Search Business Opportunities
Business Categories
Sep, 10 2010

Haute couture heads for India

INDIAN consumers' sustained brand devotion and the government's steps to garner more FDI has set the ground for international brands' entry into the Indian apparel industry. With such positive trends, international apparel brands are keen for an India ent

INDIAN consumers' sustained brand devotion and the government's steps to garner more FDI has set the ground for international brands' entry into the Indian apparel industry. With such positive trends, international apparel brands are keen for an India entry, eyeing growth, profits as well as expansion.

Confirming the trend, Renzo Rosso, President and Founder of Diesel, a premium Italian brand which was launched recently in India, says, “India has been one of our major target markets for the last five years. We worked hard to find the right location, the perfect time and the best partner to expand our brand in this country.”

Bart Denolf, Vice-President, Expansion, MANGO, Africa, Latin America and Middle East, says, “MANGO had realised the huge potential of India as an emergent market and a strong future economy when we opened the first store in India in 2001.”

Beeline for India

With big international names already in and several others in pipeline, there is more than one reason which makes the Indian apparel market alluring for the international brands.

Peter Schwartze, President, Confederation of the German Textile and Fashion Industry, states, “India is an emerging economy that will continue to grow in the future. The number of persons wanting and capable of buying top quality brands is also increasing.”

At a time when prominent international brands are raking in healthy profits in China and Japan, where does the Indian market stand in comparison? Sanjay Kapoor, MD, Genesis Luxury, says, “While there are some differences between the Chinese and Indian consumers in terms of their consumption patterns, India is being seriously looked at as a growing market over the next 15 years. More so because  India's population is going to be younger than China's with many new aspirational buyers joining the consuming population.”

Market research must

To enter a diverse market such as India entails a great amount of market research and business strategy. Abhay Gupta, Executive Director, Blues Clothing Company, observes, “Good partner, proper location, high visibility, correct environment and proper ambience, including trained manpower, are some of the basics of the market research.”

According to Federico Fiorentini, General Manager, BRD Consulting Company, Italy, “Initially it is very important to conduct research that examines the culture and buying habits of the country. Other crucial factors involve business competition, best location for stores, spending capacity regarding the type of product and entrepreneurial ability to establish a successful business.” 'Uniqlo' a Japan-based apparel brand which is on a global expansion mode and had recently entered the Russian market, has its own benchmarks for entry into any international market.

“We study the market and try to understand a customer's needs in a particular country. Then we start entry planning,” says Daisuke Hase, Spokesperson, Uniqlo.

Adds Schwartze, “A company must feel the impulse stemming from a given market, and again the respective framework conditions for trade and industry are vital prerequisites to generate this impulse.”

Launch vehicle

There has been a gradual shift in the choice of entry routes of international brands. Brands generally prefer a long-term commitment to the Indian market and are choosing to exercise ownership through franchising, wholly or partially-owned subsidiaries and through joint ventures (JV). Sensing the market potential of India, many international apparel brands from UK, Germany, Italy, France, Spain, Scandinavia, Turkey and US are eager to expand.

Notably, the role of the Indian government in attracting the Foreign Direct Investment (FDI) has been significant. The government has liberalised the foreign investment regime substantially over the last decade. Union Minister for Textiles, Thiru Dayanidhi Maran had led a high-level trade delegation to France and Germany in February this year to attract foreign investments in the Indian textile and apparel sector.

“Sustained and consistent efforts are required to drive FDI in India, which will lead to integration of the Indian textile industry with global textiles manufacturing systems,” Maran had said.

Brands to look for

Year 2010 marks the arrival of prominent brands like Tween, damat and ADV, which would venture into the Indian market through Blues Clothing Company. Brands like FRISS, METROPOL and CHARLOTTE SPARRE are also keen on India entry. Besides, several other international brands like miu miu (women's wear and accessories from Italy) and Yves Saint Laurent (a French brand which makes perfumes and luxury goods) are eyeing the Indian market. French labels such as NINA RICCI, Carolina Herrera and French shoemaker Christian Louboutin sees India as one of the fastest growing among the Asian markets. Desigual, a Barcelona-based maker of jeans and sportswear, is planning to expand into Asia.

GAP, a leading apparel brand, is expanding internationally with franchise agreements in Asia, Europe Latin America and the Middle East. Uniqlo may enter the high-growth markets of India and Brazil in the coming years if its expansion in Russia sees success, Naoki Otoma, COO, Uniqlo, told to Reuters recently.

“We think that there are four countries whose importance will increase globally and that is important for us. First China, then Russia, Brazil and India,” Otoma remarked.

Franchising: Favoured route

India has been consistently rated amongst the top destinations for consumer businesses year after year. Interestingly, many international brands are opting for the franchise route for their entry. MANGO opted for franchising for most of its international expansion, “It is the perfect way to step into a new market and get the know-how of its business,” states Denolf.

