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Flying Visits Welcome

Arpita Mukherjee, Business Today
New Delhi, March 30, 2014

Last year, electronics retail store Croma Retail decided to sell JBL speakers at its store in Delhi’s T3 domestic airport terminal. To begin with, it was an experiment. After all, why would anyone buy a set of speakers at an airport terminal of all places? But the strategy paid off. The entire stock of speakers, priced at Rs 5,990 each, flew off Croma’s shelves.

"The price was not reduced nor was there a special deal. All we did was give the brand prominent shelf space, which makes a huge difference to sales," says Ajit Joshi, MD, Infinity Retail Ltd. Croma is part of Infiniti Retail, a 100 per cent subsidiary of Tata Sons.

Croma was among the first of the big retailers to foray into airport retail in India in October 2007. Today, airport retailing has become a business no chain can ignore. Croma already has seven airport stores across Mumbai, Delhi, Hyderabad and Ahmedabad. It has plans to set up stores at Kolkata and Chennai airports soon. Sales at its airport stores are growing at about 17 per cent annually, says Joshi.

The products especially in demand at Croma’s 850 to 2,000 sq ft airport stores are accessories such as scratch guards, covers, mouse, power banks and pen drives. These are typically in the price range of Rs 600 to Rs 4,000. The affluent Indian traveller today is also open to shopping for big ticket items at airports such as tablets and smartphones. Croma sold close to 15,000 smartphones at its airport stores in the past year.

Airport retailing is a popular concept globally but is still in its infancy in India. The non-aeronautical revenue (largely from retail) is more than double the aeronautical revenue at most airports abroad, but in India it is the opposite. Singapore’s Changi International Airport’s revenues from retail operations – with more than 350 stores – were over S$1.9 billion (US$1.5 billion at current exchange rates) in 2012/13.

However, airport retailing appears poised for an impressive take off in India. The renovation of most major airports is underway with large dedicated areas for retail stores. The recently opened T2 terminal at Mumbai’s Chhatrapati Shivaji International Airport for instance, has about 700,000 sq ft area – the size of over 10 soccer fields – dedicated to retail, food and beverage, lounge and travel services. Similarly, the retail space in Delhi’s T3 terminal is spread over 290,000 sq ft.

Apart from Croma, prominent brands with a presence at Indian airports are Shoppers Stop, Hidesign, William Penn, Pavers England, WH Smith, among a host of others. Delhi’s Indira Gandhi International Airport, for instance, (terminals T1 and T3 combined) has close to 500 brands spread over 323,000 sq ft. Most of these retailers plan to scale up and are upbeat about the future.

Shoemaker Pavers England operates 14 stores at airports, and its officials say the products that sell more are the high priced ones. Its stores are small, between 150 and 300 sq ft in size, with products offered varying according to location. "What Chennai airport has may not necessarily be there at Mumbai airport, and what Mumbai airport has might not be available in Cochin," says Utsav Seth, CEO of Pavers England India. "White shoes sell well in Hyderabad, they don’t in Delhi." Pavers England’s stores at airports do better than its regular ones, adds Seth.

It is a similar story for pens and accessories retailer William Penn. "The highest selling products are writing instruments," says the company’s CEO, Nikhil Ranjan. The company gets about 10 per cent of its total revenue from its airport stores, three in Delhi and one in Mumbai. It is now actively looking at setting up shop at most of the newly developed airports across the country.

"In recent years, not only has passenger traffic gone up significantly with more low-cost airlines on the scene, but also the time spent by passengers at airports has increased due to early check-in times set by airlines following security and operational concerns," says Devangshu Dutta, CEO of consulting firm Third Eyesight. "This has increased retail opportunities, and airports in recent years are planning retail as an integral part of operations, rather than tucked away in low-traffic corners."

