India: The big playing field for global brands

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ith its vast consumer base India has emerged as land of opportunities for numerous big global brands. In fact, most global brands present here have scored well with the globetrotting Indian consumer making a bee line for their stores.

For instance, M.A.C stores at Select City Walk shopping mall in Delhi and at Dynamix Mall in Juhu, Mumbai are generating revenues in excess of $1,000 per sq. ft. per year. High-end crystal products maker Swarovski’s stores at Bandra in Mumbai and at the T3 terminal at Delhi airport rank among its top stores based on sales. Similarly, British fashion accessories retailer Accessorize’s store at Ambience Mall in Gurgaon is the company’s second biggest revenue earner, clocking in sales worth $600 per sq. ft. every year. Two of apparel brand US Polo’s stores – one in Delhi and the other in Bangalore -- generate sales of around $700 per sq. ft. a year and rank among their top 10 stores globally. Women’s fashion brand Promod’s store in Delhi reports the highest sales per sq. ft. in Asia, while Canadian shoe and accessories brand Aldo has two of its top 50 stores in India.
 
It’s been almost two decades since the Indian government opened up the economy to foreign direct investors. And since then, there has been a continuous flow of international fashion brands coming into the country. Post 2005, the flow picked up with over 20 global fashion brands making in-roads into India. The year 2010, was when many international brands bounced back post-recession and started venturing into the Indian market. While many brands that had exited the Indian market returned. For instance, Italian denim brand Energie had exited the market, however, when the Miss Sixty group entered into a licensing agreement with Arvind in 2010, Energie was re-launched as a part of its portfolio. Another notable denim brand GAS fell out with Raymond but later they re-launched with one flagship store and through various shop-in-shop counters at Shoppers Stop. 


As Tarang Gautam Saxena of Third Eyesight, a consulting firm focused on the retail and consumer products ecosystem points out in his blog “International Fashion Brands in India – 2011: Auguring a New Wave”, the entry of German casual wear apparel brand Lerros owned by the House of Pearl was ill-timed in 2008 but instead of exiting the market, it granted licenses to manufacture, retail and distribute Lerros to denim brand Numero Uno. Italian brand Zegna, a world leader in luxury menswear was first introduced in the Indian market early on in the decade through a franchise arrangement. Last year it entered into a joint venture with Reliance Brands to ramp up its India operations.
 
Amongst the new launches, was the entry of the much awaited fast fashion brand Zara. It succeeded in generating 30-40 per cent more footfalls in the malls where it opened stores. Inditex in a 51:49 joint venture with the Tata Group’s retail business, Trent has for now adopted its global supply chain for the Indian market. Another southern European value fashion brand, OVS Industry, was launched last year by Oviesse through a joint-venture with Brandhouse Retail from the SKNL group. While in the first year, products have been imported from Italy, the company says it intends to bring in merchandise directly from the supply source for speed and cost effectiveness, to achieve aggressive growth over the next five years.
 
Interestingly, the lure for global brands is two-fold. First, is the rapidly growing economy and large consumer base. Second, are the Indian companies – both manufacturers and retailers -- who are willing partners and act as a platform for a global brand’s launch in India. With the current restrictions on FDI in single brand retail, many Indian companies are setting up large multi-brand outlets for international brands under one roof.
 
For example, Reliance Brands has partnered with several well-known premium luxury, fashion and lifestyle brands. In 2010, it brought Diesel, Paul & Shark and Timberland to the Indian market. Maxwell Industries’ relationship with Eminence, a French innerwear brand let them cater to the premium segment where it does not have a presence. Similarly, RPG Group’s Spencer’s Retail retails Beverly Hills Polo Club.
 
In fact, 2010 also saw many brands from China, Japan and Turkey exploring the Indian market. China’s apparel retailer Yishion launched a 51:49 joint venture with a distribution company, Upmarket Group. Turkish brands Tween, ADV and Damat from the Orka Group partnered with Blues Clothing Company, a mid-sized retailer of fashion apparel that also distributes brands such as Versace, Corneliani and Cadini.
 
To sum up, the Indian market is becoming a major attraction for big brands. Those already present, are adopting newer strategies to grow while many others are considering entry. Among the ones reported to be interested in launching are GAP, Uniqlo and Polo by Ralph Lauren. Even as some analysts caution against the strong sales at Indian stores of global brands, there certainly is a pool of opportunities lying ahead for the global entrants.

This article has been changed to reflect that parts are based on information from Tarang Gautam Saxena's Third Eyesight, blog “International Fashion Brands in India – 2011: Auguring a New Wave”