Looking at the growing economy in India, global players foresee it as an attractive destination for doing business. Growing acceptance of international brands, yearn for novel styles and designs amongst Indian consumers is not only inspiring the domestic
India is fast becoming a hub for establishing businesses by global players around the world. India`s booming economy is attracting UK companies, among others, towards varied sectors.
Costa Coffee, Marks & Spencer, Rosebys, Savile Row, Dixy Chicken, Cox & Kings, Debenhams, Mothercare, Argos are just to name a few, among the many, that have entered India via the franchisee route.
And the reasons behind their keenness are manifold. Growing globalisation, burgeoning middle class, increase in consumerism; highly disposable incomes, well-educated and English speaking class and entrepreneurial spirit amongst youth are some of the driving factors, which are attracting international brands to India.
With the coming up of international brands, people have become more brand conscious and receptive to innovative styles and international designs. Moreover, the entry of international brands in India is also influencing the Indian retailers to upgrade their standards to provide a better customer service and a hassle-free shopping experience to consumers.
Indian market ripe for business
UK is India`s third largest trading partner and the fourth largest investor. With the Indian retail market projected to grow at a rate of around 42 per cent by 2008-end, India is emerging as a lucrative market for the UK companies. After the slowdown in the US economy, the European countries like UK are now eager to do business with BRIC (Brazil, Russia, India and China) nations. According to industry sources, UK businesses expect strong competition from all the BRIC markets, especially China and India.
Speaking about the Indian market, Sajid Dehlvi, CEO, Whites of London, India, says, “India is a huge market with growing demand in all sectors of the economy. It is an extremely attractive proposition for entry of foreign brands through the franchising route. India is often classified as an emerging market, but anybody who has been here, knows it a very sophisticated and developed market with discerning customers. Customers are very knowledgeable and have travelled widely all over the world. They are up-to-date on the trends and fashions worldwide and don`t settle for the second best. India is happening; it`s the obvious place to be.”
Rajiv Nair, Business Head, General Merchandise, Hypercity Retail Limited, says, “The Indian consumer is very aware and educated, wants the best in the world and is value-conscious. Value here does not mean the price alone, but also the quality product at a good price.”
Flourishing franchising industry
Franchising is a growing industry in the UK today. With a large number of people looking forward to change their lifestyle or career and with a success rate two times that of a non-franchised business, investors are fast realising that franchising can offer the new investor an established and successful business environment.
Commenting on the Indian market, Chetan Shah, Country Head, Pepe Jeans, India, says, “India is amongst the world`s fastest growing retail economies. With the US and European economies stagnating, emerging markets like India will be the future growth engines for international brands including those from the UK.”
Other companies like Christy, Tony & Guy, Paper Island, Glamour to go, Coffee Republic, Jimmy Choo, Dunhill, Antler, Expressions Gifts Co, Raleigh, Waitrose, Alliance Boots, Dixy Chicken, Pavers, Whites of London, Hi-Tec sports, Pepe Jeans London, Topshop and Topman, Tony and Guy, French Connection (FCUK), Unilever, Ovaltine, Canary London, UNZE, Hilton Hotels, Cadbury, B&Q, Adams Childrenwear, Lee Cooper, Revive Juice Bars, Weetabix, Cobra Beer, Diageo, Reid & Taylor, Vision Express, Scottish & Newcastle, Alpha Future and CometUK are among those who have entered via joint-venture, licensing agreements or marketing tie-ups. UK`s largest retailer Tesco also plans to enter India soon.
Insight into Indian market
Whenever any brand enters a new country, it is important for a new player to understand the laws of the country properly. Before establishing any business, it is imperative for an international counterpart to understand the market potential for its product or brand offering in the country. Before bringing any international brand, foreign players have to conduct extensive research about the market and consumer`s tastes and preferences. It should identify the competition in the market and only after a detailed study should sign the agreement with a local partner. It is advisable to develop a good understanding of the Indian market and overall economy before taking any decision.
The UK Trade and Investment Commission plays an important role in the process of bringing UK-based companies to India. It helps UK-based companies succeed in overseas market, as it provides essential support by offering professional and impartial advice, support and government assistance.UK companies willing to enter India can take assistance from the network of British High Commission offices in India. The UK Trade and Investment Commission helps companies internationalise and build opportunities.
Talking about the research required to enter India, Dehlvi says, “We hired a leading Indian market research company, which did an extensive nine-month-study on the Indian marketplace and consumers vis-à-vis our products and the synergies that we have.”
Rajiv Nair says, “We were pioneers in launching a fitness-orientated bicycle in India through the Big Box retail route. There was little market data available but we did recognise the large opportunity in the fitness segment with a growing health awareness in the country. The product has been a runaway hit in the market.” In the current scenario, global players around the world are ready to invest in India. According to sources, India was selected as the hottest Asian market by Jimmy Choo and that is why the first standalone store has been launched here.
