Ermenegildo Zegna OTB process analysis

‘ERMENEGILDO ZEGNA OTB PROCESS ANALYSIS’
By
Shraddha Sharma
MUM13MM13
Under the guidance of
Mr. Yashwant Shyam Misale
Assistant Professor
Submitted in Partial Fulfillment of the Requirements for the Degree of
Master of Fashion Management
Department of Fashion Management Studies
NATIONAL INSTITUTE OF FASHION TECHNOLOGY
MUMBAI
(2013-2015)
Declaration
I hereby declare that the project titled “Ermenegildo Zegna OTB Process
Analysis” submitted to National Institute of Fashion Technology, Mumbai in
partial fulfillment for the award of the Degree of Master of Fashion
Management is the original research work carried out by me under the
guidance and supervision of Mr. Yashwant Shyam Misale.
I, further, declare that this project or part thereof has not been submitted
in any form for any other degree or diploma. All information included from
other sources has been duly acknowledged.
Shraddha Sharma
MUM13MM13
Place: NIFT, Mumbai
Date: 14.05.2015
CERTIFICATE
This is to certify that this project report entitled “ERMENEGILDO
ZEGNA OTB PROCESS ANALYSIS” submitted to National Institute of
Fashion Technology, Mumbai, is a bonafide record of work done by
Shraddha Sharma under my supervision from 12.01.2015 to 17.04.2015
Mr. Yashwant Shyam Misale
Assistant Professor
Place: NIFT, Mumbai
Date: 14.05.2015
ACKNOWLEDGEMENT
I am highly grateful to “Reliance Brands Ltd., Mumbai” for providing me
with the opportunity to complete my Graduation research project with them.
I express my whole hearted gratitude to my mentors Mr. Deepak Shastry
(Chief Finance Officer, Ermenegildo Zegna) and Ms. Tanya Pal (Buyer &
Planner, Paul & Shark) for their engagement and support and constant
guidance in organizing my work and giving me valuable inputs in my learning
and for giving me insights and providing me with details required for my
project
I also want to extend my heartfelt thanks to my college mentor Mr.
Yashwant Shyam Misale for the help he has extended in my Graduation
Research Project.
Lastly, I am thankful to friends and family for providing me with great
support in my entire endeavour.
Shraddha Sharma
MUM13MM13
Master of Fashion Management
Department Of Fashion Management Studies
TABLE OF CONTENTS
1. INTRODUCTION………………………………………………………………2
1.1 INDUSTRY PROFILE……………………………………………………...2
1.2 COMPANY BACKGROUND……………………………………………...7
1.2.2 BRANDS………………………………………………………………8
1.3 BRAND PROFILE: ERMENEGILDO ZEGNA…………………………..10
1.3.1 INTRODUCTION & HISTORY……………………………………..10
1.3.2 PRODUCTION……………………………………………………….11
1.3.3 BRANDS……………………………………………………………...11
1.4 ORGANISATIONAL STRUCTURE…………………………………….....12
1.5 FUNCTIONING OF DEPARTMENTS………………………………….....13
2. LITERATURE REVIEW…………………………………………………………..15
2.1 THE WESTERN FORMALWEAR MARKET…………………………….15
2.2 MEN’S WESTERN FORMALWEAR………………………………….….16
2.3 KEY TRENDS IN FORMAL WESTERNWEAR………………………....16
2.4 CONCLUSION……………………………………………………………..19
3. RESEARCH OBJECTIVES & METHODOLOGY………………………………...20
3.1 SITUATION ANALYSIS & PROBLEM STATEMENT………………......21
3.2 OBJECTIVE…………………………………………………………………21
3.3 SUB-OBJECTIVES………………………………………………………….21
3.4 SCOPE OF THE STUDY……………………………………………………21
3.5 RESEARCH DESIGN……………………………………………………….22
4. SEASON PERFORMANCE REVIEW……………………………………………...24
4.1 SPRING/SUMMER………………………………………………………….24
4.2 FALL/WINTER……………………………………………………………...24
5. STOCK CONSOLIDATION PROCESS……………………………………………27
6. SELL THROUGH ANALYSIS……………………………………………………..30
6.1 STORE-WISE SELL THROUGH……………………………………………30
6.2 VALUE GENERATING CATEGORIES…………………………………….34
6.3 SELL THROUGH PROGRESSION………………………………………….35
7. SIZE-WISE ANALYSIS…………………………………………………………….37
8. OPTIMAL DISPLAY QUANTITY…………………………………………………39
9. HYPOTHETICAL OTB FOR SS’16………………………………………………..45
10. BIBLIOGRAPHY………………………………………………………………….47
CHAPTER 1:
INTRODUCTION
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CHAPTER 1: INTRODUCTION
1.1 INDUSTRY PROFILE
“A Luxury Market is a market for goods that are not bought for
need but for comfort, pleasure and an enhanced self-esteem.”
Indian history is filled with stories of the love for fine things, especially the nobility and royalty:
threads of gold, ornate hand-carved furniture, richly embroidered clothes, exquisitely carved
accessories, and, of course the jewelry. Throughout its civilisation, India has been a showcase
for unprecedented levels of refinement and has a deep tradition of luxury that can be seen in its
crafts, architecture, rituals, festivals; and a strong gifting culture through the ages, as can often
be seen at weddings. As a result, India has a large pool of skilled craftsmen, artisans and
designers from different states, skilled in producing cultural and handmade luxury products. It
is no secret that most luxury and fashion houses have been relying on India for their quest for
beautiful fabrics, their access to unique handcrafting techniques, their embroidery requirements
and their supply of precious stones, etc. India has been inspiring the luxury and fashion industry
for years. For example, the paisley, which has contributed to Etro’s success and is widely used
today, originated in India. Another illustration is found in some of Hermes’ and Guerlain’s
bestselling perfumes that have been inspired by colors, spices and fragrances from India. Yet
another illustration of India’s influence is visible in recent advertising films such as Guerlain’s
‘La Légende de Shalimar’ which presents the beautiful landscapes of India and shows the
mogul empress Mumtaz Mahal in her palace surrounded by the Shalimar gardens; or in
‘Odyssée de Cartier’s’ epic commercial boasting depictions of sumptuous iconic locations,
including the Taj Mahal. It is, therefore, surprising that despite its luxury heritage, talent and
knowhow, there are no globally recognised luxury brands that have emerged from India. The
current state of development of India’s luxury brands, save for the hospitality industry, can be
compared to that of Europe during the 1950s when the likes of Vuitton, Cartier, Van Cleef &
Arpels, Chanel, and Gucci were still promoter-owned and mostly sold locally in addition to a
handful of international capitals.
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The global luxury market was buoyant through 2012-13; a period characterised by global
economic recovery in developed economies such as the U.S. and positive recovery signals from
Europe. In consonance with this trend, the wealth of the world’s richest grew by 17 per cent as
210 new entrants joined the ever-increasing Forbes Billionaires List1 . India continued to hold
its position in the global billionaire list with a contribution of 55 billionaires, accounting for a
total net worth of USD194 billion. This is a marked improvement over 2004, when there were
just nine Indians in the list. The year 2013 was marked by a slowing Indian economy and
diminishing consumer confidence, but it seemed to have little or no impact on the growth of
India’s luxury market, with the country’s wealthiest continuing to spend unabated on luxury
goods through the year.
The Indian luxury market grew at a healthy rate of 30 per cent in 2013 to reach USD8.5 billion
in 2013. It is likely to continue growing at a healthy pace to reach USD14 billion by 20162 .
The sector includes luxury products such as apparel, accessories, home decor, pens, watches,
wines and spirits, and jewelry; services such as fine dining, concierge services, travel, hotels
and spas; as well as assets such as fine art, yachts, and automobiles. Growth was driven by
lifestyle segments such as fine dining, gadgets, hotels, jewelry, personal care and wines;
growing at 30 to 35 per cent as the luxury consumer refu sed to compromise on the ‘luxe' life.
India’s luxury potential has attracted several luxury players such as Damiani and, Royce over
the last few years, and several others such as Godiva Chocolates and Faberge Jewellery plan
