Luxury brands: Reworking India strategy to gain ground

The recent report 'World Investment Prospects Survey 2009-2012' has ranked India second in global foreign direct investments in 2010. Further, it says India will continue to remain among the top five attractive destinations for international

investors from 2010-12. And even though the issue of allowing FDI in multi-brand retail is still being debated in the country, nearly a dozen global fashion brands are waiting to open shop here. Some are already in talks with domestic players for distribution arrangements. Italian Rifle Jeans and American fashion designer Michael Kors are some big names likely to enter India soon, following licensing agreements with local partners.

Indian regulations allow 51 per cent FDI in single brand retail while no foreign investment is allowed in multi-brand retail. However, many fashion brands prefer the licensing route. Under this, the local retail partner invests in branding, marketing and expansion. As Abhay Gupta, Executive Director, Blues Clothing Company who has licenses for many top global brands in India avers, “If a brand enters directly, it would benefit in terms of financial muscle. While a franchisee would have his own limitations, own growth plans, and his own structure. Sometimes there may be a mismatch between the growth pattern presented by a franchisee and the growth pattern demanded by a brand. That’s where the discontent arises.” Gupta should know as Blues Clothing Company retails brands like Cadini, Versace, John Smedley among others.

Abhay says there is no set rule that brands should enter through the franchisee route. There have been both successes and failures of the franchise route and joint ventures. Similarly there have been failures of direct entries with sleeping partners and successes too. “But we have had two methods working for us. One is the franchise and the other is the license route. And we have done well in both. We have five stores per brand. No brand would grow from one to five stores if they were not satisfied with us as a partner. And we would not invest in five stores if we were not satisfied with the brand.” What works is that India contributes to global sales of these brands.

Ashish Dhir, Associate Vice President, Technopak Advisors, agrees there is a huge market for luxury apparels in India. The growth rate of the luxury segment is more than 20 per cent. Luxury brands are entering India. And in Delhi and Mumbai we have enough retail spaces for them.” According to experts, the luxury branded clothes market is pegged at Rs 2,000 crores or 10 per cent of the overall organized branded garments market in India. It is growing at over
30 per cent year-on-year, making India an attractive destination.

And the list of brands now wanting a foothold in Indian market is growing. For example Rifle Jeans, which entered India in 2006 but did not make a mark has been relaunched through a new local partner. As Dipak Agarwal, CFO, DLF Brands points out, “The business of retail fashion brands is worth $3 billion in India, out of which these luxury brands can easily capture half-a-billion dollars in next 3-4 years, provided they put in the right strategy.”

However, many brands already present in India have had to rework their marketing and retail strategy. The buzz is the likes of Calvin Klein, DKNY, and Hugo Boss are on the lookout for new retail arrangements while Gas wants new distributors. Diesel and Italian brand Miss Sixty which switched partners — Diesel switched from Arvind Brands to Reliance Brands while Miss Sixty did the opposite— are again looking around to add more distributors. Ditto for other luxury brands including Mango and DKNY (currently with DLF), and Brioni among others. Agarwal is clear that DLF’s arrangement with DKNY will continue. “They continue to remain with us. Rather, we are aggressively building up stores for them and are looking forward to opening a few soon,” he opined.