admin
November 28, 2013
Raghavendra
Kamath, Business Standard
Mumbai,
November 28, 2013
India’s
retail sector needs no bigger testimony than the one it got from
the CEO of Britain’s largest clothing retailer Marks &
Spencer (M&S), Marc Bolland. On a recent trip to India, he
said the company has plans to make India its biggest international
market, outside its home market. In fact, India tops its list
of priority markets, ahead of China too.
The British retail chain, which has a joint venture with Mukesh Ambani’s Reliance Industries, plans to more than double its stores in the country and open some of world’s first sections, such as M&S Lingerie and beauty department in its stores in India.
However, M&S is not alone in its optimism over India. The government has cleared single brand retail proposals worth more than Rs 12,000 crore (nearly $2 billion) in the last one year.
The biggest among them is Swedish furniture retailer Ikea’s Rs 10,500 crore proposal. Others include Swedish apparel retail maker H&M’s Rs 700 crore plans and Decathlon’s Rs 700 crore plan. Since 2006, the government has cleared 60-70 proposals of single brand retail after the segment was opened to foreign investors.
International brands such as Zara, Marks & Spencer, Benetton and Tommy Hilfiger have reportedly grown at 20-50% on year-on-year basis in the last financial year, despite the slowdown in the economy. Clearly, shoppers are not cutting down spends on foreign brands. .
This is perhaps why global retailers have forged ahead with their India plans, despite the alleged red-tapism in India. Ikea is so bullish about India it pursued its India plans for the past couple of years, despite Indian government’s pointed objections on its applications at various points.
The furniture giant is expected to take three years before it opens its first store in the country. Even H&M, which has 3,000 stores globally, pursued its Rs 700 crore application to open stores religiously, despite government raising queries on mandatory local sourcing norms and brand use here. Swedish retailer H&M are yet to hear from the Foreign Investment Promotion Board.
Consultants say, global retailers are betting on the huge potential of Indian markets. According to AT Kearney’s Global Retail Development Index (GRDI) 2012, India is the fifth most favorable destination for international retailers. Of the total Indian retail market, 8% constitutes the organised retail and this segment is estimated to grow at a rate of nearly 30% by 2015, as against the overall retail market, which is forecast to grow by 16% in the same period.
“There are very few countries in the world which offer market potential the way India does. Some international brands may say conditions are not right and require huge investments, there are equal number of players which say they are not worried about these things,” said Devangshu Dutta, chief executive of retail consultant Third Eyesight, which works with global retailers.
However, FDI in multi brand retail is still stuck, as none of the big retailers — Walmart, Tesco, Carrefour — have not sought permission to open stores in India, despite the government allowing 51% FDI in multi-brand retail.
Though retailers such as world’s largest retailer Walmart, UK’s Tesco, French retailer Carrefour lobbied hard with the central government open up the multi-brand retail sector, none of them, it appears, are comfortable with stringent conditions put by the government for them to enter the retailing business here.
A retail consultant on the condition of anonymity said retailers such as Walmart, Tesco and Carrefour entered cash and carry segment with the plan that they will enter front end retailing in the country once that is opened for them but that has not happened.
While allowing 51% FDI in multi-brand retailing, the government put several conditions, including the 30% mandatory sourcing from small and medium enterprises. Central government also played it safe by leaving the permission to allow the international retailers to respective states themselves.
Despite the slight tweaking done by the governmentin August this year, global retailers have not shown interest. The government said foreign retailers are allowed to open stores in cities that have a population of less than one million as the 53 cities where they could set up stores. Overseas retailers can now source goods from SME firms, where the investment cap will be $2 million instead of the earlier ceiling of $1 million.
Says a senior executive from global retail chain: “I think for three reasons have made us stay away from India-policy restrictions, the political environment, and upcoming festival season globally,”
Many such as Rajat Wahi, partner, Management consulting at KPMG believe the uncertainty around multi-brand retail will continue till next year (elections) due to the challenges the segment faces on scale, supply chain challenges, exorbitant real estate costs, state-wise permits required and rule on 50% of FDI to brought in the first tranche. Single brand retail faces no such issues and will continue to invest in India.