to enter the Indian market. Additionally, brands such as Geox Group and Villeroy & Boch,
which exited India previously, are now showing renewed interest in the country’s luxury
market3 . The Indian luxury consumer landscape is experiencing strong evolutionary
undercurrents that are redefining the consumer profile and how luxury players operate in the
space. A look at some of the key trends reveals the opportunities and challenges that the sector
in India currently presents.
The growth of the Indian luxury market is driven by an ever-increasing base of ultra-high-net
worth households (HNHs), which is likely to grow at a CAGR of 27 per cent through 2017184 . The luxury space was once defined and limited by the preferences of these ultra HNHs,
including only the most elite and bespoke products and services. However, in recent times,
rising income levels and aspirations have led to a growing segment of potential luxury buyers
beyond traditional luxury shoppers. These consumers are typically upper middle class aspirers
looking to ascend the ‘consumption ladder’. An increasing proportion of luxury demand is
likely to come from this segment, which belongs to a larger group likely to experience the
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highest income increase in India5 . Players have responded to this potential by launching entrylevel luxury brands to help these consumers trade up. They have also customised the shopping
experience and their services significantly to cater to such buyers, who often experience luxury
for the first time. This presents a significant opportunity for players to establish a long-term
connect with the consumer and gain a first-mover advantage.
Home to nearly half of the country’s ultra HNHs, India’s non-metro regions offer lucrative
growth opportunities for luxury segment players. Players with a longterm perspective have
already started investing in establishing a connection with consumers in these areas.
Infrastructure, which includes a proper retail environment, is a key challenge that players in
these regions face. Players are overcoming this through innovative models and local tie-ups in
order to optimise investments and minimise risks. Such innovative means are gaining
popularity amid a thriving franchising sector, stringent investment norms and limited
knowledge of local preferences. Brands such as Judith Lieber are reaching out to tier-II
consumers through local partners and exhibitors to build awareness and to induce consumer
trial6 . Players are also using these channels to educate potential consumers about luxury and
thereby, position their brand as relevant for the consumer.
‘Indianisation’ and ‘localisation’ are increasingly becoming differentiators of success with new
consumers in new markets. Luxury brands no longer deal with just the elite and well-traveled
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urbane customer. New segments with varied profiles may now constitute potential targets for
luxury brands; examples include segments such as farmers selling their lands to developers and
entrepreneurs experiencing windfall gains. Brands are responding by introducing local, Indian
elements to their products - lifestyle brands are signing up with Indian designers, hiring
relationship managers who speak local languages and tweaking offerings for Indian festivities,
weddings, to name a few.
In 2013, luxury champagne player Moet Hennessy, who previously offered only imported
products, launched its first Indian-made wine10. The strategy is aimed at targeting a new breed
of consumers -urbane youth. Similarly, brands such as Hidesign thrive on situating their
manufacturing facilities in India while catering to the market. These trends are indicative of a
growing comfort around the concept and quality products being made in India. This sentiment
now extends beyond entry-level shoppers and is shared by traditional luxury shoppers as
well10. This augurs well for Indian luxury players. The traditional Indian luxury shopper is
now more aware than before and is willing to look beyond the geographic limitations that once
determined purchase decisions. The traditional Indian luxury consumer is also increasingly
focussed on multiple aspects such as cost, after sales service, etc. while making the choice.
Homegrown players have capitalised on traditional Indian strengths in areas such as textiles,
leather, jewelry and personal care to gain popularity both in India and abroad. These players
have often capitalised on aspects such as traditional craftsmanship, unique aesthetics or
heritage value to identify with consumers. The international presence and popularity of these
brands have only reinforced their position in the luxury market in India. Examples include
fashion designers such as Ritu Kumar and Sabyasachi; high-end ayurvedic personal care
company Forest Essentials; and hospitality players such as Taj, Oberoi and ITC.
Indian luxury consumption constitutes only 1to 2 per cent of the global luxury market11.
However, with significant increase in the HNI population, the overall rise in disposable income
places India among the leading global destinations for luxury brands. Currently, luxury
consumption in India is concentrated in Delhi, Mumbai and Bengaluru, with the preference for
luxury goods growing across the country’s top 10 cities. DLF Emporio in Delhi, Palladium in
Mumbai and UB City in Bengaluru are some of the luxury malls in India12. South India has
emerged as a primary driver of India’s luxury market. In this region, the population tends to be
highly receptive to new products and flavors as compared to other regions of the country. In
North India, the demand for premium and imported goods has witnessed a boom in the metros
as well as tier-1 and tier-2 cities12. In the last few years, cities such as Surat, Jaipur, Lucknow,
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Nagpur, Coimbatore and Kanpur have witnessed prominent growth in income distribution. The
number of high-income households in these cities is estimated to grow at around 20 per cent
annually, as against 13.7 per cent in metropolitan cities13. Considering this strong growth
momentum will continue in coming years, luxury brands have been evolving rapidly and
expanding their footprint in high streets in the top 10 cities, luxury hotels and high-end
residential areas. Retailers are thinking out of the box to capture the fragmented Indian
consumer through different strategies.
At present, India enjoys only 1 to 2 per cent of the global luxury market. Luxury retailers, both
national and international, are in the race to foray or expand their footprint in India. The
frequent foreign travels of Indians have significantly increased the brand awareness of India.
Along with this, the increasing upper middle class in India are the country’s key drivers of
luxury retail demand. Louis Vuitton, Prada, Gucci and Jimmy Choo are no more unknown
brands to India. In the last decade, luxury retail has grown significantly and is growing at a rate
of almost about 20 per cent. From luxury cars and apparels to furnishings, are paving their way
into the choices of Indian consumers. The definition of luxury is very relative and changes
from country to country and among different income groups. However, most households
earning more than INR one million or above annually opt for luxury goods in India. With the
significant growth of this income group, luxury retail in India is expected to witness steady
growth in the coming years. In India, preference for luxury goods is growing across all the
metro cities, although they are mostly concentrated in Mumbai and Delhi. Luxury malls such
as DLF Emporio in Delhi, Palladium in Mumbai and UB City in Bangalore are already
operational. However, luxury retailers generally open their stores in luxury hotels with
