admin
June 27, 2012
Fashionunited
Mumbai,
27 June 2012
Global brands are betting big on India, this despite no clarity
on FDI in multibrand retail. In fact, statistics from Department
of Industrial Policy and Promotion (DIPP) the nodal agency that
clears such foreign investments reveal that a number of top brands
have put forth their proposals of either increasing stake in JV
or expanding their presence in India.
American apparel-maker Tommy Hilfiger is one of them. The brand plans to open 500 stores in India over the next five years to capitalize on the brand’s increasing popularity in the country. It has informed the Department of Industrial Policy and Promotion (DIPP) that it is looking at increasing the footprint in India.
In a separate DIPP application, French fashion brand Promod SAS has also filed for a 51 per cent stake in a joint venture with local Modex Trading. Modex is co-owned by Tushar Ved, the promoter of Major Brands, which currently owns Promod’s franchisee rights in India. It may be noted that a study by management consulting firm Booz & Co had revealed that around 100 multinational retail and consumer companies had entered India between 1990 and 2010. As many as 86 companies entered before 2009, and a little over a fifth of this (or 18 companies) changed their partnership model.
Retail analysts say it would be interesting to see whether there is scope for Tommy Hilfiger to open 500 stores in India and whether Promod with low recall value before it launched in India and a limited footprint would experience a game change post forming the joint venture since Major Brands’ portfolio also includes Mango, Charles & Keith, Aldo and now even Guess. The four-decade old brand, which claims to refresh its collection with 100 new products every two weeks, competes with women-centric, trendy brands such as Zara, s.Oliver and Esprit. Meanwhile, even Madura Fashion & Lifestyle (MF&L) is in the process of converting the distribution agreement it signed with Esprit in 2005 into a joint venture.
With MNC brands establishing themselves with the low-risk and low-return model through franchisees and distribution agreements, they are now looking at forming JVs by scouting for able partners. For instance, UK-based retailers Clarks, and Marks & Spencer, have extended their distribution or franchise agreements into joint ventures with Future Group and Reliance Retail respectively.
In the recent past, there have been major partnership reshuffles in India that included Giorgio Armani parting ways with DLF Brands and going for a franchisee deal with Genesis Luxury, Versace, Corneliani and Guess, who too are scouting for a new local partner to start afresh, and Guess planning a tie up with Major Brands, the marketer of Mango and Aldo in India.
As consumer goods and retail consultancy Third Eyesight explains, about one-third of the more than 150 international fashion brands launched in India over the past seven years have either changed partners or exited the market and around 26 brands have changed partners, while 23-26 exited the market with at least half of those later returning either as a wholly-owned subsidiary or with a new partner.
admin
June 26, 2012
There was time when there were two choices for the middle-class Indian male of all ages—(usually) Bata or (occasionally) the Chinese guy who made shoes to order. Over the years, other brands also entered the market. Things have changed. While it may not reach the scale of an all-consuming obsession, there’s now a strong enough market in India for several upscale overseas and local brands to think it worth their while to vie for custom here, as Paromita Banerjee of Mint discusses in this video.
The article from Mint by Sapna Agarwal & Byravee Iyer is available here.
admin
June 26, 2012
Sapna
Agarwal & Byravee Iyer, MINT
Mumbai,
26 June 2012
Women
love their shoes. The attachment defines leading ladies as varied
as Imelda Marcos—widow of former Philippine dictator Ferdinand
Marcos and star of her own soap opera—and Carrie Bradshaw,
the narrative lead in Sex and the City, who famously has a thing
for her Manolo Blahniks. Countless devotees of Jimmy Choo and
Christian Louboutin are also testament to the passion.
As for men, time was when there were two choices for the middle-class Indian male of all ages—(usually) Bata or (occasionally) the Chinese guy who made shoes to order. Over the years, other brands also entered the market. The thing is, men, too, like their shoes. It may not reach the scale of an all-consuming obsession, but there’s a strong enough market now in India that several upscale overseas and local brands think it worth their while to vie for custom.
“Men’s love affair with their shoes is gathering a lot of steam,” said Darshan Mehta, chief executive officer of Reliance Brands Ltd, a subsidiary of Reliance Industries Ltd that retails brands such as Steve Madden, Diesel, Zegna and Timberland in India.
