EU fashion attire

The world has become fashion conscious, and the Indian fashion industry is expected to touch Rs 750 crore by 2012, according to market figures published by Assocham. Global fashion labels are now fast foraying into emerging economies, of which India constitutes one of the prime constituent, not specifically from an opportunity perspective but from growth prospects too.

Comparing the Indian and global apparel market Purnendu Kumar, Associate Vice-President, Technopak Advisors, says, “The apparel market in India is estimated at Rs 1,20,000 crore and is expected to reach Rs 2,30,000 crore by 2013-14, whereas the global apparel retail market is estimated at US $86,000 crore and is dominated by US, EU and Japan.”

Lure of global brands

Looking at the market potential in India as an emerging economy, most of the well-known apparel brands from the portfolio of European nations like Italy, France, London, Spain and Denmark are now eyeing this productive market to popularise their brands and enticing consumers of different class. Now the question arises, why international brands are too bullish on the Indian market?

In India, nowadays, this hullabaloo of consumerism is on rise, income of middle class is increasing and they don`t mind paying a hefty amount on trendy labels. Experts believe that there is no doubt in saying that India today is a prominent market, as people here are more fashion conscious than before and they are more receptive to foreign labels. The fondness of international brands of Indian consumers prompts foreign brands to explore Indian market. LMG Brands India, has brought two international brands Kappa and Bossini which belong to Italy and Hong Kong respectively. Kappa is quite an old brand; it`s in the league of Adidas and Puma, and it caters to more lifestyle products. Being a youth brand, it has got sports identity. Sandeep, Assistant Vice President, LMG Brands India, enlightens, “Apart from footwear, lot of business comes from apparel, wherein menswear category contributes 70 per cent to the industry while the rest of 30 per cent comes from women`s category.”

Market research

Before entering into any country, it is important to conduct thorough market research prior to introducing the brand in a new market, whether it is international brand coming to India or Indian brand going overseas. Commenting on this, Dinesh Sehgal, Managing Director, Blues Clothing Company (BCC) explains, “Accessories like footwear and bags have an easy acceptance level whereas, the choice of apparel is based on the physical built, social requirements and weather conditions. It is important to study the buying patterns of target clientele to provide right merchandise mix.” Besides this, finding out a right location with high footfall, knowing target consumers, positioning brand, sourcing, considering entry routes, assessing competition, localising products, merchandising and pricing strategy are to be considered before introducing the brand to a new market.

Marketing with localized strategy

Spending more time in market research will eventually facilitate the foreign partner to understand the market demographics, income levels, peoples` preferences to western wear, consumers` mind-set and price acceptability at international standards by the target customers. With globalisation and prodigious growth of regional economic integration, the demands of people have become more diversified and heterogeneous. Samar Singh Sheikhawat, Vice president, Spencer Retai, believes, “Consumers have become pickers and more demanding in choice. The successful practice of many enterprises tells us that only by implementing localised strategy, corporations can acquire competitive edge in the marketplace.” Contrary to this Kotak believes, “In a country like India, people are so fashion conscious that they don`t need localization, hence whatever trends are doing well in the international market do well here too. Indian public only wants to buy products which are available in international markets. So, we don`t go for localisation in India because we don`t need localisation in fashion industry.”

Indian consumer is now more mature than any other Asian market consumer. It is imperative for an international brand to localise its products and offerings as per customers` choice and preferences. Several apparel brands that entered India`s marketplace have created a niche in market by offering right merchandise mix at different price points. For instance, the brands from Armani to Gucci have started Indianising their garment line to designer Saaris and Sherwanis to suit to Indian lifestyle which is quite different from the people in western countries. Isn`t it startling to know that International brands have now started understanding the tastes of Indians? It`s a truth whether one believes it or not.

Indian companies partnering with international brands

India is a vast nation with different tastes and preferences when it comes to apparel industry. The international brands entering India are inspiring the organised retail market in India. To this Kapoor believes, “International brands have brought in the culture of upscale distribution through high street and mall outlets. All this is helping India to become an International apparel destination, both for domestic and international brands.”

Reliance brands, Tata owned Trent, Spencer`s Retail Limited, BCC, Genesis Colors, Arvind Brands, Major Brands India, Future Group, Murjani Group, Raymond, Indus League Clothing, OSIM India, DLF Brands, S Kumars, Kimaya, Shapoorji Pallonji Group, TSG International Marketing, Mafatlal Group, Kishor Bajaj promoted Bada Saab Design, Alta Moda Garments are some of the Indian companies who have partnered with worldwide fashion labels.