Retailers say it makes sense to be present at airports. "Airports are a very good place to get customers. More so, since there has always been shortage of quality retail space in India," says Dileep Kapur, President of leather bags and accessories-maker Hidesign. Already, global airport retailers are eyeing opportunities in India. Nuance Group AG, the world’s largest international airport retailer, through its joint venture with Shoppers Stop Ltd, has been present in the Indian travel retail market for six years. The company currently operates 19 stores at Mumbai International Airport and five at Bangalore International Airport.

Nuance manages almost 770,000 sq ft of retail space globally and operates 300 outlets in 64 locations across the world. It reported an aggregate revenue of CHF (Swiss francs) 2.6 billion (Rs 18,116 crore) in 2012. "India has huge potential to grow. Airport infrastructure is being developed and we will see the results soon," says Anirban Dutta Chowdhury, Country Head, Nuance India. The retailer’s highest selling product is liquor, followed by confectionery and perfumes.

Not so long ago, in 2004, when GMR Infrastructure was given the task of developing the Delhi airport, it had to cajole and incentivise brands to open shop on the premises. "There were genuine concerns about whether customers would buy the products," says Romy Juneja, Vice President and Chief Commercial Officer, GMR Delhi International.

But most retailers which chose to enter early are still there and thriving. These include the likes of Shoppers Stop, Croma Retail, Ethos Watch Boutiques and Hidesign. "The Hidesign brand is a perfect fit with airports, considering its customer is the corporate traveller," says Kapur of Hidesign, which has eight Hidesign and Holii stores at airports.

Retailers, however, have to pay much higher rent per square foot for the space they occupy at airports compared with other locations in cities. "There is an assured customer base and you can directly target your core customers, that too seven days a week, so it makes sense for companies to be there, if they’re ready to pay the higher rent," says Sushil Patra, Associate Vice President, Retail, Technopak, a consultancy firm.

The returns per square foot are much higher at airports than at other stores. For Croma, the annualised realisation is close to Rs 1.2 lakh per sq ft at airports, while in the cities it is close to Rs 30,000 to 40,000 per sq ft. It is more profitable than the regular stores, says Joshi. "Our stores are as profitable as those at malls or high streets," says Govind Shrikhande, Managing Director, Shoppers Stop. It operates six stores at airports across the country. "Retailers would not stick around at airports if things were not working out for them," says Dutta of Third Eyesight.

Airport retailing then appears poised to take root in India.

(Sourced from Business Today, issued dated 30 March 2014)

Corporates spot juicy prospects in branded fruits

Nupur Anand, DNA (Daily News & Analysis)
Mumbai, March 25, 2014

As demand for branded fruits grows, corporate houses are diving into the business. After Mahindras, Tatas have entered the space.

While Mahindras sell fruits such as apples, grapes and bananas, apart from several other imported varieties under Saporo brand, Tatas have begun with grapes — Rallis-Star Bazaar Grapes.

Ashok Sharma, chief executive, agri & allied business, Mahindra & Mahindra, told DNA, "The entire Rs 3 lakh crore fruit market in India is unbranded and that spells huge advantage for players who are looking at tapping into this market." M&M forayed into the branded fruit segment in November last year and is confident of clocking a turnover of around Rs 125 crore by 2016.

However, companies at the moment are just testing the waters by only introducing few fruits and limiting the reach to select cities. For instance, the Tata group will only be offering branded grapes as of now. On the other hand, Mahindras have introduced their branded fruits only in Hyderabad and are in no hurry to expand to other markets immediately.

Sharma said at present players are also making conscious efforts to ensure that the fruits are not priced at a very high premium to the unbranded ones. "Indian consumers are very price sensitive and now that we are introducing consumers to the branded fruit category we are limiting the price to only at 5-10% premium to other fruits."

Experts said the fact that branded items can be priced at a premium ensures healthy margins for the companies and that is also getting several players interested in the business.

Devangshu Dutta of Third Eyesight, a retail consultancy firm, said there have been constraints on the supply side which had kept players away for long, but now that the issues are getting addressed it’s likely that even others will show interest in the segment.

