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Fashion Alliances: More divorces than marriages

By FashionUnited

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Fashion

Denmark-based fashion house Bestseller, which owns Vero Moda, Jack & Jones and Only, is a recent example of how relationships between global brands and its Indian partner is going sour. The company snapped its four-year-old franchisee ties with its Indian partner, Bombay Rayon's Prashant Agarwal. But

this is not the first case of break up. Of late, many such break-ups have been witnessed by the industry.

Break-up
saga continues

Indian fashion industry has been a victim of break-ups. Some of the biggest companies have ended their much touted partnerships. First there was a break-up between Mumbai-based Alok Industries and UK's iconic suit maker Savile Row as the former wanted to exit the retail space. Then DLF Brands ended its franchise partnership with Italian brand Alcott. French fashion conglomerate LVMH group's Sephora also ended its partnership with Genesis Colors. While Savile Row is looking for another partner, Sephora has signed an agreement with DLF Brands. Even Bestseller has applied to the Department of Industrial Policy and Promotion (DIPP) to bring in FDI in all its brands under single brand retail.

In 2012, Tata-owned Trent ended its relationship with Benetton's Sisley which had forayed into India with much fanfare. Aditya Birla Group's Madura Fashion and Lifestyle and fashion brand Esprit also parted ways and Planet Retail sold the rights of UK department chain Debenhams and specialty chain Next to Arvind.

Milan-based luxury fashion company Gianni Versace SpA had terminated its exclusive franchise agreement with Indian partner Blues Clothing Company, clearly showcasing expectations mismatch between the global brand and its domestic partner.

In 2008, UK’s Marks & Spencer ended its franchise agreement with Planet Retail and did a joint venture with Reliance for faster roll-out of its stores. In 2010, Italy’s Gas ended its venture with textile and apparel major Raymond and entered India on its own through the cash and carry route. The Italian owners of menswear luxury brand Corneliani also found a new partner in India in OSL Luxury.

Why are relationships going kaput?

Expectations mismatch is the primary reason behind all these break-ups. Experts point that though there are different reasons in each case, business not matching ambitions, difficulties in scaling up and operational issues remain common factors among all. Global brands expect their Indian partners to help them scale up in the market, however given the current gloomy economy and low consumer buying fails their expectations.

For instance, DLF Brands ended the partnership with Alcott because the stores were not doing well, Esprit and Sisley could not generate expected business, and Madura-Esprit venture failed to pursue their ambitious targets. And in the case of the recent example of Bestseller, while sales had almost doubled to Rs 235 crores during FY13 against Rs 124 crore a year ago, the joint venture company posted a net loss of Rs 34 crore. Like e-commerce ventures, state experts, expanding too fast without planning is also one of the reasons why such tie-ups fail to take off.

Another reason, according to experts, is not understanding that the Indian customer is different and India cannot be treated as one among many other markets. They feel that according to the geographical differences, consumers based in South, West, North and East should be treated differently. Many also believe that the debt issues faced by textile companies such as Alok Industries, Bombay Rayon and S Kumar's Nationwide are also responsible for the break-ups between their overseas partners. While Alok has sold its real estate assets and exited retail stores to reduce its debt, Bombay Rayon has gone in for debt restructuring.

With India opening 100 percent FDI in single-brand retail, there would definitely be fewer break-ups ahead since brands would not feel the need to find a local partner to build business in the country.


Alcott
Esprit
Jack&Jones