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Simran Says: A question of Business Ethics ...
Posted On: 11-10-2010 00:00:00 10

Many years ago, as Brand Manager Van Heusen, I was on a routine visit to Hyderabad with our Chennai based agent, Mr Sethi. As part of my store visit itinerary I was to visit a new retailer who was wanting to open an exclusive Van Heusen store. When I reached the store I was struck by the size of the store – 2500 sq ft approx – which was very big at a time when the average brand store was 800 sq ft – 1000 sq ft. But the location was all wrong. It was in the middle of nowhere Also I learnt that the promoter had money but no retail background. I told Mr. Sethi that I was not interested, because I could see clearly that the store would fail. Mr. Sethi was alarmed by my response and took me aside to give me a lesson in business. He told me that the retailer was determined to set up a store. He had already rented the premises and had spent over Rs 30 lacs in interiors. It was too late for him to back out of the business. If we didn’t give him our brand he would buy the stock from a competitor. So we may as well sell him our brand and make some money. So that is what we did. We sold him Rs 40 lacs worth of merchandise and a few years later he wrapped up his business. This was about 15 years ago. A few weeks ago I met a young retail operations manager from a popular sports brand. I was curious to know how they managed to open multiple stores in smaller towns like Jammu and Gwalior. He told me that often it is a matter of getting the billing in. You see when a new franchise opens there is the initial billing that happens as the franchisee fills the store. This could be anywhere between 30 - 50 lacs. Eventually if the city is over-stored then some of the stores fall out. The brand does not lose money only the franchisee does. The logic is not so different from what I learnt as a young manager in Hyderabad. The ethics of it still bothers me though.

 
 
 

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