Vijaya Rathore, The Economic Times
New Delhi, 12 December 2014
Brioni, a luxury menswear brand from Italy, is currently looking for the "perfect" location in a south Delhi upscale mall to open a store, almost after a year it shut down its earlier store located inside a five-star hotel.
Store location is not the only change that Brioni has initiated in the country. It has found a new partner to sell its jackets, ties and shirts in India.
Another luxury brand, Etro, is holding talks with a number of retailers in India to make a comeback, after it split ways with Genesis Luxury and all the India stores were shut last year.
A host of popular brands, including Ferrari, Bang & Olufsen, Montblanc, Etro, Brioni and Bulgari are revisiting their India business plans by tweaking one of the most important factors – the local partner. Reasons differ. It could either be inefficiency of the existing partner to infuse new energy and money in the business, or the desire to take control of the operations by choosing someone docile.
Iconic jewellery brand Bulgari has formed a joint venture with a new "silent partner" with an aim to have better control over its operations in this market.
"Our ambition in India is much higher than before," Bulgari chief executive office Jean Christophe Babin told ET on his recent visit to India. The decision to make direct investments in this market, instead of simply relying on a franchise partner is like "pressing the reboot button". Bulgari had ended its seven-year relationship with Mumbai-based Dia Group’s Lifestyle Tradelinks India in 2011. Likewise, Ferrari has hooked up with Yadur Kapur, a dealer of luxury cars for the Delhi market and Navnit Motors in Mumbai, splitting with Delhibased Shreyans Group.
Kapur, who is working on a plan to open a new showroom, sales and service centre for Ferrari in Delhi, says, "The brand will now be represented in the right way in the country." One of his focus areas would also be to make sure that the company sent enough cars to India to match demand and that the buyers don’t have to wait too long.
Experts point out that the change in partnerships was partly due to the natural lifecycle of a relationship between the two parties, apart from other factors. "Many pacts were originally signed for a limited period, and when that time passes, people move on," says said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.
Also, as brands become more serious about the market, they revisit everything in order to infuse a fresh lease of life into the business.
"When international brands realise the importance of India and sense that the existing partner may not have the capacity, interest or potential to address the same, they move on," adds Dutta.
Etro, for example, is one of the brands looking for a new partner to conduct business in India. "We have had a meeting with them," said a senior executive of one of the top luxury retailers in India who did not wish to be identified.
Some separations are bitter. Former cricketer and businessman Dilip Doshi and Montblanc are fighting a legal battle amid allegations of fraud and deceit. Doshi claims that Montblanc pulled out of a possible joint venture at the last minute and terminated its distribution and franchise agreements in March this year.
Earlier this year, Montblanc announced a 51:49 joint venture to setup single-brand retail stores with Titan Industries, a Tata Group company.
Similarly, Brioni and Badasaab Designs (retailer of Brioni in India) went to court against each other and the legal tussle went on for some time. "A mutual settlement has been reached between the two," said a person aware of the development. Brioni is understood to have finalised OSL Luxury, which sells Corneliani menswear in India, as its new partner. OSL executives, however, did not comment on the development.
New Partners, New Plans
To begin with, most brands are working on re-establishing a retail presence besides enhancing brand visibility and "consumer experience."
Denmark-based high-end entertainment systems maker Bang & Olufsen (B&O) for instance has just opened a single-brand store in Delhi, and so has Bulgari. Ferrari and Brioni are doing the same. "We also have access to outside investment to expand B&O’s business in India," said Gaganmeet Singh, director of BeoWorld.
For the Bulgari CEO, it was important to take control of India’s operations."Though we have a partner here, we are behind the driving wheel," Babin said.
It’s not the first time brands are shuffling their relationships. In 2009, Gucci parted ways with its old franchisee Vijay Murjani and moved to a franchise agreement with investment banker Ashok Wadhwa’s Luxury Goods Retail.
Versace, is now with Infinite Luxury, but was earlier retailed by Blues Clothing Company in India. In 2012, Giorgio Armani ended its joint venture with DLF Brands to get into a deal with Genesis Luxury, run by Sanjay Kapoor.
A recent Euromonitor report said that India was the fastest-growing emerging market for luxury goods. The country’s luxury market will grow 86 per cent in constant value terms between 2013 and 2018, while China, Malaysia and Indonesia are expected to grow 74 per cent, 62 per cent and 59 per cent, respectively, over the period. India’s luxury market was expected to reach $14.73 billion by 2015 from an estimated $8.21 billion last year, with about 30 per cent of the customers coming from smaller cities.
(Published in The Economic Times)