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)

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)