(Sourced from Business Standard.)
admin
November 25, 2013
Raghavendra Kamath, Business Standard
Mumbai, November 25, 2013
As
French menswear brand Celio looks to become the sole owner of
its Indian business, it has drawn up plans to not just open more
stores, but make them look better as well. Celio, whose joint-venture
with Kishore Biyani’s Future Group is called Celios Future Fashions,
has got clearance from the Foreign Investment Promotion Board
(FIPB) to increase its India stake to 100 per cent in July this
year. Celio has already increased stake in the JV to 65 per cent.
It is planning to increase the count of both its standalone stores
and shop-in-shops, stationed at multi-brand retail chains (please
see box).
“Our aim is to expand this presence and make the brand more
accessible to customers. Along with the major metropolitan cities,
we aim to grow stores in tier II cities as well,” says Rajiv
Nair, chief executive, Celio Future Fashions.
CELIO IN INDIA – JV WITH THE FUTURE GROUP
CELIO WORLDWIDE
Not just footprint, Celio is also looking to refurbish its store design to bring them at par with its global presence. It has brought its design concept played out in its Via Del Corso (Rome) and Champs Elysees (Paris) signature outlets to India. So far, two standalone stores and one shop-in-shop have been redone. Nair says that the brand will look to upgrade the overall look to offer the same experience across the world.
The concept stores integrate technology and contemporary chic fixtures. The open and flexible layout and subtle colour scheme are geared to exude a premium feel.
Celio’s plans echo that of Britain’s apparel retailer Marks & Spencer (M&S), which plans to make India its largest market outside its home market and more than double its store count.
Its JV with Mukesh Ambani’s Reliance Industries, is looking to open large flagship stores in metros and supporting stores in neighbouring locations. It has already opened its new concept store in Bandra, Mumbai’s tony suburb.
Celio, however, will face a few challenges as it moves towards becoming the solo owner, say consultants.
“Any brand which is going direct has to connect with Indian realities, both on the customer and business side. Cultural, language and legal frameworks are different,” says Devangshu Dutta, chief executive of retail consultancy, Third Eyesight.
Adds Dutta: “The brand has to build both explicit and implicit infrastructure, apart from investing capital. Yet, for a customer it does not make any difference whether a brand is with an Indian partner or not.”
According to sources, Future Group provides strategic inputs such as market and product know-how, vendor negotiations and distribution clout to the JV. Celio would have to manage all of this on its own when it forges out on its own.
But an executive in the JV defends Celio’s decision, saying that the French brand has a full-fledged team in India and has sufficient expertise in all areas such as designing, sourcing and marketing.
Like M&S, Celio is increasingly sourcing more from India. In its summer-2014 merchandise, the brand has sourced 53 per cent of its requirement from India.
“This is a crucial step as it also helps us be flexible to respond to the market needs and helps us de-risk the dollar price movements,” Celio’s Nair says.
To differentiate, Celio is also looking to underline the simultaneous launches of its collections globally. “We are a very strong product-driven brand with major design capabilities in Paris and a strong sourcing office in Hong Kong, which enable us to bring the same product range (and at the same time) to over 70 countries. So, we offer the same range to the customers in India as we do in Paris, with minor adaptations on account of fits, colors and seasonality,” Nair says.
Third Eyesight’s Dutta says that local sourcing helps overseas brands to lower prices as they can by-pass import duties and logistic costs, and helps them with India-specific ranges.
Celio is close to EBITDA (earnings before interest, tax, depreciation and ammortisation)-level break-even at its stores and is expecting at company-level profitability soon.
” We have grown 17 per cent like- to-like this year in our own exclusive stores and we aim at a 25 per cent growth next year,” says Nair.
But the question is whether it sustainable as the economy weathers a prolonged slowdown and brands such as Arrow, Van Heusen, Louise Philippe rule the segment or not.
But Nair is unfazed. He says that Celio is one of few only-menswear brands which offers a full wardrobe and has design capability to match. “We are competitive in markets like France, Italy, Spain, eastern Europe where the competition is even more intense,” Nair says.
