Zudio Case Study: Indian Fashion at Affordable Price

By seeing your favorite actor or actress have you ever thought that I wish I had same clothes? ??

Will feel very good. But there is a thing, when we go to check the price of such clothes, they are so expensive that our whole month salary isn't enough.

And when it happens, only one thought comes in our mind, that why not to buy its copy, but after seeing the quality of that product, this is what the reaction is.

Money got wasted. ??

But today there is such an Indian company which can give you trendy clothes like TV stars and that too below 1000 rupees.

Zudio, such an Indian fashion brand that makes trendy clothes like Zara. But here, the clothes price is 75% less than that of Zara. If you look very clearly you will hardly see any product in Zudio that costs more than 999 rupees.

And today this company of Tata Group run more than 350 stories in more than 42 cities of India. And today, the market value of this company is $500 million, around 4000 crores.

But here, the most important question is how is Zudio brand able to give people such good and affordable clothes?

Will understand all these things in detail!

So this story starts in year 1998 when Tata sells 50% stake of its brand Lakme to the HUL. And when it happens, then the 200 crores coming from this sale Tata Group use this money to start a company named Trent Limited.

Tata Group did it because they were seeing more opportunities in retail market than cosmetics market. Tata believed that the market which is so open for Global brands it's very easy for an Indian brand to launch new products in cosmetics.

That's why it's a wise decision to sell this company!

And in August 2005 Trent Ltd. acquires 76% stakes of Landmark, a toy and stationery sports franchise. Which they increase up to 100% by year 2008.

But this company was running in losses even after acquisition by Tata. And this was the reason, in year 2014 this company shut down its bookstore business. Now see, the year 2014 had come, when Tata Group, in order to bring Zara,a world famous fast famous brand in India does a joint venture with Trent Ltd. and Inditex, and the name of this joint venture was Zara India pvt. ltd, under which all the Indian Zara stores operate!

But gradually, Trent Ltd. understands that there is a huge potential in Indian fast fashion market. And a new business can be built here.

Tata Group launches its own fast fashion brand named Zudio under Trent Ltd.

But now the next question is, what did Zudio did that other companies weren't able to do, and when all this going on, what difficulties Tata Group had to face during all this?

See, before launching Zudio Trent find out these 3 flaws in fast fashion market of India. And they had to correct them with the help of Zudio!

• In which the first flaw was that fast fashion isn't affordable. It is right that the dressing sense of Indians has changed a lot in last some years. But the purchasing power of Indians didn't change much, that everyone can afford fast fashion brands easily!
• Then comes this second problem! And that is affordable low quality! Sometimes, customers get clothes at affordable prices, but they don't have good quality! So all the money they spent got wasted.
• And then comes this third problem, which is fast fashion is very slow in India. See, whenever a customer buys a product of fast fashion, he thinks to get that product before anyone in the market gets. Because it it gets late than there is no benefit of it.

And this is what Zara does. Zara is a foreign company so it's easy for them to manage. But there is no such company in India that has such a fast supply chain network that they make the cloth and send to the retailer quickly!

So, price, quality and speed in order to fill all these 3 gaps Tata launched Zudio in the market!

At first, Zudio opened its first outlet in Bangalore. After which they opened the second store in Hyderabad in year 2018 and by doing this, Zudio has more than 350 stores in whole India.

But now the question is - How did Zudio open so many stores in such a short time?

So in order to understand it, we have to understand the target market of Zudio. If you look very carefully, most of the fashion retail brands, target the customers of urban cities.

That's why you go anywhere the big brands like Zara or H&M you won't find there stores in a small city! But in India, the real earning is somewhere else. If you, as a company, wants to make money then you have to go to tier-2, tier-3 and tier-4 cities.

Because today, the customers in these cities, in comparison to the customers of tier-1 cities, spend upto 77% more money from their last shopping transaction!

And Zudio is targeting young adults apart from urban and semi-urban customers.

There are four things behind it. In which the first one is, in-house design and production!

• Trent, the parent company of Zudio has its own in-house designing team, that sees the trend and fashion of Instagram and creates their own designs.

And their in-house design and production team make the product out of design and send to the market in just 12 days. But whenever they make any new design, they send in only a few stores. If the product performs well and gets sales, then they create it in bulk, and deliver it to the rest stores. With the help of this in-house design and production Zudio has the full control over the cost and quality!

• After which the second strategy takes place, that is 'Economies of Scale'. Let's understand with an example. Suppose, 1000 people live in a city! And suppose only 50 out of them are rich people. So what Zara does, Zara will sell its products to those 50 people who can afford it.

But rest 950 people also need fast fashion! What about them? Where will they go? So, these 950 people go to Zudio!

Because they know that they will get trendy clothes at affordable rates.

If we take this assumption Zara will send just 50 units of one design, whereas Zudio will sell 950 units of same design so here, Zudio reduced the production cost because of economies of scale, and Zudio already keeps less margin so the customer will get the product at affordable rates.

But by seeing this, some people would be thinking, that 'Bro, Zara would be making more money than Zudio by selling just 50 units',

'Zara is such a big brand'.

