

5. Intensity Of Rivalry – High

There are many firms competing for market share in the retail industry. Entry of foreign firms and e-retailers have intensified competition. The growth in the retail market is slow and hence firms have to fight against each other for market share. As a result, there is cutthroat pricing competition among the existing firms.

Growth DriversRise In Internet UsersThough we are yet to achieve a good internet penetration level, the user base in India is continuously increasing at a high speed. This is encouraging more and more companies to go online. It costs less as it saves the space as well as manpower required for physical stores.

Low Penetration India is a country with low organized retail penetration which stands at 8%. That means it has untapped market of 92% which shows large growth potential for retail businesses.

Rising Income LevelsGrowing Indian economy has spurred consumption. Indian economy which is currently growing at around 7.3% has increased disposable income. This rise in disposable income has changed the consumer buying behavior and in turn benefitted retail industry.

Government PoliciesOn Nov 12, 2015, Government allowed single brand retailers with FDI to sell online through their own online platforms. Also, this move will allow local brands to leverage foreign investment. Though, the rule that mandates single-brand retailers to locally procure 30% of their goods sold in India over a span of five years remains unchanged.

Demographics The increase in young population is a promising factor for retail industry. India is one of the youngest consumer markets in the world. It is expected that over 53% of the population will be under the age of 30 by 2020. Furthermore, this population will be more dynamic than the previous generations because their consumption is driven by wants rather than needs.

Road AheadThe soaring e-commerce sector has brought revolution in retail industry. There is a substantial increase in number of smartphone users and also the number of online purchases. With the help of that, these brands can reach out to their customers in different geographic segments. It will also save cost of real estate, as it is important to be cost effective in this industry which has a lot of competitors.

ReferencesFibre2Fashion,Dnb,Ibef,InvestIndia

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FUTURE RETAILCOMPANY ANALYSIS

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Company OverviewFuture Retail is the flagship company of Kishore Biyani’s Future Group, India’s retail pioneer catering to the entire Indian consumption space. It is India’s leading retailer, it inspires trust through quality products, innovative offerings, and affordable prices which help customers achieve a better quality of life every day. It serves customers through over 10 million square feet of retail space in 95 cities across the country.

Through multiple retail formats, it connects a diverse and passionate community of Indian sellers, buyers and businesses. Each year over 300 million customers walk into Future Retail stores and choose products and services supplied by over 30,000 large, medium and small manufacturers and entrepreneurs from across India.

Company operates multiple retail formats in the hypermarket, supermarket and home segments of the Indian consumer market including:

• Big Bazaar - A unique Indian hypermarket chain.

• Fashion at Big Bazaar - Affordable fashion destination aimed to make India thoda aur stylish.

• Food Bazaar - A hitherto unseen blend of a typical Indian bazaar and International supermarket atmosphere.

• Foodhall – A premium lifestyle food destination.

• eZone – eZone brings to you the latest in electronics at the lowest prices.

• Home Town – One-stop destination for every need of the aspirational Indian home owner.

Management

Name Designation

Mr. Kishore Biyani Managing Director

Mr. Rakesh Biyani Joint Managing Director

Mr. S Doreswamy Non-Executive Independent Director

Mr. Anil Harish Non-Executive Independent Director

Mr. Bala Deshpande Non-Executive Independent Director

Mr. V.K. Chopra Non-Executive Independent Director

Mr. Vijay Biyani Executive Director

Evolution Over The Years

Future Group forays into M-Commerce with the T24 Mobile App. Bharti Retail joins hands with Future Retail

2015

2014Future Group partnered with the Fortune 500 Company and one of the largest online shopping destinations, AmazonBig Bazaar and Ezone were voted as one of the Top 50 Most Trusted Brands in the country in the Brand Equity Survey 2013 conducted by Nielson. The survey also revealed that Big Bazaar is the 4th Most Trusted Service Brand of the country2014

Future Group entered elite gourmet retailing with the launch of its first gourmet food chain Foodhall in Mumbai on 26th May 20112011Big Bazaar dons a new look with a fresh new section, Fashion@Big BazaarBig Bazaar crosses the 100-store mark, marking one of the fastest expansions of the hypermarket format anywhere in the world2008Big Bazaar launched India's most popular shopping festival: Sabse Sasta Din on 26th January

2006Food Bazaar, the supermarket chain is launched.

