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Esprit-Madura Split: A saga of souring relationships

By FashionUnited

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Fashion

In another case of expectations mismatch between a global brand and its domestic partner Esprit and Aditya Birla Group’s Madura have ended their seven-year-old distribution agreement last week. All operational Esprit stores

will be shut next year. In fact, to clear its inventory, Esprit is offering almost 60 per cent discount in its stores. Earlier, Giorgio Armani had parted ways with its Indian joint venture partner DLF Brands joining the list of many other global luxury brands such as Versace, Corneliani and Guess who have followed a similar route.

In
2008, UK’s Marks & Spencer had ended its franchise agreement with Planet Retail and opted for a joint venture with Reliance for faster roll-out of its stores. In 2010, Italy’s GAS ended its venture with textile and apparels major Raymond and entered India on its own through the cash and carry route.

As consumer goods and retail consultancy Third Eyesight points out, about one-third of the more than 150 international fashion brands launched in India over the past seven years have either changed partners or exited the market and around 26 brands have changed partners, while 23-26 exited the market with at least half of those later returning either as a wholly-owned subsidiary or with a new partner. In 2009, for instance, luxury brand Gucci parted ways with its partner Murjanis to move to a joint venture with Ashok Wadhwa’s Luxury Goods Retail. Murjanis had earlier ended their relationship with Jimmy Choo and Bottega Veneta, both of whom are now with Genesis Luxury.

The reasons behind souring relationships between global brands and their Indian partners are said to be over-scaling of retail presence at high-street locations, over emphasis on imports and high pricing. Another reason being cited by the industry is Esprit’s positioning in India. While it is a mid-market brand globally, in India it was positioned as premium label partly because of import duty. As Jaydeep Shetty, Chief Executive of fashion brand Mineral points out over-scaling of stores was the first flaw in the strategy. He feels they opened huge stores of around 8,000 to 10,000 sq. ft. at the some of the most expensive malls and one can’t build a huge business until one has deep pockets. Whenever there is a partnership between an Indian company and a foreign brand, the Indian partner would not put money beyond a point. Esprit had opened stores on Linking Road, a premium Mumbai high Street and in Select City Walk, a celebrated mall in Delhi. Another bug bear was over emphasis on imports and high pricing also played a role in Esprit’s challenges in India. Experts say when you bring in a brand to India you should look at sourcing from India.
Esprit
Madura Fashion & Lifestyle