In November, Reliance Brands announced a joint venture with US-based apparel, footwear and accessories brand Kenneth Cole. The pre-launch market research for Kenneth Cole suggested that men were keen on the brand.
Mehta wasn’t too surprised. Men’s footwear may account for just 20% of the shoe stock at Steve Madden, but contributes over one-third of the overall revenue in the shoe category.
The trend has picked up in the last couple of years, with the palette extending beyond standard black or brown.
“Two years ago, we could not even think of selling red and blue loafers. Now they are the fastest selling,” said Dipak Agarwal, chief executive officer, DLF Brands Ltd, which retails Salvatore Ferragamo and Boggi in India.
He attributes the changes to increased global exposure, Indians travelling abroad, and the so-called metrosexual male trend, which translates into men spending more time and effort on personal grooming.
Over the years, the range has evolved “from men just wearing the basic black and brown formals to sporting varied colours and different occasion wear from formals to smart casuals”, according to Vikram Raizada, executive director, marketing, retail and business development, Tara Jewels Ltd. Raizada buys shoes every time he travels abroad—four times a year on average.
Shoes that may cost anywhere in excess of $100 have become an impulse buy for men. “If they see the right colour, pattern, size, they just pick it up,” said Mehta of Reliance Brands.
R. Burman, a Mumbai-based fashion photographer whose clients include Vogue and GQ, expounds on his shoe-buying philosophy.
“Buying shoes is like buying a piece of art. It is not necessarily about a need. It’s about appreciating the craftsmanship of the product. Sometimes it’s about comfort, sometimes it could be badly constructed but looks phenomenal,” he said.
Even a slowing economy has not deterred companies from seeking to enter the country.
Indian men are also more likely to look for technology in shoes than women. They would tend to be convinced, for instance, by features such as air-based cushioning and breathable shoes, said Ramprasad Sridharan, chief executive officer, Clarks Future Footwear Ltd, a joint venture between the 186-year-old British brand and the Kishore Biyani-led Future Group. The venture opened the first Clarks store in April 2011 and plans to raise the current 19 outlets to 100 as soon as possible, regardless of the uncertainty in the Indian economy.
For Puma Sports India Pvt. Ltd, the Motorsport lifestyle offering is the fastest growing category. Sales of the line’s shoes at Rs.4,500-7,000 a pair rose 10-15% last year, said Rajiv Mehta, Puma’s managing director for South Asia.
“Since 2006, the number of international shoes and accessories brands entering the market has increased fourfold,” said Tarang Gautam Saxena, a senior analyst at retail consultancy firm Third Eyesight. She noted that there are close to 200 international fashion brands in India, with more than one-quarter of these operating predominantly in the footwear and accessories category. More want to come in.
“Close to a dozen foreign brands are interested in entering the Indian footwear market,” said Kanchan Lall, associate vice-president, Tecnova India Pvt. Ltd, a consulting firm that helped luxury French luxury footwear designer Christian Louboutin launch his first store for women in New Dehi in February.
Last September, Louboutin launched his first men’s store in Paris. His shoes can easily cost more than $2,000 a pair. “Louboutin may consider retailing his men collection in India,” said Lall.
Indian retailers have also been seeking to establish themselves at various price points.
In April, Tata International Ltd announced a joint venture with Wolverine World Wide Inc., whose portfolio of footwear brands include Merrell and Caterpillar.
Meanwhile, apparel brands including Van Heusen, Louis Philippe and Allen Solly are also focusing on footwear.
“We found that there was an unmet need for style sought after by the discerning consumer,” said Jacob John, brand head, Louis Philippe, which diversified into men’s footwear in April 2010 and now sells about 60,000 pairs of shoes a year priced on average at Rs.4,500.
The market opportunity is seen as substantial. The country’s per-capita shoe consumption is the lowest in the so-called BRIC grouping of Brazil, Russia, India and China. In 2011, it was $7.2 in India compared with $25.7 in China, $81.5 in Russia and $107.3 in Brazil, according to Euromonitor, a global market research agency.
With more men paying attention to their footwear, ancillary businesses such as shoe laundries are slowly picking up.