2002 Pantaloon Retail enters modern retail with the launch of the first 8000-sq. ft. store Pantaloons in Kolkata.

1997 Initial Public Offer (IPO) of shares by the Company

1992Company's name changed to Pantaloon Fashions (India) Limited

1991

The company is incorporated under the name of Manz Wear Private Ltd.Pantaloons, one of India's first formal trouser brands, is launched.

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Nbanks Mutual Fund

Financial Institutions

General Public

Foreign Institutions

Other Companies

Promoters

Shareholding Pattern

52%20%

20%

4% 2% 2%

Key FinancialsThe company has been showing growth trend during the financial year under review. During the year the company has recorded growth through increase in presence in various cities. Income from operations for the financial year 2014-15, for the year under review was at Rs. 10,341.66 Crore, which was at Rs. 11,577.44 Crore (on 12 months ended March 2014

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basis Rs.9,241.16 Crore) during the financial period of 2013-14.

EBIDTA excluding exceptional items, stood at Rs. 1,142.76 Crore during the financial year 2014-15, which was at Rs. 1067.50 Crore (on 12 months ended March 2014 basis Rs. 887.11 Crore) in the previous financial period. PAT for the financial year under review was Rs. 74.06 Crore, which was at Rs. 2.81 Crore (on 12 months ended March 2014 basis Rs. 7.71 Crore) for the preceding financial period.

During the financial year 2014-15, the Company is operating through 11.36 million square feet of retail space, spread over pan India basis.

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293.65

341.34

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94.84

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158.29

74.06

Pro�t After Tax (Rs in Crore)

Future Retail's value formats continue to see strong growth compared to previous years. In year 2012-2013 lifestyle, home retail same-store sales declined. Home retail business in particular has continued to be a drag on the overall growth, with sales declining for four quarters.

Same-store sales growth at its  lifestyle format, which includes Central, Brand Factory and Planet Sports, declined by 12.7%, sales at its home retail format, which includes e-Zone consumer durables outlets and Home Town, declined by 4.1% and sales at its value retail formats Big Bazaar, Food Bazaar and FBB (Fashion at Big Bazaar) outlets grew 8.1%. The results are not really comparable since the results don't include Pantaloons and Pantaloon Factory outlet format, which were demerged in April.

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Standalone

Mar' 15Mar' 14Dec' 12Jun' 11Jun' 10

Net Sales (Rs in Crore)

6316

4101

6987

1157710341

9369

12225

20186

13897

11057

0

4

8

12

16

20

Consolidated

Standalone

Mar' 15Mar' 14Dec' 12Jun' 11Jun' 10

Return on Capital Employed %

11.12

6.00

7.53 7.576.70

8.63

7.63

16.81

8.91

7.01

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4

6

8

10

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14

FY2015FY2014FY2012FY2011FY2010

EPS (Rs)

3.18

6.54

12.19

3.47

5.69

The liquidity ratios have decreased as compared to last year which shows that the value of current assets has become lesser as compared to the value of current liabilities.

FRL’s average current ratio over the last 5 financial years has been 1.58 times which indicates that the Company has been maintaining sufficient cash to meet its short term obligations.

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0.0

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Quick Ratio

Current Ratio

FY15FY14FY12FY11FY10

Liquidity Ratios

1.13

1.03

1.22

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1.14

0.84 0.84 0.81

0.49

0.65

SWOT

• Wide Presence in India covering almost all major cities and towns. It has over 1,000 stores across 90 cities• High brand equity Presence of Online store• Variety of products under single window increasing the chances of customer time and buying.• Efficient ,cost conscious and quality service

• Presence Only in India and susceptible to foreign players.

• Future Debt Rating - total debt amounts to 4200 Cr.

•Heavily crowded during festive/-discount seasons. The customer gets agitated as he has to go through a long waitng time.

• Global expansion or tie-ups with international brands

• Tapping new markets in the country and addressing the needs of people in other suburban towns.

• Evolving customer preference from traditional retail stores and outlet stores to these super and hyper markets.• New Products and Services can be offered.

• Global players(for example Walmart) trying to enter the Indian market

• Low priced product could be perceived as low quality product

• eg. fbb (fashion by big bazaar)

Strengths Weaknesses

Opportunities Threats

Competitor Analysis

Name Last PriceMarket

Cap. (Rs. cr.)