(Sourced from Business Standard.)
admin
November 15, 2013
Leonie
Barrie, just-style.com
November
15, 2013
Marks
& Spencer has so far failed to make much of a dent in the
Indian clothing sector since it first stepped into the country
in 2001. It currently operates 36 stores in there since forming
a joint venture with local conglomerate Reliance Retail in 2008.
But it’s easy to see why India appeals.
The Indian apparel and footwear market is valued at US$51bn and is the third-largest market in Asia-Pacific following China and Japan, according to data supplied to just-style by market research company Euromonitor International.
With a compound annual growth rate (CAGR) of 7.6% from 2012-2017, India is set to be one of the fastest growing markets globally – and by 2017 it is expected to have overtaken European markets such as Italy and France, with sales forecast to reach US$73bn.
"There is general consensus that India is an attractive market for new investment, especially for the world’s leading fast-fashion retailers," explains Magdalena Kondej, head of apparel research at Euromonitor.
International player
Shifting its focus from being a British retailer to an international player comes at a time when M&S is struggling in its efforts to stem a decline in its domestic clothing sales.
Earlier this month the company recorded its ninth consecutive quarterly drop in like-for-like general merchandise sales in the UK – which includes clothing and footwear – despite the much-publicised re-launch of its autumn/winter women’s wear ranges in September.
M&S, which currently has more than 770 stores in the UK and over 430 across Europe, the Middle East and Asia, plans to expand its store count in India from 36 to around 80 by 2016.
India is already its fastest-growing market in Asia – and the move to grow its store count there is a realistic one, experts say. But they also question whether India should be its top priority.
"Looking at per capita spending, an average consumer in India spends US$41 on apparel and footwear compared to US$200 in China and almost US$300 in Brazil," Kondej explains.
"Although the demand for international brands is there, it will take a while for both disposable incomes and consumer spending to catch up with other emerging markets. This immediately makes India a more challenging market to operate in."
She also highlights the state of modern retail development in India among the other hurdles it faces.
"Many recently opened shopping malls are currently struggling, and rents in Mumbai are one of the highest globally. Taking all this into consideration, it is quite surprising to see M&S putting India on top of their priority list," Kondej says.
Local sourcing
Plans by many international retailers to expand in India have been tempered by concerns about requirements to source 30% of their supplies locally. The Indian government imposed these conditions as part of efforts to open the sector up to foreign investment.
But sourcing locally has important benefits, allowing products to be tailored specifically for the Indian market "in terms of style [and] fit as well as to price points," according to Devangshu Dutta, chief executive of consumer products consulting firm Third Eyesight.
"A supply chain dependent on imports raises costs even further, potentially pricing the brand out of the market," he says.
It’s a point also picked up by Kondej. "This is a big deal because – outside their production hubs – the world’s leading fast fashion retailers are heavily dependent on imported merchandise. Both H&M and Uniqlo are now understood to be deferring their first store openings [in India], blaming exchange rate volatility."
She notes: "Gap in India arguably has an advantage over its rivals in that the company already operates a large sourcing base there.
"Any brand planning to embark on a big store network expansion in India would be comparatively well insulated from the devaluation of the rupee if they had localised production as well. For one thing, it would help M&S in developing a more tailored (country-specific) retail strategy and for another, it would provide protection against exchange rate volatility."
M&S highlights its sourcing operation in India and South Asia as crucial its expansion plans. Currently, 33% of its general merchandise products sold around the globe are made in the region, whilst 64% of M&S products sold in India are sourced from local suppliers.
It also says sourcing locally has enabled it to "stretch the seasons," by offering products like linen clothing – of which it sells over half a million pieces every year in India, accounting for 15% of sales – all year round.
Correct positioning
To succeed in India’s apparel market, M&S must get its positioning right and communicate this clearly to the consumer – issues that, worryingly, it also seems to be struggling with at home.
"Does it want to be considered a premium/aspirational brand with a focus on high quality apparel, or an affordable brand for the family with attractive price/quality ratio, or does it want to compete with the likes of Zara in the fast fashion segment?" Euromonitor’s Kondej asks. "It seems like the second option would be the best way forward for M&S in India given its product range and India’s family-centric culture."