So, let's understand it with an example. Suppose, Zara makes 2000 rupees on one dress after all expenses.

So if they sell 50 units, how much is its profit? 1 lakh rupees!

But if Zudio is making 200 rupees on one dress after all the expenses, then it is selling 95 dresses at once, so its profit becomes 1,90,000.

So this is how, Zudio increases its volume so much with less margins, that they are able to keep themselves profitable.

• Now, let's come to the third strategy, which is 'Only offline stores'.

You can't buy Zudio products online. For that, you will have to visit offline stores. Why so? Why does Zudio wants to sell its product offline in this era of e-commerce?

Why not online?

So look, there are two reasons behind it.

1. First reason is, if they list their products online then the delivery cost and reverse logistics cost will add-up in the product cost, which will make the product costlier. And the customer will get the product expensive. And the target customer of Zudio isn't rich! He is a common person who has been buying its product from local shops. So, instead of giving delivery cost he loves to buy product offline.
2. Then the second reason is high rates of return! There is only one problem of all the e-commerce companies, that there are lots of returns.

But if we talk about Zudio it's already operating on thin margins. So, if they start selling clothes online, many of its orders would start getting returned, so the cost of managing returns will add-up! This is the reason, in this era, instead of selling its product online Zudio prefer selling products through offline stores.

This way Zudio has a different approach behind expanding store so fast!

Whereas all other companies expand their business on COCO, Company Owned Company Operated or FOFO, Franchise Owned Franchise Operated whereas Zudio uses FOCO model, means that Franchise Owned Company Operated.

Here, the third party invests money to buy franchise, but the company operates that store itself.

What is the benefit of it?

The benefit is that without spending its single rupee company gets its store. Someone invested the money but the company has the control of the business.

And it is very simple. Because the franchise owner has invested money the franchise owner will get some share of the profit! Due to this, the expense of opening a store i.e. capital expenditure got saved!

And by saving this money, the company use it to make quality clothes. So that the customer get good clothes at affordable rates. And because the target market of Zudio is different it doesn't open its store at expensive location!

That's why any person who is buying the franchise of Zudio doesn't have to do heavy investment.

That's how they are able to open so many stores in such a less time. Because the money is someone else's and that too less money! And because the control of business is in their hands they are managing all things themselves.

• And then comes the fourth and final strategy, which is 'Marketing techniques of Zudio'. Now when Zudio is doing cost-cutting everywhere, from sourcing to manufacturing then how can it spend money on marketing?

They will save money there also. Look, initially when people heard the name of Zudio people didn't believe. That how a company can sell such good clothes at such affordable rates?

So people started believing that quality isn't good. And this is where Tata Group plays its role. Today, most of the Indians trust Tata Group a lot. So, whenever they come to know that Tata Group is the owner of that particular brand, they start trusting that brand automatically.

So here, neither Zudio did TV ads nor they used hoardings, they didn't waste money anywhere.

Because see Zudio understands one thing that the customers of tier-2 and tier-3 customers whenever they see TV ads or hoardings, they believe that this thing must be very expensive, and this is what Zudio didn't want.

This is how Zudio cut down its cost on every step.

Because they knew that we won't increase the margin much and if our cost increased then the rate of product will increase and if the rate increases, then how will the customer come?

And Zudio has one more advantage, that is, Zudio doesn't has any wholesaler or distributor. Their product gets made reaches the store directly. This is the reason, you will get Zudio products so cheap!

If you compare the price of a tshirt which is plain white, if you pick it up from Reliance store then 999, or if you take from WestSide, you get little cheaper would get at around 599 rupees. But if you go to buy the same t-shirt at Zudio you will get at 299 rupees.

Zudio refreshes its products at 60% on weekly basis! In every 2 months, the whole stock of Zudio gets new. Today, you went to buy clothes and you go again to buy clothes after 2 months you will get to see whole new style.

Let me also show you data. If you compare Trent ltd. with other fashion retails in India than in last five years, the stock price of Shopperstop has increased by 55$ the stock price of Aditya Birla Fashion Retail has increased by just 11.4% but the stock price of Trent has increased by just 410.6% .

It takes us toward the most important part of this article. That what are those powerful business lessons, that we can learn from this case study and implement in our business.

??First of all, understand your market. When Tata had to launch its own fast fashion brand, they didn't copy Zara blindly. Rather first they understood Indian customer and Indian market and made an affordable fast fashion brand accordingly.

??Now let's come to the second lesson which is 'Trust is very expensive'. See, people have a perception in India, that cheap thing means low in quality!

That's why when Zudio brought product in front of the people then people didn't believe that how can a brand give such good clothes at such affordable rates? Zudio highlighted this in every promotion that we are a part of Tata Group! And due to this, the trust which was on Tata Group earlier, got transferred to Zudio also.

??And finally, the third and most powerful business lesson, which is 'Innovate Frugally'. Means that, do a lot of innovation but by spending money as less as possible. Like Zudio makes a lot of designs, but it doesn't delivery all the designs to the store. It will send to a few stores only and will check, how fast the design is getting sold, and if it gets successful there then it will send to the other stores.

#tatagroup #zudio #zara #marketingstrategy #entrepreneurs

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