"There have been several challenges on the supply chain side but now some of these issues are getting addressed and also there has been help from certain state governments," he said.

Devendra Chawla, CEO, Food Bazaar, Future Group, said going ahead, the market for branded fruits will definitely expand as the demand for premium products increases. "Branding of commodities has started in India and so it’s no surprise that it is happening even in the fruits category. A brand guarantees consistency and quality and especially in segments such as fruits where there are variations in terms of size, colour, etc it can play an important role," he said.

(Sourced from DNA.)

Himatsingka Seide: Spinning a Success Story

Debojyoti Ghosh, Forbes India

Mumbai, March 20, 2014

There is no monopoly on good taste. It is this epiphany—combined with the business acumen that has driven the Marwari community for generations—that has spawned a home-grown textile success story in the erstwhile pensioner’s paradise of Bangalore.

Himatsingka Seide, a Rs 2,500 crore (sales) home-textile powerhouse with manufacturing operations in India and a retail network across 22 countries, has been growing at a compound annual growth rate (CAGR) of 15-18 percent over the last five years—this in a tough global economic environment and in a sector that is growing at a CAGR of 7 to 8 percent, according to industry estimates. For fiscal 2013, the company’s consolidated revenue grew 18.3 percent to Rs 1,689.43 crore, while profit after tax was up 73.4 percent to Rs 57.32 crore.

Started by first-generation businessmen brothers Dinesh Kumar and Ajoy Kumar Himatsingka in 1985, the listed company is a significant player in the home-textile space, points out Amit Gugnani, senior vice president, fashion-textile and apparel, at management consulting firm Technopak. “The group has always been forward-looking in terms of expanding their product portfolio, acquiring plants and setting up facilities. The company’s focus on fabric, design, drapes and pattern differentiates their products,” he adds.

Says Devangshu Dutta, chief executive, Third Eyesight, a marketing and consultancy firm: “[The focus on design, technology and scale] has provided highly profitable growth for most of the company’s life… Other design-based exporters typically lack the scale and technology orientation in which Himatsingka has invested.”

The beginning

It was during a business trip to Europe that Dinesh, then an exporter of textile products, had a chance to observe successful textile houses and recognised an opportunity to do one better. “They are not magicians. They applied great technology to quality raw materials—the right yarn, texture and colour—to create distinctive products,” says Dinesh, 65, the group managing director. Though he had no formal training in textiles, his passion for the product and his self-belief have been the driving forces behind the 28-year-old business. Ajoy is currently the vice chairman, but is not actively involved in the business.

The business got a boost when Dinesh’s son Shrikant joined in 2001. Today, much of the expansion and new initiatives are overseen by him.

The company invested Rs 1,200 crore between 2006 and 2008, as part of its expansion plan. In 2007, it invested $125 million (Rs 535 crore) to set up a new bed linen manufacturing facility at the Hassan SEZ, about 200 km from Bangalore. In the same year, it acquired Italian company Giuseppe Bellora known for its bed linen brands, New York-based home furnishing player Divatex Home Fashions, and DWI Holdings, a licensee of the Calvin Klein Home and Barbara Barry brands. Shrikant, who is the executive director, is reluctant to divulge financial details of the acquisitions, but, according to a release by DWI Holdings at the time of the acquisition in 2007, the deal was valued at $30 million, with the US-based home-textile company posting revenue of $47 million in FY07. For Himatsingka, which had sales of about $45 million then, this highlights the enormous appetite for risk and calculated growth plans.

But Shrikant, 34, points out that it was his father’s early emphasis on research, product development and product design that forms the basis of the company’s success. “To set up a manufacturing facility to make luxury home-textile products was the first of its kind in India back then,” he says.

A professional approach

Himatsingka is a family-owned business with promoters’ holding at 57.07 percent as of December 2013. But with a global presence and workforce of over 5,000, the company boasts of professionally-driven values. For Shrikant, the family is just the majority shareholder. “We have created an environment of transparency, empowerment and high governance with an underlying conservative streak, which has helped us to attract and retain talent,” says Shrikant.

