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Oct, 12 2010

FOREIGN FIRMS HOP ON BEAUTY BRANDWAGON

THE emergence of young urban elite population with increasing disposable income in cities, including an increase in the number of working women looking for lifestyle-oriented and luxury products, is the main driver of demand for imported beauty products.

THE emergence of young urban elite population with increasing disposable income in cities, including an increase in the number of working women looking for lifestyle-oriented and luxury products, is the main driver of demand for imported beauty products. Though international competitors have been very aggressive and their products are viewed as high quality but awareness levels are low for smaller brands. Even with a good growth rate, penetration of cosmetic and toiletries is very low in India. Around 15 to 20 per cent growth rate in this sector translates into tremendous potential for internationals brands in the health and beauty segment. The wellness industry covers a large number of services, including personal health counselling, fitness, beauty services and others. Within this, fitness segment viz gyms market size is estimated at US$ 113mn. However, India's membership penetration rate of 0.4 per cent has much scope to improve compared to Asia Pacific average of 3.7 per cent.

Know the market well before entering

Every country has different rules and regulations, which every international brand has to adhere to. One cannot ignore them, as it may tarnish the brand's image. As a result, it is essential for a new player to be aware of the laws of the country. Before stepping into any new market, foreign brands must endeavour to apprehend the market potential for their product and service by surveying the market viability, target consumer's profile, feasible business routes, country's economic growth, spending capacity of people on beauty, health and fitness regimes and lastly, identifying the competitors in the industry. About the market research they do while carrying out India operations, Portugal-based fitness chain VivaFit's Co-Founder and CEO Pedro Ruiz notifies, “We studied the reports from the fitness industry global association IHRSA and decided to aim for the BRIC countries, where growth is amazing and sustained. India and Brazil were our two best countries of the BRIC because English and Portuguese are VivaFit work languages whereas Russia and China are difficult markets for us, as English is rarely spoken in both the countries.”

While embarking on major expansion in India, global brands deal with the key challenge of seeking out the right business partner with local knowledge and an ideal business route to test the market. On areas where they need to work on, Jan Spaticchia, Founder and Chief Executive, énergie Fitness, a UK-based fitness club franchise, informs, “We are looking for the right investor to take the ènergie brand to India, use their knowledge and influence to push the brand out to the mass market. We have had many inquiries in taking the franchise to India and we are in talks with many investors.”

Localise to create space for brand

The franchisor faces lots of questions such as is the country apt for franchising, what are the franchise laws, will the product/service be competitive in the market, how to pick and scrutinise the space with right real estate rentals, etc. Looking at the Indian consumer's mindset, they are not keen to splurge on high membership fees. To create stable position, the global brands must not forget to customise their brand's services to capture the huge market share. David Ramadan, Chief Executive Officer, CFW India International Inc, a fitness and weight-loss facility especially designed for women, enlightens, “We are in the process of localising our weight loss system as per the Indian cuisine. Price point to consumers will be very competitive. Our goal is to make exercise available to many Indian women as possible.”

Dr Sathya Kallur, Chief Clinical Director, Swiss-Smile India, Europe's leading dental service brand, believes,” When a brand becomes eponymous with quality and affordability, indigenous vs global player becomes a moot option, as the bottom line is to meet the dental needs of the populace with the highest standards of quality dental care.”

Expansion, another key challenge

As competition is getting tougher day-by-day with the ingress of global brands, India's fragmented health and fitness market is sensing the heat. No matter how big the brand is, making a mark in consumer's mind is often a challenge for foreign brands. Devising a localised strategy for building brand awareness is the key to deal with it. Trusting franchising as the best business means to expand into India, Manisha Ahlawat, Indian Master Franchisee of Portugal's Fitness chain Vivafit, informs, “We are focussing on Delhi-NCR this year unless there is a very highly qualified franchisee application from any other areas. We want to have at least 10 centres by the end of 2011.” On expanding operations in India, Ramadan updates, “We are currently working on developing clubs in Delhi, Mumbai and Hyderabad. We will start selling franchises in other cities in 2011.”

As of now, Curves India is planning to open 200-250 Curves locations in India in three to five years. Talking of his plans, Kullar adds, “In the next three years, we plan to invest about 25-30 million dollars to launch about 10 clinics targeting the metros of India, including Chennai, Mumbai, Delhi and Hyderabad. We are contemplating various options such as joint ventures and franchising to meet the needs of the people.”

As per energie fitness, “Local knowledge is the key to our success but acute business sense is essential. There is lot of money to be made by a master franchisee but they must have the right aptitude and experience, not necessarily in fitness but simply in business.”

Says Ahlawat, “We will be looking for entrepreneurs who are passionate about operational excellence, believe in fitness for women and have a dream of owning their business.”

India, the next beauty base

Followed by saturation in the western markets, foreign brands in the services sector are targeting India as the next big destination for setting up their strong base after international markets. As per Spaticchia, “India is right there in our immediate plans for global expansion. There is, like many countries, a huge gap between our franchise offerings and the multiple products we offer. We have been breaking into the international market for many years and have rolled out the energie brand in the Middle East, Ireland, Europe and North Africa. The Asian market is large and that's where we want to be.” In case of VivaFit, “India is Vivafit's second international operation after Spain, adds Ruiz. Despite challenging market conditions, franchisors can optimise their positioning and increase sales and margins by offering customised services at right pricing, appointing highly qualified sub-franchisees with adequate local market knowledge, offering initial and ongoing training, and maintaining standardised services without diluting the brand's image.

As India's health, beauty and fitness sector is progressing towards the next level of growth, hottest trends in body piercing, tattoo making, tattoo removal, snake massage, fish therapy, nail art and sun tanning salons are likely to knock the doors. Thanks to the rampant consumer's demand and dearth of skilled talent, there is a colossal possibility for many foreign chains expected to come to India in the years to come.

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