Sagar Malviya, Economic Times

January 5, 2024

Top global apparel and fast fashion brands appear to have struck a strong chord with young customers, racking up sales growth of anywhere between 40% and 60% in FY23, bucking the trend in a market where the overall demand for discretionary products slowed down.

For instance, Swedish fashion retailer H&M and rival Zara reported a 40% increase in its topline while Japanese brand Uniqlo saw a 60% jump in sales. American denim maker Levi Strauss and British brand Marks & Spencer posted a 54% increase, latest filings with the Registrar of Companies showed. Dubai-based department store Lifestyle International, too, saw a 46% jump in revenues on a large base. These brands garnered combined annual revenues of nearly $2.6 billion, more than double compared to FY21 when it was $1.1 billion all put together.

“With consumers getting brand conscious, global brands have a natural advantage. There is a distinct aspirational momentum for international brands that carries them through. Also they can sustain having unsold inventory and discounting better than smaller peers,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm. “Also, these brands have not yet reached saturation point in terms of network and hence can invest further to widen their reach.”

The revenue surge was also led by brands’ shifting focus on ecommerce, which now accounts for more than a quarter of their sales, even as they face intensify competition from both local and global rivals in an increasingly crowded market where web-commerce firms continue to offer steep discounts. Over the past two years, sales growth for most retailers have been price-led, reversing the historic trend when volumes or actual demand drove a bulk of the sales.

The fashion retail segment has been struggling with a demand slowdown since January last year due to inflationary headwinds. The overall retail growth slowed down to 6% in both March and April, increasing marginally to 9% in August and September before falling slightly to 7% in October and November, according to the Retailers Association of India.

“Spends are shifting to experience, holidays and big ticket purchases such as cars. Stronger retailers which had the right product to price proposition works for consumers who are not necessarily looking at brands from global and local lens. What helped our sales was product rationalisation, renovation of stores as well as our value proposition,” said Manish Kapoor, managing director at Pepe Jeans that clocked 54% growth to Rs560 crore in FY23. “The current fiscal has been muted and we expect election spending and improved sentiment to drive recovery next fiscal.

As the world’s second most-populated country, India is an attractive market for aspirational apparel brands as rising disposable incomes cause the consuming base of the pyramid to broaden further. “The Indian economy is on course to be among the top economies in the world. The key factors driving the India consumption story include a large proportion of young population, rising urbanization, growing affluence, increasing discretionary spending and deeper penetration of digital,” said Levi Strauss in its latest annual report.

Last year Levi’s said India is now the largest market for them within Asia and sixth largest globally while M&S said it is opening a store every month in India, already its largest international market outside home in terms of store network.

(Published in Economic Times)

Dia Rekhi & Faizan Haidar, Economic Times
New Delhi, June 29, 2023

Fast Retailing, the parent company of Uniqlo, is looking to set up a significant manufacturing presence in India through about 20 ‘production partners’, multiple people aware of the development told ET.

One of the world’s most valuable clothing retailers, Uniqlo already has a cluster of production partners in India and is looking to expand this network through a significantly large investment, they said without sharing any estimated amount.

“The investment amount will be significant because Uniqlo is serious about India and views it as an important market,” one of the persons said. “Unlike the existing facilities in India, which cater more towards exports, the production partners that Uniqlo will bring to India will be specifically meant for the domestic market.”

One of the company’s production partners that ET spoke to confirmed that their current mandate is to produce only for exports.

Uniqlo, which is Asia’s biggest clothing brand, had said India is one of the top priority markets for them where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear.

The company’s ambitions for India are considerable with its CEO Tadashi Yanai indicating that he wants Uniqlo to become the “best-selling retailer in India”.

The Japanese brand opened its first door in September 2019, but stringent lockdown measures announced to contain the outbreak of the pandemic in March 2020 delayed the expansion plan.

The brand is now planning to enter Mumbai and Bangalore. It has already opened stores in Lucknow and Chandigarh after Delhi.

Uniqlo does not own any factories. Instead, it outsources production of almost all its products to factories outside Japan.

As per a report titled ‘The Uniqlo case: fast retailing recipe for attaining market leadership position in casual clothing’, this model allows Uniqlo to keep its breakeven point low and improve return on investment.

“As we expand our global sales, we continue to grow our partner factory network in countries like Vietnam, Bangladesh, Indonesia, and India,” the company has stated on its website.

As per its list of garment factories, as on March 1, 2023, Uniqlo has 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia, and 16 factories in India and Japan among several other locations.

As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.

Over the past decade, global brands Zara and H&M became market leaders in the fast fashion segment in India.

“For global brands, India should be one of the most logical sourcing hubs given its large vertically integrated manufacturing sector on the one hand and the large, growing domestic market driving demand on the other hand,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, told ET. “However, its weight in the sourcing baskets has historically been low due to several reasons, in spite of China being visible for decades to the management teams of brands and retailers as a concentrated sourcing risk,” he said.