Group CFO and president, finance, KP Pradeep has spent over six years in the organisation. Having worked with Accenture and Fidelity earlier, Pradeep sees no difference between an MNC and family-owned businesses in the country. “Today, family-run business houses have grown beyond that. Enterprises have realised that shareholding is different from the functioning and operation of the business,” he says.

Shrikant says the journey has been fascinating. “Over the last five years, we have been growing at a CAGR of 15-18 percent. We hope to continue with this and expand our manufacturing and distribution network,” he adds. However, with export challenges remaining, the company needs to focus on more selective products, sales channels and innovative selling and merchandising, says Gugnani of Technopak.

(Sourced from Forbes India.)

Premji fund buys 5% in Trent

Meghna Maiti, Financial Chronicle

Mumbai, March 20, 2012

Azim Premji, the billionaire chairman of Wipro, is once again turning his attention to the retail sector. His investment fund, PremjiInvest, has bought nearly half the shares on offer in the recently concluded qualified institutional placement (QIP) of the Tata group’s listed retailer Trent.

PremjiInvest has invested Rs 122 crore in Trent which runs the Westside chain and the Star Bazaar chain, according to a Trent disclosure to the Bombay Stock Exchange (BSE) on March 16. This makes PremjiInvest, with 4.91 per cent, the second largest shareholder after the Tatas who have 28.6 per cent in Trent.

PI Opportunities Fund – I bought 1.33 million of the 2.74 million shares on offer in the QIP.

The shares were sold at Rs 912 apiece last week and the issue was reportedly subscribed over two times. PI Opportunities Fund- I is a venture capital fund registered with SEBI.

Standard Chartered Securities (India) and JM Financial Consultants were bankers to the issue.

Other shareholders in Trent include the Xander group’s Siddhartha Yog, Norway’s Sovereign Wealth Fund and Government Pension Fund Global, as well as mutual funds and insurance companies.

For the nine months till December 2011, Trent reported a 21.6 per cent increase in sales to Rs 659.32 crore although its net profit slipped by 18.5 per cent to Rs 27.74 crore.

“Wipro is keen to invest in Trent because they can liquidate stake easily as it’s a listed firm. We should also not forget that Wipro has a big consumer products business and hence understands consumer-facing businesses,” said Devangshu Dutta, chief executive of the consultancy Third Eyesight.

Trent owns and manages a string of retail chains in formats such as Westside (lifestyle retail), Star Bazaar (hypermarket chain), Landmark (books and music chain) and Fashion Yatra (family fashion store). Trent also has a joint venture with Spain’s Inditex group to develop Zara Stores in India.

According to its QIP prospectus, Trent said it plans to use the funds for expansion, including setting up of retail stores and investments in certain retail real estate developments. The funds would be also utilised to meet working capital requirements.

Recent investments made by PremjiInvest include a 7 per cent stake purchase in ethnic retailer Fabindia and fund infusion in cancer care chain HealthCare Global. Shares of Trent closed up 1.18 per cent at Rs 942 on Tuesday on the Bombay Stock Exchange.

An earlier investment in the failed retailer Subhiksha had come a cropper. PremjiInvest had bought 10 per cent in Subhiksha from ICICI Venture in 2008 for Rs 230 crore. The Chennai headquartered retailer chain ran out of cash and went bankrupt and out of business. Subhiksha closed its nationwide network of 1,600 stores and defaulted on loans, vendor payments and staff salaries. In 2009 PremjiInvest sent legal notices to six serving and former directors of the retailer, charging them with not performing their duty and keeping investors in the dark about Subhiksha’s financial status.

(This is an edited version of an article that originally appeared in the Financial Chronicle on 20 March 2012.)