increased preference from consumers as they are expanding their brand presence by starting
their stores in high-end malls and high streets and sometimes opening their flagship stores in
high-end residential neighbourhoods.
1.2 COMPANY BACKGROUND
Reliance Brands Ltd. was started under the Reliance Retail leg of the parent industry with a
mandate to launch and build international and domestic brands. The focus is apparel, footwear
6
and lifestyle business in the main street to luxury segment. The management team has plenty
of experience launching international brands in India. The strong points for Reliance Brands
because of a stronger corporate background are:
- They have long-term vision and patience which according to them are two key elements
essential for building strong brands.
- They have high risk and investment appetite.
Core business area –
• Partnerships with international brands – Joint Ventures and long term distribution agreements
• Private equity investments – to invest in Indian brands
• Launch their own brands
Reliance Brands Ltd. is the shiny sports coupe in a convoy of stately, formal sedans. It is part
of the Reliance Industries Group. The company was started in October 2007 by Mr. Darshan
Mehta, with a mandate to “create long term value” through partnering with international brands
in India as also investing in home grown Indian Brands and launching own Brands. Reliance
Brands focuses on the Premium to luxury segments of the fashion business – ready to wear,
footwear, beauty, accessories etc. It is dedicated to bringing iconic international brands to India
and elevate the world of fashion & lifestyle.
Reliance Brands today has eleven partnerships. Six of them with Brooks Brothers, Diesel,
Ermenegildo Zegna, Iconix, Paul&Shark and Quiksilver Group (Quiksilver, Roxy & DC) are
joint ventures while the other five with Hamleys, Kenneth Cole, Steve Madden, Thomas Pink
and Gas are long term Distribution / License partnerships.
The Reliance Brands corporate team is made up of people with expertise in Retail Operations,
Real Estate Development, PR and Marketing, Market Research and allied areas of expertise.
The team is young and about 165 people in number. Specialties Retail operations, Fashion,
Luxury goods, PR & Marketing, Real Estate Development, Market Research, Shopping
Experience
1.2.2 BRANDS
DIESEL
Diesel has long been a leading pioneer in denim and casual fashion, known for moving outside
and ahead of trends in its industry. While retaining always its DNA, in recent years Diesel has
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evolved into the world of premium casual wear, becoming a true alternative to the established
luxury market.
QUIKSILVER
Founded in 1969, Quiksilver India stands for surfing, skateboarding, and looking better than
everyone else. Quiksilver designs, produces and distributes clothing, accessories and related
products for young-minded people and develops brands that represent a casual lifestyle driven
from a board riding.
KENNETH COLE
Kenneth Cole Productions, Inc. is an American fashion house founded in 1982 by Kenneth
Cole. Wanting to preview his line of shoes at Market Week at the New York Hilton, but unable
to afford the purchase of a hotel room or showroom to display his items, Kenneth Cole inquired
about parking a trailer.
THOMAS PINK
Part of the Louis Vuitton Moet Hennessey group, Thomas Pink is the leading international
luxury shirt brand with flagship stores in London’s Jermyn Street, Madison Avenue, New York
and Rue Francois Premier, Paris. Altogether there are more than 80 stores around the world –
in USA, France, Mexico.
ROXY
Roxy is all about heart. When you follow your heart, you inspire others to do the same. With
its core in board sports, Roxy is a fashion outdoor brand that expresses the coastal and mountain
casual lifestyle, which is represented in its heart logo that combines offsetting Quiksilver
mountain-wave.
SUPERDRY
Inspired by a trip to Tokyo in 2003, Superdry fuses design influences from Japanese graphics
and vintage Americana, with the values of British tailoring. The result – unique urban clothing,
with incredible branding and an unrivalled level of detailing.
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STEVE MADDEN
Steve Madden is easily America’s most successful shoe designer. Considered the fashion
footwear mogul of the 21st century, Madden has been responsible for the design and marketing
of the company's trendsetting shoes for the past 2 decades.
HAMLEYS
Founded in 1760, Hamleys is the Finest Toy Store in the World. Synonymous with theatre,
magic and entertainment it is now at High Street Phoenix, Mumbai and at Express Avenue,
Chennai. Hamleys, the world’s most famous toy store from the UK is here in India!
ICONIX
Iconix India is a joint venture between Iconix Brand Group Inc. and Reliance Brands Limited ,
a subsidiary of Reliance Industries Limited. Iconix is a brand management and marketing
company that owns twenty diverse and powerful consumer brands in two different silos of
trade: fashion & home
BROOKS BROTHERS
Brooks Brothers is the oldest men's clothier chain in the United States and is headquartered on
Madison Avenue in Manhattan, New York City. Founded in 1818 as a family business, the
privately-owned company has been owned by Retail Brand Alliance since 2001 and now also
features clothing for women.
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1.3 BRAND PROFILE: ERMENEGILDO ZEGNA
1.3.1 INTRODUCTION & HISTORY
Ermenegildo Zegna is an Italian luxury fashion house that makes men's clothing and
accessories; with over 550 monobrand stores and annual revenue of over €1 billion, it is the
largest menswear brand in the world. Founded in 1910 when Ermenegildo bought his
father's textile looms, it is now managed by the fourth generation of the Zegna family and
remains in family ownership. As well as producing men's suits for its own labels, it
manufactures suits for labels such as Gucci, Yves Saint Laurent, Dunhill and Tom Ford. As
one of the biggest global producers of fine fabrics (2.3 million metres per year), Zegna has
been active in promoting improvements in wool production around the world. The head
designer is Stefano Pilati, formerly of Yves Saint Laurent and Christian Dior.
Ermenegildo Zegna founded the company in 1910 in Trivero in the Biellese prealps. Zegna
quickly gained a reputation for producing fine quality wool for suits, and by the end of the
1930s, the wool mill employed 1,000 workers. In 1938 the Zegna Woollens Corporation was
set up in New York although exports were not helped by the privations of war.
When Ermenegildo Zegna's sons Aldo (born 1920) and Angelo (born 1924) joined the
company in 1942, it was renamed Ermenegildo Zegna and Sons. By 1955, the company
employed 1,400 workers.
Ermenegildo died in 1966 at the age of 74. Aldo and Angelo took over the business, and two
years later they launched a line of ready-to-wear suits produced in Zegna's factory in Novara.
Another factory was opened in Spain in 1973 and Switzerland in 1977. As of 1999, the Zegna
Group had eight manufacturing plants in Italy, two in Spain, three in Switzerland, one
in Mexico and one in Turkey. While many Zegna suits are factory-produced, the majority of
premium suits are still made-to-measure.
The first boutique was opened in Paris in 1980, followed by Milan in 1985. In 2010 their
numbers had grown to 560 boutiques, of which over 300 are controlled by the company.
Zegna's flagship boutique locations are mostly found in the United States, Europe, Japan and
China.
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1.3.2 PRODUCTION
Zegna's range includes fabrics, suits, neckties, knitwear, shirts, accessories and sportswear.
They have also branched out in other areas, for instance upholstering the interior of automobiles