JVs and franchise - most preferred entry routes

International apparel brands from European countries or other parts of the world usually make way to India particularly through joint ventures, master franchising agreements, marketing tie-ups, licensing contracts, or by setting up a subsidiary in the country. BCC is a well known retailer of men`s fashion apparel and accessories for past two decades. Talking about preferred routes for entering India, Sehgal considers, “In the current market scenario JVs and franchise options are preferred. It also depends on the brand`s marketing strategies and planning. Direct operating stores are the best option as the operations can be controlled to provide the luxury experience at par with international standards.”

Rachna Aggarwal, CEO, Indus League Clothing, informs, “In December 2008, we entered into a licensing agreement with Daniel Hechter, a Paris based brand. This route gives us access to their inputs along with the freedom on managing the business.”

In this period of global recession, when India is experiencing a slow down, the good news comes, that the Indian government is considering to allow foreign single brand retailers to invest more than the current limit of 51 per cent in their Indian operations.

Franchising finds an edge

Pepe Jeans London, Benetton, Versace, Corneliani, Mango, Savile Row, Debenhams, Mothercare, Valentino, Brioni, Alcott, Banana Moon and Axara are some of the brands that made an entry into Indian market through master franchise agreements. “India, with its huge market, and growing demand in all sectors of the economy, is an extremely attractive proposition for entry of foreign brands through the franchising route. The key attractions for this are lower capital requirements, huge market, cultural empathy, laws and language (English being the commonly spoken language) etc,” says Sheikhawat.

Nowadays, recession in the US and European nations has given rise to franchising not only in western, but in Indian market markets too. At present, the franchising industry in India is growing at the rate of 30 – 40 per cent, and it`s incredible to see franchising business in India taking off like never before. Kamal Kotak, Director, Major Brands India Pvt Ltd says, “All our brands are present through franchise agreements wherein we have brands starting from footwear, fashion to cosmetics.” BCC also has franchise arrangements with Versace, Gianni Versace, VJC, Versace Collections and Corneliani. Whereas, the company has licensing agreement for yet another Italian brand Cadini.

Feasibility of luxury brand franchise

This is a straightforward question that an entrepreneur asks before investing his money on a franchise partnership of a luxury brand. On evaluating the feasibility of franchising business, Sehgal says, “Taking franchise of a luxury brand is feasible if the brand already enjoys a popular reputation and desirability in the market. But the higher property rentals and the strict contractual agreements with the brand prove a deterrent to the desired profitability of an investor.”

While on the other side Kumar believes, “Demand for luxury products in India is primarily restricted to metro and mini metro cities and hence master franchise strategy can work; however it would be very important for the franchisee to understand the brand philosophy and invest accordingly.”

Kapoor considers, “Franchising in Indian industry is feasible. Both the franchisor and the franchisee should be committed to serve the Indian consumer. A long term view through brand strategy should be adopted and shortcuts should be avoided.”

“From my point of view, currently, whatever brands we have are premium brands, not luxury brands and what we feel is - for luxury brands, the investment is very high, so it`s bit difficult to take up franchise of a luxury brand, because import duties are high, and rentals are too high at this point of time” suggests Kotak.

Sourcing products

To balance and maintain the global standards of international brands present in India, the Indian partner sources the products by importing it from the brand`s source of origin country, while some of the companies manufacture the products indigenously by keeping in view the quality and product guidelines of the brand owner. On sourcing products from abroad, Sehgal explains, “Under the franchise agreements, the sourcing of the products has to be done from the original brand showrooms of origin country. But under licensing agreements, products can be manufactured under strict quality guidelines from the brand.” On the same lines, Kotak says, “Since, we have franchise arrangements with the brands that we own, we import the products from the international company.”

Smeeta Neogi, Marketing Head, Westside, informs, “Across geographies, each Zara store orders twice per week new items and they receive them within 48 hours later. As for new designs, it is addressed by the design and commercial teams within three weeks. These teams of a total of 250 designers study new designs everyday which are manufactured in various locations and sent to the stores worldwide through an efficient logistics network.”

