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Jun, 15 2012

GEARING UP IN STYLE FOR BIG PROFITS

India is no longer a virgin territory for international fashion brands foraying via franchising. These luxury brands woo Indian consumers in a bid to catch their imagination and have largely succeeded as the Indian consumer not only likes to wear clothes

IN the midst of growing aspirations of Indian consumers, the luxury market has grown by leaps and bounds over the years. Today, the power exhibited by robust international brands remains invincible. However, while some brands have won over all odds, many fizzled out after the initial bang. We peek into some of these high-end foreign brands.

In retrospect

Today, the phrase 'you name and get it' seems apt if you are looking for any foreign brand in India. Before 1980s, the presence of international brands in India was insignificant. But after liberalisation in 1990s, the Indian government opened its arms to welcome brands from overseas. Since then, the Indian market is flooded with international brands. Augmented brand consciousness coupled with increasing disposable incomes is the main reason that has encouraged western brands to enter the Indian market through franchising.

Elaborating more on the emerging trends in the luxury market in India, Punit Agarwal, Managing Director, VEMB Lifestyle Pvt. Ltd and Master Franchisee of Marc Cain, a German luxury women's fashion wear brand in India and the UAE, says: “Looking good has always been an integral part of Indian culture. Indian consumers really care about brands. Almost 22 per cent of Indian consumers try foreign products and brands. With increase in standard of living and customised product offerings, the country is turning into a place of great opportunity where brands are making tailor-made products and solutions for end-users. According to a report by CII-A T Kearney, India's luxury market, which is small compared to global standards, is likely to grow three times and touch $ 14.7 billion by 2015.” He goes on to add that the luxury market witnessed robust growth of 20 per cent over the past year and owing to huge market potential, it was the right time for Marc Cain to enter the market and create a niche for themselves.

India, consisting of one of the youngest and most dynamic population in the world, has also spurred the luxury market that has grown significantly in the last two decades. GAS Jeans Pvt Ltd, an international fashion brand that uniquely blends versatility, durability, quality and accuracy that is typical of the Italian style, entered India as it believed that there is a big market for GAS in India. M.M. Kamath, Director, GAS Jeans Pvt Ltd, thinks that due to economic and cultural growth of this country, Indian people, especially young Indians, are travelling around the world for business and pleasure more than ever before. They want to create their own personal style reinterpreting the best in international fashion and mixing it with their unique taste and cultural background.

In 2000's, the number of international brands entering India took off exponentially. If industry sources are to be believed, the presence of western brands has grown three times more in 2005.

From ‘videshi’ to ‘desi’

Among the retail sectors, very few can match the fashion sector in terms of its global nature. Though the food and beverage sector has led the way of global trade, it is the fashion and lifestyle sector that is leading the march in the franchise sector. It will also be enthralling to see if these brands cull for customisation to satisfy the needs of Indian consumers.

Sharing his view on customisation, Shailesh Chaturvedi, CEO and Executive Director, Tommy Hilfiger India, says: “Indian consumers expect the same international offer they can get in New York or London. Therefore, we have always made it a point to offer the latest imported line of products, the same our consumers get at any global centre.”

Tan Yew Kiat, CEO, bYSI, a fast fashion and affordable luxury brand from Singapore, says: “We are actively making changes for the next few collections to add elements to connect with Indian consumers better. The competition from Indian brands does exist given the strong cultural background of Indians. But the Indian population is highly educated and flexible to accept new brands. The market contemplates more choice and quality alternatives so that all good brands have their fair share of the market.” To make a mark in the Indian market, Kiat is of the view that it is essential to understand fashion needs of Indians and be able to customise bYSI fashion collection to suit the taste and preference of the fashion world in India.

GAS offers its Indian consumers the same quality and design that is granted by the brand globally. The collections remain the same all over the world. “Our clothes meet the needs of smart, aware, international and cosmopolitan consumers who want to express their own individuality. And although we do not customise our products, we have met the requirement of our Indian consumers, from whom we have found ready acceptance,” says Kamath.

Marc Cain does not customise their products as the products are sourced directly from the parent company in Germany. There is a set standard in terms of the quality and design while sourcing from Germany and they bear in mind to provide the same quality and design to all their shops and franchisees all over the world. However, they keep in mind the latest fashion trends, the weather, the location, etc., that suits the Indian market.

Following the franchise itinerary

Cognisant of the fact that fashion and accessories is the largest retail sector, many western brands penetrated the Indian market. Driving the retail segment in India, this sector has unlocked infinite opportunities for global retailers who want to enter this segment. Many of these brands have either taken the route to franchising or have entered India through joint ventures.