“We have just signed up a master franchisee for three additional brands called Tween, damat and ADV. We will be doing four stores side by side by August 2010 and will then spread to more locations,” says Gupta.

Strategies & survival

Brands face constant challenges and cut-throat competition while planning expansion. Therefore, formulating strategies for brand survival, profit and expansion are of utmost importance. One key area is customisation. Brands usually take up the route to customisation as per the market or consumer demands.

Gupta comments, “Serious brands study market conditions and incorporate them into their merchandise and collection planning.” Hase feels it is the apparel size that needs to be customised, “We do not customise our products for each country or region, except for the size (they have US/Europe size and Asia size).”

“MANGO, with presence in 100 countries, has always tried to operate locally. Thanks to the franchise system, we have done it by designing special limited collection or by accurately selecting the stock of its stores,” states Denolf.

Apart from this, high import duties and escalating real estate costs are some of the challenges an international brand has to face.

“Relaxing the duty norms further, removing hurdles like service tax on rentals and making labour laws conducive to business are some of the ways in which the Indian government can encourage international brands,” remarks Gupta.

Schwartze says, “India is yet to open more doors as regards market access to stimulate FDI. We hope that current negotiations regarding the Free Trade Agreement between the EU and India will be concluded in a fully reciprocal and symmetrical manner. This is what I have expressed during my several meetings with the Textile Minister.”

High street fall

Fashion high street scores high on the brands' expansion moves. Some of the high streets like that of Champs de Elysees and Avenue Montaigne in Paris, Fifth Avenue in New York or that of Kurfürstendamm in Berlin have several international luxury and premium apparel stores lined up. It not only boost sales but leads to maximum footfall. However, in India, most of the international luxury brands are set up either in shopping malls or in hotels.

On this, Kapoor remarks, “India definitely needs better retail infrastructure for luxury brands. The existing malls and hotel spaces are not enough. We do need high fashion streets that contribute to better retail footfalls. We have such great heritage locations in Colaba (Mumbai) and Connaught Place (New Delhi) and should seriously look at converting them to luxury high streets.”

Schwartze opines, “Each country has its own characteristics when it comes to the point of sales. This is what we accept in every market and our companies are very successful in adjusting their products to the respective market requirement.”

Forging fruitful alliances

International brands entering the Indian market have been quite forthcoming in forging fruitful alliances. Leading luxury brand Versace, which has been brought to India by the Blues Clothing Company, is on an expansion path. Versace, which is at Emporio New Delhi and at the Oberoi Trident, Mumbai, will be expanding into additional 1,500 sq.ft at the new international airport T3.

Besides, other premium luxury brands such as Corneliani and Cadini are eyeing rapid expansion.

“Corneliani will soon come up at the Grand Hyatt, Mumbai, at Taj Krishna, Hyderabad, and another location in south Mumbai. Cadini will be established at the Grand Hyatt, Mumbai, at the Pacific Mall in New Delhi and many locations are under planning,” informs Gupta.

Premium Italian brand Diesel, which recently entered India with Reliance Brands Ltd, would be launching two stores in Mumbai, and one each in Bengaluru, New Delhi and Hyderabad over the next few months.

Darshan Mehta, President and CEO, Reliance Brands, says, “Diesel has spawned a genre of fashion that is alternate to established luxury. In India, it arrives to a throng of hungry fashionistas and a growing generation of cool consumers.”

Similarly, the German fashion brand s.Oliver, which entered the Indian market in 2007, is looking to grow significantly. Gaurav Sehgal, Chief Operating Officer, s.Oliver Fashion India, says, “We will have a chain of 77 outlets and shop-in-shops across India by 2012. We intend to become the largest premium segment brand by 2015 with a turnover of at least Rs 250 crore.”

Denolf quips, “We started in Mumbai and New Delhi because these cities matched our profile the most. Once our brand was consolidated in these tier-I cities, we started opening in tier-II cities like Pune, Hyderabad, Bengaluru and other potential ones such as Ahmedabad, Chennai and Kolkata.”

Though most of the international brands have tasted success in the Indian market, but failures, too, have forced several either to quit or shelve their entry plans.

According to industry sources, most of the brands have been forced to quit due to lofty real estate rentals, escalating operational costs, domestic red tape and regulatory hurdles, increasing trade of fake goods, sluggish demand and high import duties. Besides, luxury fashion products are priced at 15 per cent higher in India than their country of origin.

Etienne Aigner had to close its store and the grand arrival of Dolce & Gabbana had to cancel its plans. Raymond, the apparel maker and retailer, ended its partnership with Italy's GAS, while Kanz and Argos had to quit the Indian market.

Fashion forward

Fashion industry is ever evolving and one of the most dynamic industries in the world. Despite several roadblocks and challenges, the Indian apparel industry has proved conducive for international brands. With the Indian consumer getting more fashion savvy and liberal with their purse strings, optimism rules the international brands.

Comment
Insta-Subscribe to
The Franchising World
Magazine
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities
Trending
More Stories

Free Advice - Ask Our Experts