ELTO operates globally, with a substantial presence in Belgium and a significant influence in the fast fashion market. Competing with brands like Z…

ELTO operates globally, with a substantial presence in Belgium and a significant influence in the fast fashion market. Competing with brands like Z & A, Guccz, A to Z. ELTO produces over 20,000 designs annually and employs a strategic pricing strategy to carve out its market niche. ELTO's adherence to its strategic vision is pivotal in maintaining its competitive advantage in the fast fashion industry. Concerns about the quality of products from fast-fashion companies are common, as these companies often aim to sell more by cutting costs. However, ELTO's robust quality control system ensures the delivery of high-quality products, distinguishing it from many of its competitors. One of ELTO's key strategies to sustain its competitive edge is minimizing the time span between design creation and store availability. The fast fashion industry is accelerating, with companies continuously reducing the time from product design to distribution. The integration of online platforms and the normalization of one-day delivery are becoming industry standards. ELTO is committed to keeping pace with these developments to stay competitive. Marketing and communication also play crucial roles. Leveraging information technology, ELTO can identify customer preferences and reach a broad audience. Social media is a significant tool in building relationships with customers, and ELTO utilizes these platforms effectively. It also utilizes it for super-efficient analysis of what's selling and being said on social media platforms. However, in a highly competitive industry, ELTO must constantly innovate, focusing on quality, pricing, and speed to retain its market position. Pricing is critical for ELTO, which targets a wide market by offering products for women, men, and children. ELTO's pricing strategy aims to attract both the middle class, its largest market share, and wealthier individuals. In the South Asian market, ELTO employs a below-market or penetrating pricing strategy, often referred to as a charming price tactic, which involves setting prices lower than the competition to attract a larger customer base, particularly among the middle class. This approach helps ELTO capture a significant market share by appealing to price-sensitive consumers. In contrast, ELTO adopts a different approach in the European market by setting prices higher than those in other regions. This strategy targets consumers who are less sensitive to price and are willing to pay a premium for ELTO's fashionable and trendy products. By catering to a wealthier segment that values brand prestige and exclusivity, ELTO effectively maximizes its profits in Europe. ELTO's pricing strategy is part of its broader 4Ps marketing mix: product, price, promotion, and place. With a diverse product range, ELTO attracts a broad consumer base, launching new products regularly to meet changing fashion demands. This approach maximizes profit margins by aligning product prices with consumer behavior and preferences. ELTO has used almost zero advertising and endorsement policy throughout its entire existence, preferring to invest a percentage of its revenues in opening new stores instead. It spends a meager 0.75 per cent of sales on advertising compared to an average of 5 per cent by competitors. The brand's founder Mr. Gupta who is the ninth richest man in the world, has never spoken to the media nor has in any way advertised ELTO. It currently operates in 1189 retail stores across 97 markets (countries). The flagship locations are located in the most critical markets that appeal to their most loyal shopper. ELTO uses its store location and store displays as key elements of its marketing strategy. Its window displays, which showcase the most outstanding pieces in the collection, are also a powerful communication tool designed by a specialized team. A lot of time and effort is spent designing the window displays to be artistic and attention grabbing. According to ELTO's philosophy of fast fashion, the window displays are constantly changed. This strategy goes down to how the employees dress as well – all ELTO employees are required to wear ELTO clothes while working in the stores, but these "uniforms” vary across different ELTO stores to reflect socio-economic differences in the regions they were located. ELTO's pricing strategy and broad product range have given it an advantage over rivals like A to Z and Z & A, enabling global expansion to meet product demand. A company's pricing strategy significantly impacts market presence and revenue returns. ELTO's strategy aims to meet consumer needs and outperform competitors to maximize returns. ELTO, part of the Gupta group, has gained global recognition through its innovative retail strategy. Unlike many competitors, ELTO minimizes the time between design conception and store availability to just two weeks, allowing it to respond swiftly to market demand fluctuations. This agility is enhanced by ELTO's vertical integration and avoidance of outsourcing, maintaining control over production and quality. ELTO's business model is meticulously designed to maintain its competitive edge in the fast fashion industry. A key element is the short lead time, which ensures that ELTO's products are always aligned with the latest fashion trends. This is complemented by the strategy of reduced risks through limited production runs, allowing ELTO to quickly pivot away from unpopular designs. The company focuses on producing styles rather than mass-producing clothing, which helps keep its offerings fresh and desirable. Vertical integration, with manufacturing based in Asia, allows for rapid adjustments in production to meet market demands. ELTO's marketing strategy is innovative, investing in making its products easily accessible rather than relying on traditional advertising methods. The company is highly reactive, swiftly responding to market demands as they arise, and it emphasizes affordability, offering stylish clothing at reasonable prices. Interactivity is another crucial aspect, as ELTO closely engages with consumer trends through social media, ensuring that it stays in tune with customer preferences. This combination of elements creates a dynamic and responsive business model that drives ELTO's success. Aware of ELTO's recent successes in becoming a major player in the global fashion industry, many smartphone and mobile software manufacturers quickly sought to partner with the company. For instance, since 2012, Ramson smartphones have been sold with the preinstalled ELTO mobile application. Ramson Electronics announced the launch of the ELTO fashion app, which will showcase the global fashion chain's latest collections on Android smartphones for the first time. The app allows fashion lovers to browse the new season must-haves and make immediate