Not surprisingly, most of their customers are male, according to Shashank Bharadwaj, who started a shoe laundry business in Bangalore eight months ago along with friend Chitra Ambareesh. The business, which charges Rs.150 per pair, has broken even, he said. Customers are happy to pay this much for shoes that cost Rs.20,000 and more.
To explore further, watch the Livemint video by Paromita Banerjee.
admin
June 22, 2012
Nandita
Bose and Matthias Williams, Reuters
Mumbai/New
Delhi, 22 June 2012
Swedish
retailer IKEA , the world’s largest furniture maker, is opening
up in India, marking a crucial step for the Indian government
whose policy flip flops related to foreign investment have damaged
market confidence.
The company, known for huge stores selling flatpack furniture and accessories, said it would invest 1.5 billion euros ($1.9 billion) to open 25 stores in Asia’s third-largest economy after initially balking at India’s sourcing requirements.
IKEA’s plans, announced by the Indian government after a meeting between the company’s CEO and India’s trade minister in Russia, could give a boost to the embattled government of Prime Minister Manmohan Singh, which was forced in December to backtrack on plans to allow in foreign supermarket operators.
While the government removed foreign investment caps in single-brand retail in January, it imposed a condition that foreign retailers source 30 percent from local small and mid-sized enterprises, dampening the enthusiasm of retailers for the plan.
"It’s a baby step but it has definitely sent the right signal out … The government is trying to convince international investors, India is still open for business," said Devangshu Dutta, consultant with Third Eyesight, a retail consultancy said.
The Indian economy which grew at its slowest pace in nine years has been badly hit by political roadblocks to economic policymaking battering corporate investor sentiment.
But the company, following similar moves in China and Russia, plans to cash in on India’s burgeoning urban middle class, which, having grown up on pop culture, generates a strong demand for owning international brands and lifestyle products such as furniture.
SOURCING
On Friday, India said the company had discussed its reservations over the sourcing policy with the government.
"IKEA had certain reservations about sourcing norms which were discussed with the DIPP (Department of Industrial Policy and Promotion) officials; suitable answers of which were provided leading to the decision to invest," the Indian government said in a statement.
The company does not yet have any stores in India but sourced $450 million worth of goods from the country last year, a figure it aims to lift to $1 billion in coming years.
It sources goods such as textiles and carpets from 70 suppliers and 1,400 sub-suppliers in the country, the company said.
"The mandatory sourcing clause that requires goods to be sourced from small and medium enterprises will remain a challenge," IKEA spokeswoman Malin Pettersson Beckeman told Reuters by phone on Friday.
The Singh government is keen to bring global supermarket chains such as Wal-Mart Stores Inc and Carrefour SA into India, in hope of improving the efficiency of supply chains in a country where roughly one-third of fresh produce rots before it gets to market.
However, foreign direct investment in supermarkets has been opposed by owners of one-off shops, which account for roughly 90 percent of India’s $450 billion retail sector, as well as by members of the ruling coalition.
IKEA said its investment will be made over 15 to 20 years.
India’s Commerce Ministry said IKEA will initially invest 600 million euros and a further sum of up to 900 million.
"These investment estimates have been drawn up based on our experience in countries like China and Russia," Beckeman said.
Industry officials, however, said that the Swedish firm’s entry will not really shake things for the domestic market given the number of stores it plans and the period of investment.
"It’s not going to shake up the entire domestic market but it will set a benchmark model for others to follow in India’s nascent furniture and home products market," Dutta said.
admin
June 22, 2012
Asit
Ranjan Mishra, Vidhi Choudhary & Sapna Agarwal, MINT
New
Delhi, 22 June 2012
Swedish
furniture retailer Ikea will invest as much as €1.5 billion
(around Rs. 10,740 crore today) in India, chief executive Mikael
Ohlsson told trade minister Anand Sharma, signalling an endorsement
of the country by a high-profile investor, something that’s
been rare of late.
Sharma said in a government press release on Friday that Ikea will initially invest €600 million and subsequently an additional estimated €900 million “for initial establishment of 25 retail stores in a wholly owned subsidiary”. Ohlsson and Sharma met in St Petersburg, Russia on Thursday.
While Ikea confirmed in a press statement that it will invest €1.5 billion in retail expansion “over the coming years”, it didn’t refer to the retail stores, nor did it give a timeline for the investment.
