Brand : Koutons
Company : Koutons Retail India Ltd
Brand Analysis Count : # 483
Koutons is a brand story which has gone sour. This 1000 crore corporate brand is now facing the worst period of its existence- facing mounting debt and bad press regarding the financial position and the stock price moving southward.
Koutons , the brand owned by Koutons Retail India Ltd was born in 1991. The original name of the company was Charlie Creations which was later rechristened as Koutons. Koutons is both the corporate brand and an individual brand . The company has a range of readymades with the brand name Koutons. Along with it , the company also has other brands of clothings like Charlie Outlaw, Le Femme etc. The current post focuses more on the individual brand.
Koutons Retail is a classic entrepreneurial story. The company was founded by Mr. DPS Kohli. Mr Kohli and his family owned a television manufacturing business which was destroyed during a riot. Mr. Kohli had to suffer huge financial losses from that even and had to work as an insurance surveyor for long . Later he ventured into the retail textile business.
Koutons grew really fast. The company became India's largest retail apparel chain in a span of 10 years . In 2009, the company had around 1400 Exclusive Brand Outlets (EBO) making it the largest apparel chain. The company had a turnover of around Rs 1000 crore in 2008-2009.
Koutons was a brand built on a very unique strategy - deep discounting. Deep discounting is a pricing strategy where the brand offers huge ( often mind-blowing) discounts on an unusually high MRP ( Maximum Retail Price) . So the consumers are attracted towards the product seeing the huge discounts which are actually not a discount ( in pure sense).
Koutons has a popular discount scheme known as 50% + 40 % off. So there is a 50% off on the MRP and then another 40% off on the discounted price. So the consumers obviously are delighted to get a shirt with an MRP of Rs 1500 for as low as Rs 450. Another very successful offer was " Buy 4 garments for the price of One ". Seeing this unbelievable offers , consumers flock into the showrooms and buy what ever that is available .
Along with the deep discounting strategy, the brand also invested some money in the brand building.Koutons has the tagline " The way ahead, always " . It had campaigns featuring foreign models and usually the showrooms are located in upmarket malls thus giving the impression that Koutons are a premium brand. But frankly no one really knows whether Koutons really sells a shirt for Rs 1500.
But nobody was complaining because consumers got a feeling to getting a good bargain and that is what matters. So this model worked well for the firm for more that 20 years. As usual, 20 years is pretty long time for consumers to learn the discounting model. The sales started drying up and the cost and inventory started building up. More discounts followed and revenues started sliding. The company landed itself into a financial trouble. ( source).
The brand really was able to tap the " value for money " psyche of the Indian consumer. Indian consumers like a good bargain and for long years, the firm was able to capture profit out of it. But the popularity of other discount outlets of established brands and the quality issues of Koutons paved the way for the downside for the brand. According to some newsreports, the company faced the issue of inventory mis-estimates and huge debts.
I also have bought the brand believing that I got a good bargain later found that I was a victim of a very clever marketing strategy. Often some students ask me whether Koutons will lose its brand equity if it gives discounts like that, assuming that they sell the product at MRP atleast in some outlets. In the case of Koutons, they sell by these discounts.
In the deep discounting model, the brand is secondary. What matters is the attractiveness of discounts and high media spents announcing the discounts. It is not the brand that pulls the customers but the perceived bargain. Ofcourse the consumers should feel that the brand is aspirational . So it is a kind of a very risky , clever strategy. Project aspirational image and use discounts to pull the consumer in.
In the deep discounting model, the brand is secondary. What matters is the attractiveness of discounts and high media spents announcing the discounts. It is not the brand that pulls the customers but the perceived bargain. Ofcourse the consumers should feel that the brand is aspirational . So it is a kind of a very risky , clever strategy. Project aspirational image and use discounts to pull the consumer in.
Koutons as a company is in financial trouble and the fate of the brand depends on how the company survives the crisis. The deep discounting model will work in a market like India as long as the firm is able to project the aspirational image. It lacks the glamour of brand-building but may work for short-term. In the long term such deep discounting will eventually kill the brand.
The company's vows come from inventory mismanagement, and opening up too many stores too soon, and not closing them early enough.
ReplyDeleteThe brand's strategy remains relevant for the Indian market.
Also, their story has strong parallels with Vishal Retail. Hope they don't go the same way.
I agree with the failure of Koutons. But that failure is as much a failure of marketing innovation, as it is of the brand. Koutons has not changed anything about its strategy in the last decade, and so now, people walk into a Kouton knowing that they are going to get a deep discounted price. They have never seen a section of fine clothing being sold at premium prices, and hence the weariness. PLUS, there are several other brands like Cantabill and whatever, who have rented places in the same malls and are following the same strategy.
ReplyDeleteKoutons could have easily survived or done better, had they managed to create a premium line (and that's just one of the base recommendations)
I have to agree with Amith. Over the 20 years the brand has build up an image of poor product quality, or rather that is how customers would perceive it.
ReplyDeleteOnce you see a product being deep discounted all through out the year, you tend to think there is something wrong with the product. No matter what, the Indian consumer has two thoughts when they see a discount offer : Old products , or slow moving products.
This deep discounting strategy backed by poor styles of clothes has destroyed the brand. I doubt a come back is possible with this strategy.
Completely agree with Koutons deep discounting marketing strategy and beleive that it is not the main reason for thier failure.
ReplyDeleteHowever past five years I do not see anything aspirational for that brand..even to lower middle class..the products their do not qualify in terms of quality, design, fabric. Not only I am saying this on behalf of consumer sentiment, but also on my personal experience where I had to waste an hour to use my 1000 rupees voucher in 3-4 Koutoon showrooms in Bangalore. The products have degraded and with that what ever markeitng you will use..you will land up in such a mess. Mind it, that has not always been the case with them where in early 2000 they had decent value for money products.
May be last couple of years they have grown too fast.
Koutons was a brand built on a very unique strategy - deep discounting!!!
ReplyDeleteHow discounting could be a strategy?? Ya it could be a brand destroying strategy..
Just think ...what'll customers think if you give discounts to them? They'll think that the product could be of inferior quality...and its obvious...
Ya for some time of a period, you could run your brand with this strategy because of the huge amount of advertising budget. But in long term...I am sure that you have to sell your brand with deep discounting..you'll be in trouble and that's what really happen to Koutons.
You know, one day same thing is going to happen one another brand uninor-which has been running on the same strategy...24*7 changing discount plan.
One day there will be an article in your blog....Uninor-RIP...
I am confident that by following your recommendations, I will not be disappointed. I sincerely thank your efforts for making us knowledgeable people.you have mentioned very useful and profitable message message for us .
ReplyDeleteThanks
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Markets and people, especially Indian people, are circus clowns. "Aspirational", "deep-discounting" - what nonsense. I have bought Koutons this last decade because their shirts are of good quality, look decent and are reasonably priced, if not amazingly cheap. But what to do, clowns control the economy, right?
ReplyDeleteThere is nothing like discount. If publish buy 1 match boz and get 10 match boxes free. The cost of 1 match is Rs 12/- So where is the discount or great deal.
ReplyDeleteI have purchased from their show room and most of the article they sold is exceptionally good and they were having good variety. But I feel they have lost their game , because of their over heads and in Bangalore, they were doing very well.
ReplyDeletevenki