Koutons Retail – Business Strategy + Review

Today we are presenting to you some of the unwritten Business Strategies at Koutons Retail which is helping the company beat the slowdown blues. Koutons Retail India Ltd (KRIL) is a domestic apparel retailer in the “value segment” with a franchise retailer model in the organized market. The company has two main brands – Koutons ( menswear age between 23-45) and Charlie Outlaw (youngsters between 13-22). It had almost 1,400 stores located in 505 cities as at end December 2008.

Strategic Retailing Initiatives Risk Mitigation:

  • Almost 91% of Koutons and 97% of CharlieOutlaw stores are managed by franchisees, which creates a scalable, lowcapital intensity model with labor/pilferage costs borne by the franchisee
  • Tighter cost control vs. peers in tougher times, given integrated nature of its operations (which results in elimination of various intermediaries). Cost savings could ultimately be re-invested to ensure lower prices
  • Category diversification is on the way from men’s apparel to children’s and ladies apparel too.
  • Inventory risks will continue, given the elevated levels, and management proposes to mitigate risks by passing excess inventory to stores in Tier 3 and Tier 4 cities

Mens clothing forms bulk of the revenues at 85% followed by 8% from women and 7% from kids. The company hopes to bring down the Mens segment contribution to 70% in FY10.

The main costs for the company are all production related [Raw Materials, Fabrication, Washing ans Finishing]. Koutons also bears the Advertisement expense while its Franchisees are supposed to be fully focused on the customer. Compared to Future Group, Koutons management doesn’t have to undergo the pain of Real Estate hurdles in establishing stores which also cost a fortune to many retailers who are now renegotiating their earlir deals.