Uniqlo’s existing production partners in the country include Shahi Exports, Brandix Lanka, Tangerine Design, Maral Overseas, Shingora Textiles, Silver Spark Apparel, SM Lulla Industries Worldwide and Penguin Apparels.

As per Fast Retailing’s first-half results, the company said its revenue was 1.4672 trillion yen, or around $10.2 billion, and that its operating profit had risen to 220.2 billion yen ($1.53 billion), bolstered by strong performances from operations in several regions, including India where it said it generated significant increases in both revenue and profit.

With regard to Uniqlo International, in particular, it said revenue stood at 755.2 billion yen ($5.25 billion), while operating profit was 122.6 billion yen ($852.93 million).

The company said regions like India “reported significant revenue and profit gains as they enter a full-fledged growth phase”.

(Published in Economic Times)

India’s economy is in focus globally, and is also at an inflection point.

Join Devangshu Dutta at the Asia-Pacific conference of UFI, The Global Association of the Exhibition Industry. Registration Link: https://lnkd.in/dq89_rY3

See you at UFI Asia-Pacific Conference in Kuala Lumpur!

[Accompanying Image credit: Amazon Go; CC/Wikimedia Commons/Brianc333a)]

To many, retail seems to be having an identity crisis.

Closed storefronts on American and European streets and dead malls in India and China are blamed on the growth of online retail. At the same time, the world’s largest online retailer, Amazon, is opening physical stores and buying offline retail operations in the US and in India, while the world’s largest retailer, Walmart, is busy digesting India’s ecommerce market leader. Even India’s online fashion and lifestyle websites – among them Myntra, Firstcry, Yepme and Faballey – are acquiring offline brands or opening stores. Or both.

What in the world is going on?

The short answer: consumers want choice; and retailers have no choice.

For many, ecommerce still seems to have the “new car smell” after more than 20 years, the message pitched so desperately by the founders of and investors in ecommerce companies still echoing: that this “new kid” will make customers’ lives a quintillion times better and wipe out the competition. Two decades on, and hundreds of billions of dollars of investment later, online retail is estimated to be about 12% of the global market. Ecommerce is 10% of the US market, of which Amazon takes up about half. In India the figure is in the vicinity of 2%, with that share is virtually stitched up between Walmart-owned Flipkart Group and Amazon.

Clearly, consumers value offline retail stores, whether for convenience or as holistic brand ambassadors. You can’t take away the fact that retail for us is theatre, experience, social.

Over at physical retail businesses, managers have been terrified of “channel conflict”. Senior management have squeezed resources for online, even when return-on-capital was demonstrably better than a new store. Some have refused to publicise their own company’s website through in-store banners, fearing that the customers would get sucked away from the store. It has been strange to see this opportunity being passed up – if a customer is trusts you to walk into your physical store, why would you not want to connect with them at other points of time when they are not near your store?

As I’ve written earlier, retail is not and should not be divided between “old-world physical” and “upstart online”. Successful retailers and brands have always been able to integrate multiple channels and environments to reach their customers.

For instance, British fashion retailer Next has long used a combination of physical stores (of varying sizes) as well as mail order catalogue side-by-side, and then ecommerce as the digital medium grew. Another British retailer, Argos, took another angle and embedded a catalogue inside the physical store – first a paper catalogue, and then on-screen.

American designer Rebecca Minkoff has taken this unification further. Without the weight of legacy systems, the brand attempts to create a seamless experience for the customer, unifying the store, in-store digital interfaces such as smart dressing rooms, the website and the mobile.

No doubt, for older companies, integrating is tough; business systems and people are in disconnected silos, incentivised narrowly. Each channel needs different mindsets, capabilities, processes and systems, to ensure that the optimal customer experience appropriate for the interface, whether it is a store, mobile app, website or catalogue. But etailers opening physical stores have their own challenges, too, tackling the messy slowness of the physical world, where you can’t instantly switch the store layout after an A:B test. They now need to develop those very “old-world skills” and overheads that they thought they would never need.

Regardless of where they begin, retailers need to mould and blend their business models with proficiency across channels. In the evolving environment, any brand or retailer must aim to offer as seamless an experience to the customer as feasible, where the customer never feels disconnected from the brand.

Varying circumstances make customers choose different buying environments. At different times or on different days of the week, even the same person may choose to shop in entirely different ways. Successful retailers that outlast their competitors have used a variety of formats and channels to meet their customers, and will continue to do so.

To my mind, retailers have no choice but to see the retail business as one, even as it is fluid and evolving. A retailer’s only choice is to bend with the customer’s choice.

(Published in the Financial Express under the title “Uniting retail: Why online versus offline debate must end“)

B2B event companies don’t often think about consumer spending as something directly relevant to their business. However, consumer trends can allow industry event and exhibition organizers to get an advance view of where the opportunities can lie in the future. In this Keynote address at UFI’s Asia Open Seminar in Bangalore, Devangshu Dutta shares his views about the key consumer trends in India, and the implications for the events and exhibitions industry.

(This presentation was delivered on 6 March 2014 in Bangalore, India.)