such as the Lancia Trevi Volumex in 1982 and a limited edition, sixth generation Maserati
Quattroporte sedan.
Ermenegildo Zegna has a yearly output of over 2.3 million meters of fabric, 600,000 sleeve
units’ suits, 1.6 million pieces of sportswear and 1.7 million textile accessories. Zegna employs
over 7,000 workers worldwide. The export quota was more than 90% in 2010 divided equally
between Europe, Americas and Asia.
As one of the biggest buyers of ultra-fine Merino wool, Ermenegildo Zegna has encouraged,
supported and rewarded the efforts of the Australian wool industry since 1963 in the production
of finer and softer wools.
In 2002 the Ermenegildo Zegna Vellus Aureum Trophy was launched for wool that is
13.9 micron and finer. Wool from Australia, New Zealand, Argentina and South Africa may
be entered and a winner is named from each country.
In 2010 a soft ultra-fine, 10-micron fleece, from Windradeen, New South Wales set a new
world record in the fineness of wool fleeces when it won the Ermenegildo Zegna Vellus
Aureum International Trophy.
1.3.3 BRANDS
Most Zegna suits cost in the US$2,300–$6,500 range. Price is dependent upon several factors.
Zegna's top line is "Couture", formerly known as "Napoli Couture".
Ermenegildo Zegna's Su Misura suits are Made-to-Measure and can be ordered in all
Ermenegildo Zegna stores. The cost is typically 15-20% more than regular Ermenegildo Zegna
suits, but the service provides clients a custom ordered suit detailed to his own specifications.
Ermenegildo Zegna's website stated, "Ermenegildo Zegna's Su Misura service makes it
possible to produce tailor-made suits, jackets, trousers, coats, shirts, [and] ties in just a few
weeks, respecting the clients size and needs, and maintaining the standards of quality for which
Zegna is rightfully famous".
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On July 1, 2011, Ermenegildo Zegna signed a licensing agreement with Estée Lauder
Companies Inc. for exclusive global rights to market fragrances and develop new cosmetics
under the Ermenegildo Zegna Group's brands, thereby replacing the previous partnership
with YSL Beauté.
In February 2014, the Ermenegildo Zegna Group signed a ten-year licensing agreement for the
manufacture of eyewear with the Marcolin Group.
1.4 ORGANISATIONAL STRUCTURE
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1.5 FUNCTIONING OF DEPARTMENTS
Planning and buying used to be 2 separate departments. While planners used to work on the
quantitative aspect of things like OTB and sell through, buyers used to work on qualitative
aspects like fashion trends and instinct. Any poor achievement in figures could not be justified
by the planners or buyers. Hence it was realised that buyers should have knowledge about
planners’ numbers and planners should know about qualitative aspect of the products too. The
two departments were merged and hence the product lifecycle department came into being.
RETAIL OPERATIONS
Every requirement at the store level from fashion consultants to carry bags is taken care of by
this department. Store managers report to retail operations heads of respective brands.
MARKETING
The marketing department looks into various marketing events and public relations related to
the particular brand, whether it be launch of the brand or an event like Tony Hawk event for
Quiksilver. Digital marketing is also a part of this department. Reliance brands does not have
a website but is active on all the social networking sites as the CEO believes social networking
sites are 2-way communication where the public can put forward their word, a website only
informs people but is unable to listen to what people have to say in return.
PROJECTS
The project team looks after the store design, fixtures, and other aspects related to the look of
the store.
VIBES DEPARTMENT
The vibes department shares responsibility of visual merchandising. Since visual
merchandisers not only create a particular visual appeal at the store, but also help in creating
vibes at the store for the customer, hence the name of the department.
13
CHAPTER 2:
LITERATURE REVIEW
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CHAPTER 2: LITERATURE REVIEW
The persistent economic uncertainty, coupled with a perception of policy paralysis and the
possibilities of a change in government in 2014, had negatively impacted the growth of
business activities in India. The annual GDP growth, which was consistently hovering around
7-9 percent between 2003-04 and 2010-11, slumped to 6.2 percent in 2011-12 and 5 percent in
2012-13. Industrial growth also dipped to as low as 2 percent, with the mining and quarrying
sector registering -0.5 percent and manufacturing a mere 1 percent growth.
This decline in growth has in turn dampened consumer confi dence and lowered discretionary
spending among different consumer groups. With spending on fashion also being discretionary,
the growth of the fashion apparel category has also slowed down noticeably in recent years.
The formalwear category is no exception to this trend. However, it is expected that, following
the general elections of 2014, business and economic activities will return to the growth track,
and thereby further the growth of western formal wear in the country.
In India, the western formalwear market can be broadly split into two categories, viz. business
wear or offi ce wear, which includes formal shirts, trousers, suits, skirts, dresses, etc. and eventspecific formal wear, which includes formal clothing worn at such events as weddings, proms,
awards ceremonies, product launch events, etc. Though the former forms the larger chunk of
the market, the latter is relatively less impacted by the economic slowdown.
2.1 THE WESTERN FORMALWEAR MARKET
It is estimated that the western formalwear market in India is worth US$ 4,675 million, of
which 90 percent is contributed by men’s formal wear. Again, these numbers are not inclusive
of the size of rental services available for occasion or event-specifi c formal wear. The blurring
of the difference between casual wear and formal wear makes the categorisation of certain
products diffi cult.
The western formal wear market is concentrated in urban areas, with major contributions from
metros and mini metros. The size of the women’s formal wear market is relatively low due to
two primary reasons: the skewed ratio of working women to working men and the strong
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competition from ethnic wear categories as saris, salwar-kameez, etc. The evolution of fusion
wear, which combines the attributes of women’s ethnic wear with formal western wear, is
emerging as an additional challenge for women’s western formal wear players.
2.2 MEN’S WESTERN FORMALWEAR
Formal shirts, trousers, and suits dominate the US$ 4,320 million-worth men’s formal western
wear market, which is also relatively organised. Formal shirts dominate the men’s formal
western wear market with a share of 53 percent, followed by trousers at 35 percent, and suits
at 12 percent. In addition to the readymade garment segment, men’s formal suits market also
encompasses bespoke tailoring. In the super premium and premium segments within men’s
suits, consumers are very specific about the quality of the material used, as well as about the
overall look and fi t of the garment.
The organised bespoke model has evolved to cater to demand from customers who are willing
to pay a premium in order to avail their desired attire. Thanks to the increasing presence of
multinational companies and the growing business environment, the bespoke
formalwear market in India now sees a demand for high-end premium shirts, trousers, and suits
tailored to fit customers’ body dimensions and using fabrics from manufacturers of
international repute like Dormeuli, Ermenegildo Zegna, Brioni, Sic
Tess, Scabal, Holland and Sherry, John Foster, etc.
2.3 KEY TRENDS IN FORMAL WESTERNWEAR