purchases. This initiative has significantly contributed to ELTO's substantial sales growth. With the ELTO mobile application installed on their smartphones, customers can conveniently purchase the company's products online without needing a computer. ELTO's success stems from a combination of innovative manufacturing and marketing strategies, allowing it to remain competitive. However, maintaining this edge requires continuous adaptation and technological advancement in marketing activities. After reading the article in Business Daily, Mr. Gupta calls a senior management meeting to discuss the impact of fast fashion on the environment. He proposes the use of eco-friendly fiber and recycled material to make clothes. Clothes can be sold in sustainable packages that are eco-friendly. He also proposes to set up recycling bins in the stores in order to encourage recycling programs. Mr. Kanti, global head for production and operations, and Mr. Patel, global head for strategy, disagree with Mr. Gupta. They argue that fast fashion by its very definition requires customer demand to constantly change thereby encouraging over consumption. By catering to this every changing demand with new and fresh fashion trends is the core business model of the fast fashion industry. They argue that with increased competition, ELTO should not worry about product sustainability. Increasing longevity for clothes goes against the very essence of fast fashion, the bedrock of the company. Particulars of ELTO India Ltd. (Indian Subsidiary) Employee Details and Profit Distribution ELTO India Ltd. has a headcount of around 1,000 employees in F.Y. 2024-25. As per the company's policy, the employees are given 35 days of privilege leaves (PL), 15 days of sick leaves (SL) and 10 days of casual leaves (CL). Out of the total PL and sick leaves, 10 PL leaves and 5 sick leaves can be carried forward to next year. Based on past trends, it has been noted that 200 employees will take 5 days of PL and 2 days of SLand 800 employees will avail 10 days of PL and 5 days of SL, next year. Indian Subsidiary has been incurring profits since 2018. Therefore, it has decided in 2024-25 to distribute profits to its employees @4% during the year. But, due to the employee turnover, the expected pay-out of the Indian Subsidiary is expected to be around 3.5%. The profits earned during 2024-25 is 4,000 crores. It has a post-employment benefit plan also available which is in the nature of defined contribution plan where contribution to the fund amounts to 200 crores which will fall due within 12 months from the end of accounting period. Indian Subsidiary has paid 40 crores to its employees in 2024-25. Asset Acquisition On 1st April 2024, ELTO India acquired machines for production purposes at its Gwalior plant, with a list price of 160,00,000. The company was granted a trade discount of 10% on the initial list price, reducing the cost to 144,00,000. Additionally, a settlement discount of 5% was offered, provided payment was made within one month of purchase. ELTO India made the payment on 20th April 2024, thereby availing the settlement discount. In addition to the purchase price, the company incurred several costs. These included an import duty of 10,00,000, delivery fees of 2,00,000, electrical installation costs of 20,00,000, and pre-production testing expenses of 10,00,000. Furthermore, ELTO India entered into a five-year maintenance contract with the vendor for 14,00,000. During the initial four months of operation, the machines were operating below capacity. During this period, a production cost of 4,00,000 per month was incurred, while sales proceeds amounted to 3,00,000 per month. Additionally, the company earned - 2,00,000 from the sale of output generated during pre-production testing. Real Estate Transaction ELTO India holds a commercial plot in Mumbai which it intends to sell. M/s. Best Broker, a real estate broker with its Head Office in the USA, has been appointed by ELTO India to find some suitable buyers for the said commercial plot in Mumbai which is situated at a prime location. M/s. Best Broker identifies Legacy Estate Inc., based out of USA, as the potential buyer. It is to be noted that Legacy Estate Inc. is controlled from India and hence, is a 'Person Resident in India' under the applicable provisions of Foreign Exchange Management Act, 1999. A deal is finalised and Legacy Estate Inc. agrees to purchase the commercial plot for USD 14,00,000 (assuming 1 USD = 84). According to the agreement, ELTO India is required to pay commission @ 7% of the sale proceeds to M/s. Best Broker for arranging the sale of commercial plot to Legacy Estate Inc. and commission is to be remitted in USD to the Head Office of M/s. Best Broker located in USA. During the year 2024-2025, ELTO introduced health care benefits for employees. Health Care Benefits for Employees outstanding during the year is 70,000. The expenses are allowable as a deduction in tax only when benefits are paid but in line with Ind AS 19, such liability is recognized in profit or loss when employees provide service. Assuming the tax rate of 32% for the year 2024-2025. ANNEXURE The News Your fashion sense is a major pollutant! Brussels, 26th January 2025 – Do you love trendy, fashionable clothes? Would you love them more if you could change them literally at the drop of the hat because they are easy on your pocket? Who wouldn't, yet do you realize the amount of pollution that your fashion sense can produce? Fashion giants like ELTO work relentlessly to cater to your every whim by introducing clothes that are latest in trend, within few weeks of them becoming popular. To do this their speed of production is very fast as is their distribution channel. However, the clothing often relies on fibres like cotton that require lot of energy and water to produce, as also synthetic ones that are derived from fossil fuels. Reliance on non-renewable resources increases their carbon footprint. Imagine the scale of production when giants like ELTO start catering to market demand. Last year alone they produced 8,20,000 tonnes of garments, a number that has steadily increased over the years. What is additionally wasteful is that fast fashion encourages over consumption. So, when you discard a piece of clothing you had bought just a month back to replace it with a trendier clothing, you're contributing to landfill waste which is highly detrimental to the economy. The local government municipalities may consider drawing regulations that can make clothing retailers to pay for the waste they produce. However, fast fashion companies encourage this over consumption through slick marketing and advertising making you yearn for a newer attire when you can sensibly use the one you recently purchased many more times. So, the next time you visit a fast fashion website or store, do keep in mind that you may also be polluting our planet. Fast fashion isn't free; it just isn't sustainable.