Sales Turnover

Net Profit

Total Assets

Future Retail 137.85 5,895.79 10,341.66 74.06 9,398.85

Trent 1,419.00 4,715.56 1,358.00 100.03 1,446.92

Shoppers Stop 367.70 3,068.34 3,041.99 40.74 1,223.20

Kewal Kiran 1,995.00 2,458.84 408.32 66.25 331.16

Panta-loons Fash

216.65 2,010.37 1,850.73 -228.14 1,581.20

Future Life 75.00 1,421.39 3,134.10 18.55 2,719.12

V-Mart Retail 447.90 808.67 720.50 37.37 235.09

Trent Ltd.Trent Ltd, a Tata Group company, is one of the oldest retail players with presence in the lifestyle and value retailing business. The company operates in many formats namely Westside, Star Bazaar, a hypermarket chain, Landmark, books and music chain, and others including Sisley, Fashion Yatra, Zara and Treasury. The company has tied up with global retailers like Tesco and Inditex to further the growth of its format stores Star Bazaar and Zara respectively.

Shopper’s StopShoppers Stop is the pioneer of pan-nation one-stop retail outlets. The total area of operations of Shoppers Stop, (50 departmental stores in FY12) and its various formats total to 4.6 m sq feet. While the group primarily caters to the lifestyle retailing segment, it has forayed into specialty retailing and through associates it has ventured into formats like large hypermarkets, entertainment zones, F&B concepts and airport retailing. Its list of stores includes the flagship Shoppers Stop, Home Stop, book store Crossword, HyperCITY, Mothercare and others.

Kewal KiranIncorporated in 1981, Kewal Kiran Clothing Limited today is amongst the few large branded apparel manufacturers in India. With 5 units, an annual capacity of 25 lakh pieces, over 800 employees, the latest technologies in jeans manufacturing, the company ability to innovate in manufacturing enables it to quickly go from design to market. Its list of brands is: Killer, Lawman, Easies, Integriti, K-lounge.

Future OutlookThe Board of Directors of the Company has approved the composite scheme of arrangement for the consolidation of the retail and retail infrastructure businesses of Bharti Retail Limited (BRL) and the Company. This will be achieved by way of two simultaneous demergers i.e. the FRL Demerger and the BRL Demerger as part of the composite scheme of arrangement.  Both the Companies will be under control of the Future Group.The Company continues to explore possibilities to monetise its non–core retail investments which will help in improving liquidity and net worth position of the Company.

ReferencesFuture Retail, Equitymaster, MoneyControl

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MTVBRAND ANALYSIS

H&MBRAND ANALYSIS

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MTVBRAND ANALYSIS

H&M offers customers inspiring shopping experiences in  61 markets, as well as through a growing shop online. The store that opened in Västerås in Sweden in 1947 has become a global fashion company. Expansion is long-term while maintaining quality, sustainability and high profitability.The H&M Group offers fashion from the H&M, COS, Monki, Weekday, Cheap Monday and & Other Stories brands, along with home interiors at H&M Home.

H&M History

was open, or the equivalent of 5,000 pairs of jeans and 10,000 tops sold. The store opened its doors to 2,500 eager fans who had queued up outside overnight to be among the first to get their hands on H&M's merchandise. 

H&M made in one single day what a smaller store like Puma or Adidas would make in one year. Brands in the vicinity, too, benefitted from the opening of the H&M store, which occupies 25,000 square feet. My Square food court and US coffee chain Starbucks logged their highest daily sales. Starbucks generated sales of Rs 4.75 lakh.

H&M Brand Portfolio

H&M STP Analysis

Segmentation StrategyThese are approaches to subdivision of a market or population into segments with defined similar characteristics. Demographics and psychographic segmentation are used for H&M to reach all their customers. H&M is spread throughout the world. This means that the company targets many religions, culture and lifestyle. Therefore, their marketing has to be done differently in different areas.

1. Segments by class: H&M strategy is offering high fashion at low prices, typically targeting working class, lower middle class and students.

2. Segments by class/home: The most popular segment is women aging between 15 and 30 years, either

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The �rst store opens in Västerås, Sweden, selling women’s Clothing. The store is called Hennes.

The �rst store outside Sweden opens in Norway.

Founder Erling Persson buys Mauritz Widforss, a hunting and �shing equipment store. Sales of men’s and children’s clothing begin. The name is changed to Hennes & Mauritz.