Formal wear categories will grow slower than casual wear
The growing demand for apparel offering higher comfort, better design, and trendy
look at affordable prices is a worldwide phenomenon, with India being no exception.
Additionally, technology and innovation-driven companies have started allowing
casual wear in office spaces—the growing demand for knitwear apparel is one
reflection of this trend. It is expected that in India, T-shirts and denim markets will
grow at double-digit rates over the next five years, whereas the corresponding rates
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for formalwear categories like shirts, woven trousers, suits, etc. will be in the range of three to
eight percent.

Western formal wear market will remain strong despite slower growth
Consumers of medium to high-end formal wear and occasion specific formal wear
are expected to remain loyal to the category, with a lower propensity of shifting to
casual clothing. Many business leaders and professional services companies consider
the classic business attire as a necessity in a serious business environment.
Aspiring, middle-aged Indian consumers, working in corporate roles, are expected to stick to
business attire and thereby indicate their ambition of climbing the corporate ladder.

Consumers to experiment even in the formal fashion space
In the men’s category, consumers who normally do not experiment much with
fashion are also expected to tinker with fabric design, fi bre content, fabric fi nishing,
apparel design, colour, and fi t even for their formalwear. The increasing acceptance
of cotton suits is one indication of such experimentation whereby consumers bring in
comfort and a casual look at comparatively lower prices. The rise in sales of slim-fit
shirts and trousers also refl ects the trend of experimenting with formal wear. The
designing of collars, cuffs, etc are also expected to undergo frequent changes with a
view to improve the formal look.

Private labels promise opportunities for value-conscious consumers
The slowing of growth and persistent economic pressure has turned the middleclass
consumer more value-conscious. Business executives in non-client-facing roles or in the junior
to mid-manager levels are now opting to trade down. It is thus expected that some consumers
now perceive value solely through affordability.
Consequently, private labels, which offer formal clothing at an affordable price, have
started witness sing comparatively higher growth. Some brands are also banking upon
17
discounts and promotions to lure bargain hunting customers.

