India a budding sourcing hub for global luxe players

While Louis Vuitton’s chief Yves Carcelle may be unhappy about the 30 per cent mandatory sourcing clause norm in single-brand retail his former deputy Regis Fournier seems quite comfortable about the norms. In fact, Fournier is setting up

a manufacturing facility in India that will supply to the world’s top luxury labels. His firm La Compagnie (meaning ‘The Company’ in French) plans to invest Rs 350 crores in a manufacturing facility in Puducherry, a former French colony, to make shoe uppers for unnamed luxury footwear brands starting December. It will subsequently produce 100 per cent India-made high-end bags, clutches and clothes for the global market.

And he is alone for there are many more who are eyeing India as a manufacturing hub for best international brands. A clutch of businessmen are busy refurbishing their businesses to supply to global luxury goods makers once they enter India. They already supply to brands such as Armani, Polo Ralph Lauren, Hermes, Fendi and Bottega Veneta, among others in a small way. And now that the government has opened FDI in retail, these suppliers are hoping that the reform will open up a window of opportunity for them.

The government last month allowed foreign retailers to set up majority-owned (with more than 51 per cent shareholding) single-brand stores in India, but on the condition they would have to source 30 per cent of their products from Indian vendors. But according to the Knight Frank report, the primary reason which put down the interest of foreign players to conditions on sourcing from small scale industry. While investment is not an issue for these big pocketed retailers, retailers are worried about whether the quality of the products sourced locally would match their international standards. The vast difference between their requirement and what they would finally procure locally has held them back from rushing into Indian market.

On the other hand, Indian entrepreneurs feel the new entrants would be left with no choice but to tap the Indian market to source locally, since even at the global level, their sales are not encouraging. Plus, India is one of the fastest growing markets for luxury products and. Studies suggest it is the biggest luxury outsourcing destination today after China. It is also one of the biggest retail markets with sales expected to touch $15 billion (Rs 78,180 crores) by 2015. Research by Fondanzione Altagamma, the Italian luxury goods industry trade association, shows Indians spend around $500 million (Rs 2,606 crores) every year outside the country on luxury goods.

Its time, premium global brands accept the real potential and craftsmanship India can offer to them, and industry players are certain that the undisclosed supply happening on a small scale as of now, would definitely grow manifold once these labels make an official entry into the Indian market.