While Aggarwal adds, “For our international brand, we do sourcing and manufacturing in India. It has to be done as per specifications and with the approval from the original brand owners, but directly importing is not an option for the full range, as economies don`t work out. Few stuff in terms of trims, accessories are imported. However to add a lifestyle or to complete the look, we do small imports.”

Another aspect behind producing products locally under license is that, it allows the Indian partner to avoid the heavy import duties and international freight bills.

Winning customer`s heart is the rage

How to woo and entice the customer, has now become the rage of retailers. So, in order to win the consumer`s trust and establish a popular base, a fusion of strategies is required to capture the new market. Any brand which is venturing into Indian market should consider long term potential in the market and move accordingly. It is important to invest on well organised marketing and adopt promotional strategies to create brand awareness among the target consumers.

To beat competition Sheikhawat believes, “It is important for the International brand to target the customer with right pricing strategy.” While on other hand Sehgal considers, “With the current market scenario, there is a long way to go. The best strategy today is to start with small offerings and expand slowly into diverse categories, based on the response from the market.”

Foreign brands zostling to make inroads

Infiltration of brands from western countries to India`s marketplace and strategically opening of their stores in a way to make their brand quite acceptable to the consumers in the new market is in trend. For future expansion, Sehgal says, “In India, the company will soon be opening two Versace stores, in New Delhi and Mumbai. On plans to open the first store of BHPC in India, Sheikhawat informs, “The first BHPC store will be opened in the first quarter of the next fiscal. By the end of March 2010, we are planning to open about half a dozen standalone BHPC stores.”

Kappa has got presence in all across Europe, America, Canada, Middle East and China. The brand entered India 2½ years ago. Talking about his plans further, Sandeep Krishan, Vice President, Bossini informs “I won`t say that, we will bring brands from European or American markets only, but we are looking at new markets too. As market is struggling with recession these days, so we may not bring more brands at the moment. But hopefully, in coming eight to nine months things will get better.” Whereas, Kotak says, “At present, India owns nine major brands, which include Mango, Aldo, Promod, La Senza, Nine West, Charles & Keith, Okaidi, Aldo Accessories and Inglot.” Of which, the company has six Mango stores across the country. With good shopping malls coming up now, we can see that in the next 5-10 years, we might open 50 stores of Mango and Promod in India. Apart from presence in Delhi, Mumbai and Bangalore, we are also looking at targeting Hyderabad, Ahemdabad, Chandigarh, Kolkata, Pune, Ludhiana in next one year`s time.” Kotak adds that the brands that are missing in its portfolio are casual wear and mens` wear. These are few brands which it is planning to bring in next 2-3 years time.

Trent Limited, the retail arm of the Tata Group, recently announced its joint venture with Inditex Group, to develop and promote Zara stores in India. Inditex is one of the world`s biggest fashion retailers from Spain. Talking about the expansion of Zara in India Neogi informs, “The first store is expected to be operational in FY -10. More stores would be opened in Delhi and Mumbai and thereafter the intent is to cover other major cities.”

After partnering with international brands such as Giorgio, Armani and Salvatore Ferragamo, DLF Brands, the retail management subsidiary of DLF Group, plans to tie up with 12-15 global brands in the next five years with an investment of over Rs 1,000 crore. The company plans to fund its expansion through a mix of equity and debt and go in for tie-ups through joint ventures (JVs) and franchise routes.

Bright prospective for global brands ahead

In the backdrop of global recession and slowdown in India, the mall owners in real state and brands striving for space have found some relief. Industry experts feel that in India, the penetration of luxury apparel brands in 2008 remained very high due to media hype, and the prices of real estate skyrocketed. In the existing trend, the challenge for luxury brand apparels in India can be relentless due to lesser sale of the brand, but higher rentals of stores. On this, Kumar considers, “Recession has much deeper impact in US and European markets, whereas, markets like India and China are still expected to grow. Hence, India provides growth significant opportunities for international brands. In addition, falling real estate prices, modest competition and abundant sourcing base provide a good opportunity for international brands to enter India.” Looking at this, no one can deny the fact that India certainly has the potential to convince global brands, starting from luxury to premium segments, like in menswear, women`s wear, kidswear, and the youth segment. It is expected that 2009 can prove better for retailers from abroad. It is also believed that with fall in rentals in high streets, shopping centres/malls and hotels may actually encourage brands from global markets besides European nations to India.

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