The aspiring youth will contribute the most to the growth of formalwear
India has over 700 million people in the age bracket of 15-54 years who form 59
percent of the country’s total population. This younger population has a heightened
awareness of the latest fashion statements and is ambitious in terms of career
choices. The majority of this population is also very specific when it comes to dressing
for an occasion, whether it is active wear for the gym, formal wear in the office,
jeans and tees when shopping, and nightwear for sleep. Despite a penchant towards
casual clothes many customers within this aspirational group dress themselves
appropriately for business meetings and formal events like marriages and award ceremonies.

The trend of gifting formal western wear is gaining momentum
Typical formal dresses are increasingly seen as a suitable gift for people working in
Corporations. Many formalwear brands have therefore started offering gift vouchers, which are
slowly gaining acceptance among parents, friends, spouses, etc. Many corporations also use
such solutions for rewarding employees or as wedding and birthday gifts.

The relatively unnoticed market for formal accessories will attract more
consumers
The desire to stick to perfect formal attire, especially in specifi c events like award ceremonies,
marriage functions, etc. forces consumers to be more selective in their choice of accessories,
be it ties, belts, wallets, pocket squares, or cuffl inks, for men, or handbags, scarves, stockings,
etc. for women. The formal wear market has only recently graduated from unbranded clothing
to branded clothing; soon, the use of appropriate accessories will also gather momentum.

Corporations have started considering customised formal wear for Employees
The customisation of formal wear by organisations provides them scope for inculcating
a sense of ownership among employees. Shirts or suits with corporate logos, colours, or
18
specifi c styles, which refl ect the values and beliefs of the organisation, sometimes act as a
morale booster for employees, reminding them of their offi cial duties and obligations. Even
sports federations across the country are customising their formal wear for senior executives
and offi ce bearers.
2.4 CONCLUSION
Despite the global trend for casual clothes, formal wear is expected to remain the preferred
attire for business meetings, formal weddings, and special functions. Additionally, certain
professional services will continue to stay away from adopting
casual wear in business environments. For manufacturers and retailers, the formal wear market
will remain an opportunity given the growth of long-term business activities in India. Again,
the formal wear market is expected to see a lot of experimentation in terms of fabric design,
application-specific finishes like crease resistance, wrinkle-free fabric, stain release, etc. The
widening, high-end bespoke market for formal wear is yet another growth opportunity on
which players can cash in. The continued success of the formal wear market will depend on
the ability of brands and retailers to demarcate their customer segments through a granular
understanding of their customers and tailoring their product offerings as per customers’
demand. Players offering formalwear products should thus view their offering not just as a
product but as a complete solution for the consumer who seeks formal attire.
19
CHAPTER 3:
RESEARCH OBJECTIVES &
METHODOLOGY
20
CHAPTER 3: RESEARCH OBJECTIVES & METHODOLOGY
3.1 SITUATION ANALYSIS & PROBLEM STATEMENT
 The Hyderabad Store has not been performing up to required standards and therefore a
process needs to be initiated to send old season merchandise to the same.
 A stock consolidation process needed to be established to ensure proper size sets in
every store throughout the country.
3.2 OBJECTIVE
 To analyse and review the Open-to-Buy Process for Ermenegildo Zegna.
3.3 SUB-OBJECTIVES
 To analyse past season performance for different product categories for Ermenegildo
Zegna from SS’12 to SS’14.
 To establish a stock consolidation process
 To propose a process for sending past season merchandise to the Hyderabad store.
 To analyse the sell through of different sizes for various product categories.
 To draft a hypothetical Open-to-Buy for SS’16 keeping the outcomes and analysis of
above in mind and incorporating the learning made from the above.
3.4 SCOPE OF THE STUDY
 It is a useful record of the sell through performance of the past season and it would
serve as the basis for future research in related fields.
 The study highlights the sell through trend, which would be vital in range selection for
the coming season.
21
 This information can also be used for planning size sets for different product categories
for every store.
 It would help in transferring old season merchandise which is priced at a lower point
which may help in increasing the sales of the store.
 It would ensure that maximum size sets are created from whatever inventory is on hand.
3.5 RESEARCH DESIGN
 Secondary Research:
Desk research- The aim was to analyze the sales data of past seasons to understand and
establish the performance of all categories and to get a thorough understanding of the
OTB process so that all the objectives of the study could be met.
 Tools: The secondary source included the sales data of past seasons provided by the
department through various reports maintained by them.
 Data Source: All the data was collected using the various records maintained by the
brand.
 Analytical tools:
The tool of analysis used was MS Excel and all the results have been represented in
the form of tables, pie charts, bar graphs etc.
22
CHAPTER 4:
SEASON
PERFORMANCE REVIEW
.
23
CHAPTER 4: SEASON PERFORMANCE REVIEW
4.1 SPRING/SUMMER

During every season, shirts were the most sold category and contributed the highest
value to the business. So an attempt should be made to offer the maximum options
possible to the customers at all points of the season. Also, ties, trousers, belts and textile
accessories have performed consistently well during every season.

The sell through of textile accessories has been declining every season with the sell
through of SS’12 being 76% and that of SS’14 being 45% even though the quantity
sold for the category has remained almost the same for almost the same. The reason for
this being the case is an increased order quantity for textile accessories for every
succeeding season. Maybe a high sell through can be maintained by ordering a smaller
quantity for the category.

The sell through of small leather goods shot up to 75% in SS’14 from 21% in SS’13 by
reducing the order quantity for the goods which implies that a small quantity should be
ordered for the category so that most of the merchandise does not remain unsold. A
similar phenomenon could be traced in the case of scarves also.

Beachwear (introduced in SS’14) only had a 17% (only 4 units sold out of 24) sell
through so it is a category that may not perform so well in the future also. Therefore,
not too many pieces of the inventory should be ordered for the same in the succeeding
seasons.

The quantity sold for cufflinks sold drastically from 44 in SS’13 to 25 in SS’14 so
attention needs to be paid to this category in the upcoming seasons.
4.2 FALL/WINTER

Similar to Spring/Summer, maximum number of pieces were sold for shirts, followed
by ties, trousers, belts , ties , jersey and textile accessories which leaves the scope for
providing the maximum number of options to customers.