Dutta also points out the a direct investment arrangement, whether through a joint venture or a wholly owned subsidiary, "creates more commitment on the part of the brand and also allows it to steer the business with a longer-term approach in mind."
Indeed, he adds, since moving into a joint-venture with the Reliance group, "M&S has committed to investing in larger stores, and also tweaking the product mix to suit its reading of the upper middle income consumers in India.
"While it is feasible to grow the business significantly in India, it needs to create a balance between seeking volumes and maintaining its premium ‘international’ positioning."
(Sourced from just-style.com.)
admin
November 12, 2013
Vishal
Krishna, Businessworld
Bangalore,
November 12, 2013
If
the Rs 1,000-crore Page Industries, the Bangalore-based manufacturer
and distributor of international innerwear brand Jockey is in
the spotlight today, it’s because of a strategic move it
made four years ago.
Sunder Genomal, managing director, Page Industries, introduced a women’s innerwear line, marking his entry into the $1.7-billion segment. He backed this up with a ramping up of Page Industries’ retail presence from 18,000 to 23,000 outlets over the next three years. The women’s range received a push-up, with over 100 styles on offer.
That appears to have paid off as the women’s range alone contributes 25 per cent to the company’s topline. Interestingly, about 45 per cent of the company’s sales comes from tier-3 cities. And that requires greater reach and availability of products on demand. To cater to this, Genomal reached out to some of India’s biggest e-tailers. Though e-tail sales — largely through Myntra, Jabong and Shoppers Stop — comprise less than 1 per cent of Page Industries’ revenues, they help tackle the bigger issue of customer dissonance with the brand when it’s not available despite the consumer’s ability to pay.
Page Industries was set up two decades ago with the purpose of manufacturing and distributing Jockey products in India. In the boardroom, you cannot but notice that the walls are lined with awards. Most are for best manufacturing and retail practices, but there is one award that stands out. Amid catalogues of the latest lingerie collections, there stands a large silver trophy in the shape of briefs. It is in recognition of Page Industries’ excellence in design and style.
In 20 years, Genomal has managed to make the brand synonymous with premium innerwear and has gone on to garner a marketshare of some 5 per cent. Leaders Maxwell Industries (VIP) and Rupa each enjoy a 15 per cent share of the organised innerwear market.
However, the Indian market continues to be dominated by the unorganised segment. The lower and mid-market segments form 86 per cent of the industry. According to Technopak, a retail consultancy, the size of the innerwear market in India is $2.9 billion; the category is also growing at a compound annual growth rate (CAGR) of 12 per cent and is expected to reach $5.1 billion by 2017.
“Corporate governance makes a company successful in the long run for both the promoters and the management,” says 58-year-old Genomal. He adds that a lot of his learnings were from his school days in the Philippines where his family held the franchise for the Jockey brand for five decades. “You need to create and maintain relationships if you are to be a long-term player. You need people who can also execute and believe in your vision,” he says.
In addition to Jockey, Page Industries is also the master franchisee of Speedo, a swimwear brand, with 12 stores across the country. It is also available through 730 retailers. Rival Maxwell Industries currently has over 110,000 distributors and sells through 550 retail outlets.
“Jockey has been a sought-after brand because of its style, fit, its representation of a young urban India and, most importantly, for being an aspirational brand,” says Devangshu Dutta, CEO of Third Eyesight, a retail consultancy.
Genomal has emerged number one in BW | Businessworld’s rankings of the Most ‘Value’able CEOs in the small companies (Rs 500 crore-Rs 1,499 crore) category largely on account of his modest compensation package of Rs 1.1 crore. He has achieved a 101 per cent CAGR on sales over two years. His closest competitor, P. Kaniappan of Wabco India, an automobile ancillary, has delivered around 47 per cent CAGR. However, Genomal is modest: “There are so many inputs like employee relations in the corporate structure that cannot be put down in numbers.”
“My goal as a leader is to ensure an environment and a culture founded on mutual respect, where everyone’s contribution is important, regardless of the rank or type of job,” he adds. The MD says such an environment instills a sense of bonding and belonging, not just as employees but as members of a family.
Finally, for Genomal, it boils down to passion. He loves golf and his BMW, but they aren’t the sole drivers for him aspiring to be the best. He got into the game to create an industry that stands the test of time.