H&M is listed on the Stockholm Stock Exchange.

The �rst store outside Scandinavia opens in London, in the UK.

Impuls stores, focused on teenagers, are launched. Sales of cosmetics begin.

Stores open in Germany and the Netherlands. H&M acquires the mail order company Rowells.

Progress continues in Europe with the opening of the �rst store in France in 1998. Newspaperand magazine advertising is complemented by outdoor advertising featuring famous models. In 1998 H&M online shopping begins. In 2000 The �rst US store opens on Fifth Avenue in New York.

H&M initiates designer collaborations starting with Karl Lagerfeld. More collaborations follow with Stella McCartney, Viktor & Rolf, Madonna, Roberto Cavalli, Comme des Garçons, Matthew Williamson, Jimmy Choo, Sonia Rykiel, Lanvin, Versace, Marni, David Beckham, Anna Dello Russo, Maison Martin Margiela, Isabel Marant and Alexander Wang.

The �rst Asian stores open in Hong Kong and Shanghai. In the same year, the new concept store COS is launched. In 2008 H&M opens its �rst Japanese store in Tokyo and acquires fashion �rm Fabric Scandinavien AB, which comprises the brands Weekday, Monki and Cheap Monday.

The �rst H&M stores in Russia open. Beijing also gets its �rst store. Weekday and Monki open in Germany. The �rst H&M stores in South Korea and Turkey open. Israel becomes a new franchise market. Online shopping starts in the UK. H&M becomes the world’s largest consumer of organic cotton and continues to increase its use of sustainable materials in the following years.

H&M opens in Romania, Croatia and Singapore, and via franchise in Morocco and Jordan. COS opens in Sweden, and Monki and Cheap Monday in the UK. The H&M Incentive Program – a reward and recognition programme for all employees – starts. COS and Monki launch online shopping in 18 markets. H&M opens in Bulgaria, Latvia, Malaysia, Mexico, and Thailand.

The �rst H&M store in the southern hemisphere opens in Chile. H&M also opens in Estonia, Lithuania and Serbia. Indonesia becomes a new franchise market. H&M introduces online shopping in the US.

H&M In India - 2015Hennes & Mauritz clocked more than Rs 1.75 crore in sales on the opening day of its first store in India, almost double what its largest rival Zara sold on its inaugural day five years ago at the same location, Select CityWalk mall in New Delhi.

This translates into an average billing of about Rs 27,000 every minute during the 11 hours the store

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still living at home, in student dorms, or in their first house in urban regions

3. Segments by age: The most popular segment is women aging between 15 and 30 years commonly known as generation Y, ambitious with high buying power.

4. Segments by family life: Typical college to graduate females life at home single, on their own in dorms or in their first home, either single or as a young couple without children.

Influences: Cultural, social, personal and psychological influences result in a lifestyle and personality. This group is looking for affordable fashion and typically shop at more than one store. They are fashionable consumers whose shopping as a social activity providing pleasure in their daily lives. They buy clothes each season, want to follow trends and are very up-to-date.

According to Maslow’s hierarchy of needs, they would fit perfectly in the social part: belongingness/love

Decision making: A consumer follows the "consumer decision-making process". Step one on the process is to recognize a need, step two (if needed) to search for internal or external additional information about the product or service. Then the consumer evaluates the new information to make the decision to purchase, or not. In H&M's case the typical costumers are following something similar to the decision making progress: "routine response behavior". Which means the consumer is frequently buying a low-cost product or service with little search and decision time. This process can be compared to the impulse shopping many H&M consumers do because of their ongoing sales and over all low prices

Targeting StrategyThe selection of potential customers to whom a business wishes to sell products or services. The target customers of H&M belong to the group of fashionable and trendy consumers who see shopping as a social activity provide pleasure in their daily life, who wants to follow the trends without investing a lot of money. The target market for H&M is for younger people. Even though H&M offers clothing and accessories for all ages, their target market is women. Women usually shop more for them, but also buy all their children's clothing and often their husbands as well. With their low prices H&M targets woman in the lower middle class and working class, this is a concentrated targeting strategy. Because their focus is to sell a fashionable product for a low price they target married to single woman, mothers and daughters. Many single young women who always want to stay on top of the fashion

trends are constantly upgrading their closets with H&Ms new affordable items. The consumers are not highly brand loyal; rather they shop at multiple retailers in search for the perfect fashion pieces. They shop anywhere from four to six stores on average. Customer attractiveness is high, customer loyalty is low. According to dancehall dilemma theory, these are targets for conversion, attractive enough to be worth chasing.

