Global brands relook India JV partnerships

Global brands are betting big on India, this despite no clarity on FDI in multibrand retail. In fact, statistics from Department of Industrial Policy and Promotion (DIPP) the nodal agency that clears such foreign investments reveal that a number

of top brands have put forth their proposals of either increasing stake in JV or expanding their presence in India. American apparel-maker Tommy Hilfiger is one of them. The brand plans to open 500 stores in India over the next five years to capitalize on the brand’s increasing popularity in the country. It has informed the Department of Industrial Policy and Promotion (DIPP) that it is looking at increasing the footprint in India.

In a separate DIPP application, French fashion brand Promod SAS has also filed for a 51 per cent stake in a joint venture with local Modex Trading. Modex is co-owned by Tushar Ved, the promoter of Major Brands, which currently owns Promod’s franchisee rights in India. It may be noted that a study by management consulting firm Booz & Co had revealed that around 100 multinational retail and consumer companies had entered India between 1990 and 2010. As many as 86 companies entered before 2009, and a little over a fifth of this (or 18 companies) changed their partnership model.

Retail analysts say it would be interesting to see whether there is scope for Tommy Hilfiger to open 500 stores in India and whether Promod with low recall value before it launched in India and a limited footprint would experience a game change post forming the joint venture since Major Brands’ portfolio also includes Mango, Charles & Keith, Aldo and now even Guess. The four-decade old brand, which claims to refresh its collection with 100 new products every two weeks, competes with women-centric, trendy brands such as Zara, s.Oliver and Esprit. Meanwhile, even Madura Fashion & Lifestyle (MF&L) is in the process of converting the distribution agreement it signed with Esprit in 2005 into a joint venture.

With MNC brands establishing themselves with the low-risk and low-return model through franchisees and distribution agreements, they are now looking at forming JVs by scouting for able partners. For instance, UK-based retailers Clarks, and Marks & Spencer, have extended their distribution or franchise agreements into joint ventures with Future Group and Reliance Retail respectively.

In the recent past, there have been major partnership reshuffles in India that included Giorgio Armani parting ways with DLF Brands and going for a franchisee deal with Genesis Luxury, Versace, Corneliani and Guess, who too are scouting for a new local partner to start afresh, and Guess planning a tie up with Major Brands, the marketer of Mango and Aldo in India.

As consumer goods and retail consultancy Third Eyesight explains, 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.