Reliance Retail plans to sell jeans at Rs 199

BANGALORE: One of Wal-Mart's most talked about products — for remarkably low-price — is $10 jeans. Now, India's aspiring Wal-Mart, Reliance Retail, is planning to come with jeans at Rs 199 (less than $5) when it starts its hypermarket venture.

The company has asked Arvind Mills, the world's biggest denim manufacturer, to produce jeans that can be sold at that price. Sources in Arvind Mills said the company was working on it but declined to provide details.

Sriram Srinivasan, head of Reliance Retail's apparel business, said he could not comment on the matter. Other sources close to Reliance said Reliance does not expect to make money on the product, but intends to use it as a "loss leader". In other words, sell it at a loss to increase store traffic and sales of other items.

A loss on the product looks inevitable. A reasonable denim fabric comes at Rs 70/metre. A pair of jeans requires 1.3 metres of fabric, which means the total fabric cost will be Rs 91. Tailoring charges and other costs (see graph) will take the total cost to over Rs 240. Even without the retailer's margin, there is a loss of over Rs 40."To prevent losses, you would need to bring the fabric cost down to Rs 40/metre. At that price, what you get is denim lookalike, not denim," says one denim expert.

Shumone Jaya Chatterjee, MD, Levi Strauss India, says if a hypermarket is trying to create new users with a low priced product, then it does not make sense to do it in the top 30 cities because people in these locations are already into jeans.

Bulk of the jeans market in top 30 cities is seen to be in the Rs 500 to Rs 800 range. Chatterjee says the largest selling price point in Levi’s standard segment brand Signature is Rs 799, followed by Rs 899 and then Rs 699. "We find people in big cities want better products. So, in Signature, we plan to move from the Rs 599-Rs 999 range to Rs 699-Rs 1,199 range, with improved products."

Source : Times Of India