Shah says, “Prior to entering India, Pepe Jeans conducted an exhaustive research to map the likes and dislikes of the Indian consumer. Much to our surprise, the research pointed out a huge gap between the demand and supply of Western wear. The thirst for Western wear, which is comfortable and stylish and international in appeal and fits their vital stats, is very high. This has not only paved way to introduce our range of merchandise in the Indian market but also to bring in newer and newer styles and live up to the aspirations of the consumer.”
Identifying entry routes
A thorough research will help a company determine whether to go in for a master franchisee agreement, form a joint venture, licensing agreement, mergers, acquisitions, exclusivity contracts and marketing tie-ups. UK businesses entering into the franchise business tread rather carefully. They first evaluate the feasibility of a franchising business and then assess the type of franchise agreement most appropriate for India business.
Also, one should be aware of FDI rules. In India, Foreign direct investment (FDI) is allowed in the wholesale cash and carry model but it is not allowed in multi-brand retail stores. In the single brand stores, it is limited up to 51 per cent. However, multi-brand international retailers can operate through the franchise route, where an Indian partner would own the operations.
Viable marketing strategies
A good marketing strategy plays an important role in positioning the brand`s image in the market. To overcome challenges, the foreign players work hard on providing international feel and experience to the consumers. Effective promotional strategy not only helps the brand to gain popularity, but also helps to maintain a long-lasting impact on the consumer`s mind. Sometimes, the brand has to make some modifications in the international label to woo the Indian customers.
Hemant Sachdev, Managing Director, Hi-Tec sports, says, Hi-Tec is a global brand with a standard brand communication. The label was made keeping in mind the global attitude of consumers and their world-trotting style.”
Shah says, “Considering and understanding the Indian market, Pepe Jeans London has converted all exclusive stores to high density stores vis-à-vis European stores, which are usually low to medium density stores. Measurements are customised based on the feedback from customers walking into the Pepe retail outlets. They are tailor-made to fit the Indian body shapes. Prior to Pepe in India, all brands in the market were selling unisex denims.”
Penetrating Indian market
The UK-based brands are making their presence felt by seeping deep into the country through expansion.
Talking about the future plans of the company, Reetika Mehra Dalal, Executive Head, Forbes Brands, says, “Savile Row company in India has eight exclusive stores at Mumbai, Bangalore, Delhi and Jaipur. The number of shop-in-shops is 15. There are plans to add women`s wear, kids` wear, fitness range and shoes. Savile Row is targeting a large number of MBOs and departmental stores. By 2012, Savile Row will increase its presence in malls and open 15 brand outlets and about 200 shop-in-shops”
Shah reveals, “Taking advantage of the current Indian retail boom, Pepe Jeans is looking at a speedy retail growth. Pepe Jeans has envisaged a very aggressive retail expansion plan and hopes to open 300 standalone stores by 2010. With India set on a giant retail boom, franchising has huge potential as a successful business model.” Dehlvi says, “We currently have two exclusive retail outlets in India. Eighteen more retail outlets are in the pipeline all across India, starting with Mumbai, Bangalore, Calcutta, Hyderabad, Goa and Pune. Our India-specific website will also be operational soon to enable customers buy online. With rapid growth in the organised retail sector in India, franchising will also increase manifolds.”
UK`s Lee Cooper would be investing Rs 25-30 crore for additional 24 stores, from the current 30 exclusive stores. Besides, it would also enhance its presence from the 200 multi-brand stores and 50 shop-in-shop formats that already exist. There would a mix of both company-owned and franchise stores and it also plans to have at least 600 points of sale in the next 12 months, according to sources.
Bhavna Darira, Head Marketing, Murjani Group, says, “In India, French Connection has entered into a licence agreement with Murjani Group to promote the brand. Since its launch in India in April 2007, French Connection has 10 stores across Mumbai and plans to launch about 25 stores by end of 2008-09. These will be in the form of stand alone concept stores and shop-in-shop formats at leading retail destinations.”
If we compare the Indian market with other emerging economies of the world, I would say that India is a country with huge potential. Changing consumer lifestyles and wider acceptance of international brands amongst youth are the contributory factor in luring international countries to India. People have become so fashion conscious that don`t hesitate to spend their money on high-end brands.
India presents a vast potential for overseas investment and is actively encouraging foreign players to enter the market.
According to an industry expert, “Clothing and beverage retailers from the UK have been rather more successful in the Indian market.”
Looking at the growing economy in India, global players foresee it as an attractive destination for doing business. Growing acceptance of international brands, yearn for novel styles and designs amongst Indian consumers is not only inspiring the domestic players to raise their standards, but also boosting the strong competitive spirit amongst the international counterparts to survive in the market.