Ikea’s decision will come as a symbolic boost for a government that’s been criticized for being unable to push through policies and turning investors off the country at a time when it needs them badly as growth splutters amid global uncertainty.
The gross domestic product (GDP) growth slowed to a nine-year low of 5.3% in the March quarter.
“This quantum of investment at a time when India is facing challenges of credibility both within and outside the country sends a positive statement from a business outlook perspective,” said Arvind Singhal, chairman of Technopak Advisors Pvt. Ltd, a management consultancy firm.
Sharma also met Olaf Koch, CEO and chairman of German wholesaler Metro AG on Thursday in Russia. Koch expressed satisfaction over his firm’s investment in India and apprised the minister about expansion plans in the country. “He also informed that soon they will raise the number of their stores from 10 to 16 in the country,” the statement said. A Metro spokesperson in India declined to comment on the expansion plans.
Ikea said it has already applied to the department of industrial policy and promotion (DIPP) to be allowed to establish a fully owned subsidiary in India.
“We expect DIPP to expeditiously process our application and present the same before the Foreign Investment Promotion Board (FIPB) for consideration of the government of India,” the company said. “Once our application is approved by the government of India, we will be able to share more information about our intentions to establish retail operations in India.”
The government had hoped its decision to remove the 51% ceiling on foreign direct investment (FDI) in single-brand retail in November would persuade high-profile brands such as Ikea, Louis Vuitton, Cartier, Armani and Rolex to invest in fully owned stores in India.
But a condition requiring 30% local sourcing from small industries in India has been a stumbling block. Small industries are defined as those with a total investment in plant and machinery not exceeding $1 million.
Friday’s commerce ministry statement said Ikea had certain reservations about the sourcing norms and discussed those with DIPP officials. “Suitable answers…were provided leading to the decision to invest,” the release said, without elaborating.
Ikea said it will source at least 30% of the purchase value of products sold in India from its “direct and indirect supply chain comprising Indian small industries”. However, it said the mandatory sourcing norm remains a challenge “in the longer term” and asked the government to review the requirement and “provide flexibility”.
Ikea Trading (Hong Kong) Ltd-India, headquartered in Gurgaon, employs 140 people and sources many popular Ikea items from India such as textiles, rugs, plastics, lighting and metal products for its global supply chain. Currently, it is working closely with 70 suppliers and 1,450 sub-suppliers, including many small industries.
According to the Sweden India Business Guide 2011-12, Ikea’s annual turnover in India is $645 million, while its global turnover is $31.4 billion. Worldwide, it employs 127,000.
Ikea is known to adapt to local market requirements. For instance, in Turkey and China, emerging economies similar to India, Ikea offers home delivery and assembly as a service. The company also takes time to scale up operations and has just half a dozen stores in China in its 10 years of operations there.
“It will be interesting to see where the company sets up (shop) and how it adds value to the manufacturing and supply chain logistics in India,” said Mark Ladham, president, home division, at Future Group, which has 38 stores in 19 cities.
Devangshu Dutta, chief executive officer, Third Eyesight, a Delhi-based retail consultancy, said Ikea is known to have large stores that exceed 100,000 sq. ft and are designed as all-day destinations for shoppers with café and restaurant options.
“In India, one of the biggest challenges is realty and they may adopt a more pragmatic approach here and consider smaller stores (because of high property prices). What they do needs to be seen,” Dutta said. “Additionally, Ikea is favoured for its very cheap products. But the reason they are cheap is largely because the cost of assembly and delivery is borne by the customer. If the company offers these services, it will have to relook at its prices very carefully.”
Technopak’s Singhal also said Ikea, which is known for developing vendors globally, will maintain this tradition. “This step will encourage growth of manufacturing set-ups for SMEs (small and medium enterprises),” he said.
Dhvani Modi, research analyst at ICICI Direct, a Mumbai-based brokerage, said the opening up of FDI in single-brand retail was a positive move for the country.
Boosting sourcing from India will encourage job creation and better development of the sector as a whole.
The Indian cabinet’s bid to allow 51% FDI in multi-brand retail was scuppered by intense resistance from within and outside the ruling coalition.
In a bid to revive the initiative, trade minister Sharma wrote to the chief ministers of Uttar Pradesh, Punjab and Orissa on 19 June seeking their support on the issue.