Positioning StrategyIs a marketing strategy that aims to make a brand occupy a distinct position, relative to competing brands, in the mind of the customers? H&M is a retailer that is looking to provide consumers with fashionable, high-quality clothing at the best price possible. They offer “fast-fashion” clothing, in other words from runway to racks in record time, and sell European influenced clothing in the American market. The company is the second largest clothing retailer in the world, the largest in Europe and actively engages in E-retailing. H&M is also economically, socially, and environmentally sustainable

Social Media Marketing By H&MFacebookH&M has attracted more than 14m fans to its Facebook page and posts several updates a day except on weekends. Most of the updates focus solely on promoting its products, but in among the blog standard "buy these trousers" posts there are some really neat promotional ideas. For example, the retailer clearly does a lot of blogger outreach and often links to third-party blog posts and articles on its H&M Life site. Similarly, H&M has run several competitions recently that require fans to submit their own photos for a chance to win, which is a great way to encourage engagement that is relevant to the brand and more meaningful than just asking for a ‘like’ or re tweet.For example they asked entrants to post photos of their best ‘bike style image’ on Instagram using the hashtag #HMBikeStyle for the chance to win clothes from the H&M Brick Lane Bikes collection.

Twitter

H&M has created separate Twitter feeds for each of the local markets in which it operates, but each one uses the same background and header image so the branding is obviously closely controlled. The feeds appear to be equally poor at responding to other users, with each tending to churn out marketing messages

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rather than answering queries or @mentions. Looking at the main corporate account for example, it tweets a number of product images, links to blogs and competition promos each day, but generally responds to fewer than 10 @mentions. And most of the responses tend to simply be messages directing the query to the dedicated customer service feed.

One noteworthy Twitter campaign by H&M recently was a Q&A with brand ambassador David Beckham.

The footballer responded to around 30 questions from fans using the hashtag #AskBeckham, including queries about his fashion mistakes, plans for the future and his favorite goal. This is a great use of Twitter as it gives fans a unique opportunity to speak to a global celebrity, though it obviously required H&M to spend millions on sponsorship.

Google+H&M has more than 2.5m fans for its G+ page, which it updates on a daily basis, however as with most brands engagement remains relatively low.Though the imagery used is always eye-catching the posts generally only attract a few hundred +1s and tens of comments.

H&M Co-BrandingH&M  initiated its collaboration with designers with  Karl Lagerfeld  in 2004 and collaborations in subsequent years include Stella McCartney, Viktor & Rolf, Primadonna SpA, Roberto Cavali, Comme Des Garçons,  Matthew Williamson,  Jimmy Choo,  Sonia Rykiel, Lanvin, Versace, and Marni.H&M  co-brands receive a high media exposure and co-branded items become most sought-after. The whole collection of Marni for H&M was sold out by lunchtime of the first day of opening in London in March 2012. By collaborating with a luxury designer fashion brand, a  fast fashion  brand like H&M can increase its brand equity as well as its brand image. Collaborations between fast fashion  and designer fashion brands, which is recognized as ‘fast fashion co-branding’, has shown an incredible market response across countries as it can create a win-win situation for the brands involved.Co-branding between two brands is about making a joint effort such as creating marketing synergy to appeal to brand loyalists and consumers

new to either brand. This is particularly important for the fashion industry because a brand name or logo provides a key function for business operations and is an important means to attract consumers for building a relationship with the brand.Consumer perceptions of  luxury  brands can vary among consumers, but consumption of  luxury  products appears to have a strong social function. The social dimension of  luxury  value perception refers to the perceived utility that consumers acquire by consuming products or services recognized within their own social groups..Fast fashion brands are driven by consumers’ desire for newness of which products are quickly changing and available only for a short time frame. Fast fashion co-brands are then positioned to combine the strategies adopted by their parent brands. Fast fashion co-brands usually available in the form of a limited collection, which will be discontinued after a short period of time and they emphasize trendiness and newness like fast fashion brands/productsH&M Campaign To Promote Sustainability Initiatives

H&M is running its first campaign to promote its clothes recycling scheme as the retailer looks to raise awareness of its sustainability efforts and encourage more shoppers to donate unwanted items of clothingThe ads, which run in The Evening Standard and Metro, focus on H&M’s “Conscious” range of sustainable clothes, as well as highlighting its collection service which offers customers a £5 discount voucher for every bag of clothes they take into stores.