(Sourced from Businessworld issue dated 2 December 2013.)
admin
November 12, 2013
Zahra
Khan, Sapna Agarwal, MINT
Mumbai,
November 12, 2013
Marks & Spencer (M&S) on Monday said it expects to have
80 stores in India by 2016, making the country the largest international
market by stores outside of the UK.
Marc Bolland, chief executive of London-based Marks and Spencer
Group Plc, said India is the retailer’s new “priority
market” and a “key sourcing hub”.
“We also want to expand to attractive tier-II cities like
Surat and Kanpur, and aim for more than 80 stores by 2016,”
he said in an interview, adding, “China used to be the priority
international market, but now that has changed.” The company
declined to give details of its investments plans.
The company runs its business in India through a 51:49 joint
venture with Reliance Retail, owned by Mukesh Ambani’s Reliance
Industries Ltd, called Marks & Spencer Reliance India Pvt.
Ltd.
M&S said it will continue to work closely with its Indian
partner and does not plan to invest directly in the country. India
last year allowed 100% foreign direct investment in single-brand
retail. “Sometimes, cooperations can be difficult, but this
one (Reliance Retail) has been a great partner,” said Bolland.
The company said its India sales were up 28% in the first half
of fiscal 2014, with double-digit growth across all stores. Apart
from its growing store presence in the country, M&S has given
a push to its local sourcing operations as well. Bolland did not
disclose the revenue generated by the Indian subsidiary, but said
going forward “the financial contribution will be much higher”.
M&S competes with local retailers such as Shoppers Stop Ltd
and Dubai-based Landmark Group that runs the Lifestyle chain of
stores. It also competes with stand-alone brands Benetton India
Pvt. Ltd and Tommy Hilfiger (the latter is present in India through
a joint venture with Ahmedabad-based Arvind Ltd). Japan’s
Uniqlo and Sweden’s H&M are in the process of opening
stores in the country.
M&S has always been aggressive about the Indian market and
moved from a franchisee model to the joint venture model in 2008.
In 2008, the British department store chain outlined plans to
set up at least 50 stores in India by 2013, a target it could
not meet, mainly because of an economic slowdown. Currently, M&S
has 36 stores in India.
“We don’t focus on quantity, but on quality; we always
look for good placing of our stores…and this time our strategy
for India is different than it was three years ago,” said
Bolland.
Devangshu Dutta, chief executive at Third Eyesight, a retail
consulting firm, said M&S started cautiously in India with
a franchise model, but moved to the joint venture as it considers
India a key market. Over the years, the retailer has increased
its India sourcing for domestic and global markets, and has lowered
prices and widened the range of offerings to appeal to a larger
number of consumers in India, Dutta said. As such, both Reliance
and M&S have deep pockets and they can make the commitment
to grow, he added.
M&S recently opened a flagship store in suburban Mumbai,
a 35,000 sq. ft outlet with over five floors. “We require
bigger stores as we have a bigger catalogue, but we will also
have more mid-sized stores going forward,” said Bolland.
“We have been cutting pricing, mainly backed by our sourcing
capabilities, and have brought it down to mid-market level,”
he said, adding, “33% of all M&S’s products sold
around the globe are made in South Asia, while 64% of products
sold in India are sourced from local suppliers”.
India’s organized apparel market accounts for $8 billion,
or 20%, of the overall domestic apparel market, according to Technopak
Advisors Pvt. Ltd, a retail consultancy. “Most department
retail chains in India are expanding and opening five or more
stores per year depending on availability of real estate,”
said Abhishek Ranganathan, vice-president (retail, real estate,
institutional equity research), PhillipCapital (India) Pvt. Ltd.
Shoppers Stop and Lifestyle are also expanding. Shoppers Stop
has over 65 stores and plans to open 8-10 stores a year. Lifestyle,
which has 45 stores, plans to open three-four stores this year,
Kabir Lumba, managing director of the Landmark Group owned company,
had said in a 1 September interview.
The Times of India newspaper, in a report in March, had said M&S planned to launch its food retail business as well in India.
(Sourced from MINT.)