Flying off the shelves

Rashmi Pratap, The Hindu Businessline
Mumbai, March 14, 2014

Circa 2002: Waiting for a flight at the Mumbai Airport is a nightmare. There is just one coffee shop and a long queue to announce it. Your ability to wait out and pay for a cup of coffee will be of no help. If the shop’s staff, employees of the Airports Authority of India (AAI), are not irritated by the time your turn arrives, you’ll get your coffee. And if you’re lucky, it will be hot. Else, your only takeaway from the shop will be a sullen “khatam hai (it’s over)”.

The rest of the airport looks equally sad — bare walls, dark corridors and a disinterested ground staff. Carrying a book is mandatory, for there’s nothing to browse through — no shops, no food courts — except the pages of the bestseller in your bag.

Fast forward to 2014: from Starbucks and Café Coffee Day to Domino’s and Royal Challengers Bar, there is enough to keep you and your taste buds occupied when your flight is delayed. And if you want to shop, your flight better be delayed, for there’s Apple, Sony, Emporio Armani, Roberto Cavalli, Croma, Kimaya and a multitude of other brands to take your custom to.

Not surprisingly, airport retail is estimated to be a Rs. 6,000 crore industry. With 61.42 million passengers travelling by air in 2013 alone, there is an ever-burgeoning market to tap. One that apparently allows some brands to earn almost eight to nine times of what they earn at malls or high-street outlets.

Taking off

Ajit Joshi, MD and CEO of Infiniti Retail, vouches for this upward trajectory. His company sells consumer durables under the Croma brand, which has a strong presence at airports. “Our retail stores at the terminals are doing very well. We have annualised sales of Rs. 1.27 lakh per sq ft at airport outlets — the highest among all our formats,” he says. Croma currently has seven stores across Indian airports, ranging from 850 to 2,000 sq ft. In contrast, the company’s per sq ft revenues from outlets in cities are just about Rs. 30,000 to Rs. 40,000 per sq ft.

Café Coffee Day, which opened its first airport outlet in 2001, has opened 33 more since then and is continuing its expansion. “In the last few years, airports have gone through a major facelift, and many airlines are operational today. This has increased the number of air travellers. Airports have good footfalls that result in better sales,” says K Ramakrishnan, the company’s president (marketing).

Dipak Agarwal, CEO, operations and strategy at DLF Brands, which include Boggi Milano, Mango, Sunglass Hut, ELC and Mothercare, says revenues from airport outlets are equally high for them — “Productivity at airports is 80 per cent more than street retail.” This means that if a street store is bringing in Rs. 2,000 per sqft, shops at airport would rake in anywhere between Rs. 3,600 and Rs. 4,000 per sq ft. The reason? “Here, stores operate for 24 hours and traffic is much higher than city outlets,” says Agarwal.

The travelling wallet

Customers at airport outlets are often well-travelled and more aware, so their propensity to conclude a transaction is higher than window-shoppers at stores in the city. “We get a wide range of customers round-the-clock, who have time to spare till they get onboard. It’s a great time to pick up I-thought-of-you gifts, souvenirs, guilt purchases and thank you notes,” says Dilip Kapur, founder of Hidesign, which specialises in leather handbags and accessories.

Hidesign set up its first airport outlet in India at Hyderabad’s international departure terminal in April 2008. It retails at domestic as well as international airports now, and Kapur says, “Overall, we are doing very well, with Delhi and Mumbai leading the pack.”

For Café Coffee Day, no-frills airlines have come as a shot in the arm. “There are quite a few budget airlines today that do not essentially offer food and beverages; many travellers like a quick takeaway for their onward journey,” says Ramakrishnan.

Siddharth Sahgal, mall mechanic and chief managing officer at the advisory firm, Beyond Squarefeet, points out that 70 per cent of the buyers here are business travellers. “They have time constraints and shop at airports instead of malls. Since they are an educated, focused group of genuine customers, they also act as ambassadors for the products,” he says, “Besides, there is a lot of faith in the merchandise that retails at airports as brands do not typically showcase discounted goods.”