ReferencesH&M, Economic Times

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SIMULATION ADVANTAGECONCEPT OF THE MONTH

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Simulation Advantage

Experimentation is used to develop and test new products and services by companies all over the world. There are many challenges in applying traditional approaches to experimentation. Cost and time constraints can saddle the organization with an unreasonable burden of complexity. Market-facing tests and pilots can jeopardize a company’s brand and reputation. 

To get rid of these problems, a increasing number of companies are using many new approaches and technologies to broaden the scope and impact of experimentation in their businesses. By doing so they are creating a “simulation advantage” of achieving superior “economics of experimentation.” In other words, these companies are able to generate, test, and replicate a larger number of innovative ideas more quickly, at lower cost, and with less risk than their rivals can.

Techniques For Capturing Simulation AdvantageGenerate And Implement Ideas At Greater Speed And Lower Cost Companies are finding new ways to collaborate among employees and customers to generate a continuous stream of rich new ideas. Royal Dutch Shell’s GameChanger unit uses an online collaboration portal, workshops, and relationships with universities to gather ideas from contributors both inside and outside the company. Shell professionals review the ideas and grant the best ones up to $25,000 in initial funding for development into investment proposals. These proposals are then assessed by project-specific panels, which can allocate more substantial funding from set-aside budgets. Till now they have evaluated more than 3,000 ideas. Around 70 percent of the ideas chosen for development involve at least one individual from outside Shell. These projects have generated a large volume of patents, most of which have been picked up for further development in R&D and some have also spun off into successful businesses or licenses to other companies. Royal Dutch Shell estimates that it has invested $250 million in GameChanger projects to date.

Process Of Experimentation Needs To Be Made Faster And Less ExpensiveBy creating “virtual worlds” for testing product and ideas, companies have decreased their costs of physical prototyping and testing. Such environments make it possible to set up, modify, expand, and rapidly execute experiments at much lower cost. Kimberly-Clark, for example are using a 3-D virtual store to gauge consumer reactions to new products, shelf layouts, and packaging. This has considerably reduced their cost of testing new ideas before they scale up. Increase The Volume Of ExperimentsVirtual worlds provide companies greater insights by increasing the number of variables tested or by running more tests in parallel. Amazon.com is able to test numerous page variants on different groups of consumers and track their resulting behaviour. If the impact of a potential new feature is statistically significant, Amazon promptly incorporates it into its mainstream model. Reduce The Cost Of FailureThis risk can be reduced by switching to online

SIMULATION ADVANTAGECONCEPT OF THE MONTH

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testing or soft launches in friendly communities. The European telecommunications company Orange uses its online platform to interact with its customers at multiple points in the development process using a suite of methodologies, including co creation workshops, surveys, and usability testing. This enables it to modify its products according to the needs of its customers.Enhance Predictive PowerVirtual experimentation can help companies capture a broader range of behavioural data with greater accuracy. These kind of experiments improve the accuracy of predictions by providing a view of customer behaviour not just at the point of purchase but before and after as well. The predictive value of experimentation can also be improved through the use of prediction markets, which collect, collate, and track many individual predictions of success.Accelerate Learning And Scale-UpSimulation advantage can help cmpanies to scale up and deploy successful experiments more quickly and comprehensively than their competitors. Wal-Mart, tests different layouts in its own stores as a regular part of its operating model. Traffic patterns and sales impact are measured for each layout, and the most successful designs are implemented across the country.

An Integrated Approach To ExperimentationEstablishing a simulation advantage requires not only the application of individual techniques and tools but also an integration of different levers and behaviours.

Developing And Promoting A Culture Of ExperimentationSimulation-advantaged companies share a number of cultural characteristics:• Appreciation of the necessity of having an

experimental approach

• Embracing creative dissatisfaction with the status quo 

• Providing incentives that encourage experimentation and remove barriers that discourage it 

• Measuring the effectiveness and economics of experimentation rigorously 

• Accepting failure as a necessary part of the learning process

• Promote collaboration  among employees and other individuals from outside the organization

• Cultivate statistical literacy and a hunger for information

Reference:BCG