Throughout all the seasons, Knitwear as a category performed extremely well which
highlights it as category that would contribute not only in terms of quantity but also
revenue to the total during fall/winter.
24

Fleece Sweatshirts which were introduced in FW’14 had a 97% sell through with 33
out of 34 pieces getting sold which makes it an outstanding product category and
therefore probably more styles and options could be introduced to the market for this
category. The same can be done for Z Sport where the sell through was 93% and 13 out
of 14 pieces were sold.

Both Leather & Fabric Outwear had a sell through of 75% and above which were
maintained by ordering smaller quantities during FW’14 in comparison to FW’13
where the sell through percentages were within a range of 46%-50%.

Large leather goods continued to perform poorly during all the seasons making it a
category which requires immediate attention.
For both Spring/Summer and Fall/Winter EZ Sartoria & EZ Upper Casuals have sold
the highest number of pieces and contributed the maximum amount to the total value of
units sold.
25
CHAPTER 5:
STOCK CONSOLIDATION
PROCESS
26
CHAPTER 5: STOCK CONSOLIDATION PROCESS
With specific focus on SS’15 a stock consolidation process can be can be put into place
where each style and option can be firstly analyzed from the point of view of on-hand
quantity, sell through and number of pieces sold in different stores. This would obviously
enable one to identify the different styles and options that are moving in different regions.
For example, if a particular style is moving fast in Emporio, Delhi and not moving in
Palladium then it can be transferred to the Emporio store and vice versa.
It should be ensured that the styles transferred have proper size sets while the practice
is being undertaken to ensure that sizes are available for customers at all points if at all they
like a particular style. Size sets of 5-6 sizes can be formed after the highest selling sizes are
identified. The size wise analysis specified above highlights that for upper clothing 50, 52,
54 and 39, 40, 41 are the highest selling sizes and for lower clothing 34 & 36 are the highest
selling sizes. Therefore an effort can be made to include these sizes when the size set for
transfer is being consolidated.
This practice can be performed every fortnight after the performance of all the styles in
different regions is analyzed. This would not only ensure efficient stock rotation but such
a process would also help in increasing sales. Also, inter-store stock transfers would
maintain an element of freshness in the stores and in the minds of the customers. For
example, the Zegna store in the Oberoi, Delhi might receive some merchandise from the
Taj Mahal, Mumbai store that wasn’t previously allocated to it. This would make the
customers feel that the brand has something new to offer at several points during a
particular season.
Old season merchandise for which a proper size set can be consolidated and are
preferably of lower price points can be sent to the Hyderabad store as it would make it
easier for the merchandise to move. A lower price point may encourage the customers to
buy the merchandise that Hyderabad has probably not seen in the previous seasons and is
also being sold at a lower price point.
Once the process has been completed all the stores can be directed to transfer the
merchandise as per requirement. If such a practice proves to be of any help then it can be
performed regularly.
27
Also, when this process is carried out it should be ensured that every store is given back
as many units as the total number of units transferred out of it to ensure that there is no
understocking and no kind of vacuum and gaps are created.
28
CHAPTER 6:
SELL THROUGH
ANALYSIS
29
CHAPTER 6: SELL THROUGH ANALYSIS
6.1. STORE-WISE SELL THROUGH
The following pie charts represent the contribution made by every store to the total sell through
for every season.
 SPRING/SUMMER ‘12
CONTRIBUTION TO TOTAL SELL THROUGH
12%
19%
Oberoi, New Delhi
14%
Taj Mahal Palace, Mumbai
DLF Emporio, New Delh
15%
Taj Krishna, Hyderabad
Palladium, Mumbai
40%
CIn.SS’12, maximum units were sold in DLF Emporio, New Delhi and the store’s
contribution stood at 583 units out of the total 1442 units sold during the season.
30
 SPRING/SUMMER ‘13
CONTRIBUTION TO TOTAL SELL
THROUGH
Oberoi, New Delhi
23%
15%
Taj Mahal Palace, Mumbai
11%
DLF Emporio, New Delh
9%
Taj Krishna, Hyderabad
42%
Palladium, Mumbai
Similar to SS’12, DLF Emporio was the best performing store for Ermenegildo Zegna.
 SPRING/SUMMER ‘14
CONTRIBUTION TO TOTAL SELL
THROUGH
18%
21%
14%
9%
Oberoi, New Delhi
Taj Mahal Palace, Mumbai
DLF Emporio, New Delh
Taj Krishna, Hyderabad
38%
Palladium, Mumbai
It can be seen that the over the seasons, the performance of the Palladium store has
improved significantly with the contribution it made to total sales rising from 12% in
SS’12 to 21% in SS’14.
31
 FALL/WINTER ‘12
CONTRIBUTION TO TOTAL SELL
THROUGH
17%
18%
10%
16%
39%
Oberoi, New Delhi
Taj Mahal Palace, Mumbai
DLF Emporio, New Delhi
Taj Krishna, Hyderabad