Temporary turbulence

But if sales are high, so are costs of operating at airports. The rentals are eight to nine times higher than at malls or high streets. Ankur Bisen, senior vice president, retail and consumer products at Technopak, says, “One reason for such high rentals is the acute supply shortage. Since most of the supply is restricted to Delhi and Mumbai, the demand for these travel retail destinations is high.” Apart from these two airports, retail space is also being developed at the Bangalore and Hyderabad airports, which have also been privatised. While GVK group operates the Mumbai and Bangalore airports, GMR manages the Delhi and Hyderabad airports.

GVK charges a fixed rent or offers a revenue sharing arrangement with retailers. So a brand that earns well will have to shell out ever-increasing revenue to the operator, if it opts for the latter. Bisen says the choice of revenue model depends on the category and format. A standard rule cannot be applied to say that one model will work better over the other.

Profitability targets can also be hard to meet since traffic has not grown in keeping with projections. The number of passengers travelling by air grew only 4.43 per cent in 2013 after a decline in 2012, according to DGCA.

Besides, the staff has to be paid for operating 24×7 and that doubles salary expenses. Devangshu Dutta, chief executive at the advisory firm, Third Eyesight, says, “The staff deployed at airport outlets is different from high streets because of the different category of customers walking in and a superior product mix. That is an addition to costs.” Moreover, as Kapur says, “Operationally, it requires a good deal of sophistication in dealing with both security and government regulations.”

But Sahgal of Beyond Squarefeet believes that good brands can afford such expenses as airports generate high sales volumes. Joshi agrees: “Airport sales more than compensate for the rentals and will only grow faster as more people travel by air.” Over the years, airport retailing has been profitable for Croma, says Joshi, declining to detail the financials. Airport sales add two per cent to Croma’s total revenue. And while they have been growing at 17 per cent annually, other stores have reported nearly half the growth at 9 per cent.

DLF’s Agarwal is not worried about high operating expenses either. “One can take on high costs as airports offer high visibility. It is an investment in brand-building,” he says.

Airports, then, are not just retail outlets. They are also the places where brands as built. Croma’s Joshi says, “ airports get filtered premium customers.” And that makes them the best platform to launch the latest products. “You get to tap India’s who’s who as well as regular business travellers. These buyers are also the decision-makers for their families.” Kapur concurs, “We consider airports critical to the development of the brand internationally. We would target all major airports in India and strategically important stores internationally to help us build the brand.”

However, airport retail in India has other challenges. Unlike in Singapore, Dubai or London, India doesn’t have airports that act as a hub for passengers. “Most of the airports here are not hubs; there is some traffic getting redirected to other locations in the country, but it is just a fraction. Most of the traffic is meant for the destination, leaving little scope for shopping at airports,” says Dutta.

Also, there is a lot of low-cost traffic due to tariff dynamics in the market. “We’re living with that as a nation of travellers. But it just means that unless you have a real need for something, you won’t buy at the airport. And that’s a challenge,” adds Dutta.

Shubhranshu Pani, managing director, retail services, JLL India, says, “The future of airport retailing depends on how it evolves and how it’s positioned. In the West, airport retail is an option for shoppers who have requirements after normal shopping hours. If Indian establishments make 24×7 shopping their USP and airports do away with some of the access restrictions, it would boost their success.”

Creating retail spaces alone is not enough. The retail flight will take off only when the quality of customers improves and impulse buying supplements planned shopping.

(Sourced from The Hindu Businessline)

US retailers go online to net Indians

Raghavendra Kamath, Business Standard

Mumbai, March 6, 2014

According to the Internet & Mobile Association of India, the e-commerce sector had grown from $3.8 bn (Rs 23,560 crore) in 2009 to $9.5 bn (Rs 58,900 crore) in 2013. The share of e-tailing had grown from 8% in 2009 to 16% in 2013.

And while they are not physically present in this country, some of the largest US-based retailers — JC Penney, Nordstrom, Macy’s, Ann Taylor — are increasingly betting on “shipping to India” or selling their products here through their e-commerce portals, to test the waters.