GAS entered India in 2006 as a joint venture with Raymond, which operated for a period of three years, after which both parties felt they were mutually ready to part ways.

Being aware of the acceptance of GAS in the Indian Market with a vast clientele, it chose to be in India on its own, having full control of its brand, under the cash and carry format, laying the foundation of GAS Jeans Private Ltd, the Indian subsidiary of Grotto Spa.

Now they operate via the franchise model. “We have found franchisees that have good understanding of the market and share values that are similar to ours. Our growth through franchising has been exceptional. At present, we are happy with the Indian subsidiary and the franchisee system that we have followed through it. Also, with 100 per cent FDI coming into existence now, our potential to function in a totally independent way has been furthermore increased,” says Kamath.

Now, GAS is in its expansion stage in India and is marking its presence in the metros and tier- I cities. GAS is overwhelmed with the response it is getting from its consumers. It is available in exclusive areas in Mumbai, Bengaluru, Hyderabad, New Delhi, Kolkata, Pune, Chennai, Ludhiana, Patiala, Chandigarh, Jalandhar and Jammu. It will open more stores by the end of this year in Chennai, Chandigarh, Amritsar and two more stores in Mumbai.

BYSI that has forayed into India via a master franchisee believes that the benefits of franchising are numerous. For instance, the resources that a local partner has in areas like market understanding and language. It gives an edge and creates more efficiency when making business decisions. Still at a nascent stage, bYSI's first boutique was opened in New Delhi and the brand is open to expansion pan-India. The investment required for a bYSI boutique is about 5, 00000 SGD (Singapore Dollar) and the area can range from 80-130 sq m. The location must be where there is a good tenant mix for similar international brands and is mutually agreed upon by bYSI and the franchisee. The RoI is between 1 and1.5 years.

According to recent estimates, the Indian luxury market is estimated to touch the $30 billion mark by 2015 and the country is aiming to become the world's fifth largest consumer market by 2025. Luxury retailing is the new buzzword in the Indian context and hence, Marc Cain saw the potential to step into India. The company has brought Marc Cain to India and the UAE via a master franchisee. Shedding more light Agarwal says: “The responsibility for making the brand a success (for the master franchisee) is way higher than a franchisee alone. The investment, risk and responsibility for the franchisee are comparatively lower than the master franchisee. We believe that in order for the master franchisee to grow, one needs to pay attention to the fact that the franchisee yields profit.” Currently, Marc Cain has two stores in Mumbai one at Juhu and the other at Bandra. They plan to expand their footprints to other metro cities like Delhi, Hyderabad and Bengaluru. Their estimated investments for every store will be approximately Rs 3-4 crore. So they have set aside Rs 20 crore for the five stores. The area needed is 1,000 sq ft and Marc Cain is looking at franchisees hailing from metros to set up their stores at prime locations or high streets. The German company has posted 100 per cent annual growth for the last five years. They expect sales of Rs 5-6 crore in the first year itself for every store. The company is also eyeing international markets like Kuwait and Qatar to expand operations.

Additional perks

Most of the overseas brands that have tasted success in the Indian market have put their marketing, training and support strategies in place. Many have devised formulas different from their home markets to achieve great success. For instance, bYSI provides support to its franchisees in IT, merchandise planning, visual merchandising, operations and customer-service training.

GAS partners with carefully selected business associates who share its commercial strategies, lifestyle and values. GAS offers the franchisee the required support, including manpower training, for the sales personnel that is line with the premium positioning of the brand and its philosophy.

On the other hand, Marc Cain currently has a staff of 800 employees in Germany alone. The selective distribution strategy is characterised by 127 Marc Cain stores and 243 shop-in-stores in 59 countries and more than 1,460 further top-quality specialised shops all over the world. For all employees, a manual has been provided by Marc Cain Germany, and coaching classes and training sessions are held to enlighten them about the new season's collection. This helps the employees to be aware of the latest merchandise, styles and patterns and in understanding the brand better.

Pearls of wisdom

With humungous potential in the franchising sector in India, many international companies are using it as the launch vehicle. Franchising has become the preferred mode as it provides several benefits such as the opportunity for brand expansion and presence and reduction in business risks. Some of the western brands have significantly dropped their prices and customised their products to fine tune themselves with Indian consumers. Though India is a promising market, the international brands have to follow a strategic approach. For them 'Indianisation' is important. However, with the rise in consumption of products provided by these brands, this sector is proving to be a boon for the franchisee and is expected to show soaring success in the future.

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