Palladium, Mumbai
In FW’12 too, DLF Emporio was the best selling store for the brand.
 FALL WINTER ‘13
CONTRIBUTION TO TOTAL SELL
THROUGH
21% 14%
12%
11%
42%
Oberoi, New Delhi
Taj Mahal Palace, Mumbai
DLF Emporio, New Delhi
Taj Krishna, Hyderabad
Palladium, Mumbai
A pattern similar to spring/summer can be observed here too as the Palladium store starts
to improve its performance.
32
 FALL WINTER ‘14
CONTRIBUTION TO TOTAL SELL THROUGH
19%
20%
9%
11%
41%
Oberoi, New Delhi
Taj Mahal Palace, Mumbai
Taj Krishna, Hyderabad
Palladium, Mumbai
DLF Emporio, New Delhi
A close competition can be seen between the Palladium store and the Oberoi
store with both contributing almost equal amount to the total sales.
 Thus, it can be concluded that irrespective of the season, the Zegna store
in DLF Emporio, New Delhi is the best performing store of all times and
it generates the maximum sales for the brand.
33
6.2 VALUE GENERATING CATEGORIES
The figure shown below represents the value generated by the different product
categories for the brand across all seasons with shirts being the highest selling
category for Ermenegildo Zegna followed by jackets, trousers, suits and shoes.
VALUE GENERATORS
6%
3%
20%
6%
7%
14%
9%
10%
13%
12%
Shirts
Jackets
Trousers
Suits
Shoes
Knitwear
34
Jersey
Belts
Ties
Jeans
6.3 SELL THROUGH PROGRESSION
SELL THROUGH PROGRESSION FOR
SPRING/SUMMER
41%
40%
39%
38%
37%
36%
41%
41%
SS'13
SS'14
35%
34%
35%
33%
32%
SS'12
The bar graph represents the sell through for Ermenegildo Zegna from SS’12 to SS’14.
SELL THROUGH PROGRESSION FOR
FALL/WINTER
58%
56%
56%
54%
54%
52%
50%
48%
49%
46%
44%
FW' 12
FW' 13
FW' 14
The bar graph represents the sell through for Ermenegildo Zegna for Fall/Winter from
FW’12 to FW’14.
35
CHAPTER 7:
SIZE-WISE ANALYSIS
36
CHAPTER 7: SIZE-WISE ANALYSIS
CATEGORY
MAXIMUM
UNITS SOLD
SELLING SIZE
2 Pieces Suit
52
60
Blouson
52
9
Cardigan
52
12
Knitwear
M
64
Knitwear
L
64
Formal Jacket
50
78
Formal Jacket
52
70
Formal Trouser
50
252
Formal Trouser
52
287
Polos & T-Shirts
M
213
Polos & T-Shirts
L
220
Denim
34
67
Denim
36
75
Shirts
39
250
Shirts
41
299
Shirts
42
275
Belts
115
868
Underwear
M
34
Underwear
L
33
Dress Shirts
M
282
Dress Shirts
L
284
Dress Shirts
XL
255
Sweatshirts Tops & Pants
L
14
Sweatshirts Tops & Pants
XL
14
Shoes
8
138
37
CHAPTER 8:
OPTIMAL DISPLAY
QUANTITY
38
CHAPTER 8: OPTIMAL DISPLAY QUANTITY
The optimal display quantity for every store was determined based on the past season sales
data of every product category, total number and capacity of fixtures in every store and the
total options available for every product category. The tables below represent the optimal
display quantities for all the stores.
 PALLADIUM, MUMBAI
S. NO.
PRODUCT
OPTIMAL DISPLAY QUANTITY
1.
Shirts
85
2.
T-Shirts & Polos
50
3.
Jackets
12
4.
Trousers & Denims
40
5.
Suits
8
6.
Ties
128
7.
Small Leather Goods
37
8.
Large Leather Goods
18
9.
Scarves & Pocket Squares
32
10.
Underwear
50
11.
Fragrances
18
12.
Eyewear
22
13.
Belts
45
14.
Shoes
16
39
 TAJ MAHAL PALACE
S. NO.
PRODUCT
OPTIMAL DISPLAY QUANTITY
1.
Shirts
75
2.
T-Shirts & Polos
35
3.
Trousers & Denims
30
4.
Jackets
7
5.
Suits
5
6.
Ties
62
7.
Small Leather Goods
28
8.
Large Leather Goods
10
9.
Scarves & Pocket Squares
21
10.
Fragrances
14
11.
Eyewear
18
12.
Belts
36
13.
Shoes
10
40
 DLF EMPORIO, NEW DELHI
S. NO.
PRODUCT
OPTIMAL DISPLAY QUANTITY
1.
Shirts
100
2.
T-Shirts & Polos
60
3.
Jackets
17
4.
Trousers & Denims
45
5.
Suits
12
6.
Ties
140
7.
Small Leather Goods
42
8.
Large Leather Goods
24
9.
Scarves & Pocket Squares
40
10.
Underwear
55
11.
Fragrances
25
12.
Eyewear
30
13.
Belts
52
14.
Shoes
22
41
 OBEROI, NEW DELHI
S. NO.
PRODUCT
OPTIMAL DISPLAY QUANTITY
1.
Shirts
85
2.
T-Shirts & Polos
46
3.
Trousers & Denims
30
4.
Jackets
7
5.
Suits
5
6.
Ties
62
7.
Small Leather Goods
28
8.
Large Leather Goods
10
9.
Scarves & Pocket Squares
21
10.
Fragrances
14
11.
Eyewear
18
12.
Belts
36
13.
Shoes
10
42
 TAJ KRISHNA, HYDERABAD
S. NO.
PRODUCT
OPTIMAL DISPLAY QUANTITY
1.
Shirts
60
2.
T-Shirts & Polos
32
3.
Trousers & Denims
26
4.
Jackets
5
5.
Suits
4
6.
Ties
50
7.
Small Leather Goods
22
8.
Large Leather Goods
8
9.
Scarves & Pocket Squares
16
10.
Fragrances
10
11.
Eyewear
12
12.
Belts
30
13.
Shoes
8
43
CHAPTER 9:
HYPOTHETICAL OTB FOR
SS’16
44
CHAPTER 9: HYPOTHETICAL OTB FOR SS’16
After thorough review & analysis of past season sales and buy mix, along with keeping in mind
the options required for each category, the SS’16 OTB was determined. The table below listed
below shows the same.
CATEGORY
BUY MIX (UNITS)
Shirts
950
Ties
525
Jersey
480
Other Textile Accessories
350
Trousers
320
Shoes
300
Eyewear
260
Belts
250
Small Leather Goods
230
Jeans
170
Jackets
155
Knitwear
135
Suits
75
Scarves
55
Sweatshirt Fleece
45
Fabric Outerwear
35
Large Leather Goods
35
Cufflinks/Jewels
20
Socks
20
Leather Outerwear
5
TOTAL
4415
45
BIBLIOGRAPHY
46
BIBLIOGRAPHY
https://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/KPMG
-ASSOCHAM-India-Luxury-Summit-2014.pdf
http://en.wikipedia.org/wiki/Ermenegildo_Zegna
http://www.indiaretailing.com/Fashion/7/1/15/10069/The-Western-Formal-Wear-Marketin-India
47