Most of these portals accept the rupee for payments and have ‘Exclusive India’ pages on their sites, to woo customers here. Most offer shipping in 6 to 12 days.

According to Third Eyesight, a retail consultancy, eight US department stores and brands are shipping their products to India.

While these companies say this is a strategy to build their sales, retail consultants say they’re testing the waters before they actually enter.

When asked, a Macy’s spokesperson declined to comment on India-specific sales trends but shared a press note it had issued during the launch of international shipping in mid-2011. “International shipping will enable Macy’s to build upon its existing customer base beyond the United States, by exposing our product offerings abroad,” said Kent Anderson, president of Macys.com.

Cincinnati, Ohio-based Macy’s ships to 91 countries and its online sales have grown 40 per cent since 2010, to reach a little over $3 billion (Rs 18,000 crore) in annual sales.

Consultants say the share of e-commerce business for these sites is low but its a precursor for the brands’/retailers’ entry here. Said Tarang Gautam Saxena, lead consultant at Third Eyesight: “Given the restrictions in FDI (foreign direct investment) in multi-brand retail, international retailers yet to enter the Indian market are tapping the demand through shipping online orders. This presents a low investment option, while allowing the company to test the market.”

Added Prashant Agarwal, joint managing director of Wazir Advisors: “It is a call to test the market. Testing might actually last a year or two before they decide.”

He says shipments by international retailers has picked up significantly in the past six months. “As e-commerce is becoming popular, many people are buying online from these sites. Their deliveries have also become efficient,” he added.

‘Expensive buy’

However, the impact of this route is curtailed by the fact that the range available for Indian consumers might be limited, and the additional shipping costs and tax-related charges are fairly high, said Saxena.

For instance, a buyer of a discounted shirt on Macy’s website needs to pay nearly three times the price of one sold by the US firm, after shipping charges and duties. A shirt priced at Rs 1,756 will have shipping charges of Rs 2,284 and duties and taxes of Rs 929, taking the final price to Rs 4,969.

Saxena said global e-commerce companies such as Amazon, eBay and Groupon have gained a foothold in the country through alternate online business avatars (mostly the marketplace model, where the sites do not hold inventory), given current FDI restrictions, even as investigations had been initiated to see whether the existing e-tailers were breaking the latter rules.

(Sourced from Business Standard)

Half of global fashion brands here came through franchise, distribution pacts

Raghavendra Kamath, Business Standard

Mumbai, March 3, 2014

Half of international brands which are present in the country had entered the local market through franchise or distribution agreements, said a new study.

The logic for opting for this route is to gain control in terms of the product, price and partly the retail experience, said a study by retail consultant Third Eyesight. "Amongst the new brand launches this year (2013), many are luxury or bridge to luxury brands. For such brands, the low volumes may not justify India-specific sourcing to meet the 30% local sourcing clause of the FDI policy. Thus, franchise has emerged as a logical option for these brands," said the report.

In comparison, in 2010, a considerable number of international brands took the ownership route through joint venture or subsidiary, apart from franchising as well. Series of brands such as Forever 21, Oviesse, Vero Moda and Zara opened their stores here in 2010. About 30% of international fashion brands present in India are from the US while about a fifth of the brands are Italian, said the study.

The prominent among US brands which entered the country last year include Brooks Brothers, Genesco Inc, Stuart Weitzman, Hanes Brands among others. Others belong to the UK, France and Germany, said the report by Third Eyesight.

According to the report, though over 200 global fashion brands are present in the country, the number of brands entering the country could go up significantly. “The growth of international brands entering the Indian market has been slow but steady for the last three years amidst global economic conservatism and a slowing Indian economy.

However, there are enough currents at the deeper level,” it said. Brands such as H&M, Massimo Dutti, Prada and others are expected to open stores in the country in the current calendar year.

(Sourced from Business Standard)