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August 19, 2024
Ratna Bhushan, Economic Times
New Delhi, 19 August 2024
Close to a dozen small to mid-sized global cafes and restaurant brands have either entered India in the past two quarters or are in talks with local players at a time when large global chains are seeing sharp decline in same store sales and growth.
Mid-sized global chains are making investments even in a modest range of Rs. 20-30 crore to tap select cities and intend to keep store counts under about 30 to stay profitable on each store. This is in contrast to earlier times when cafes and chains entered India with mega deals and investment plans, executives said.
Belgian bakery Le Pain Quotidien, French patisserie chain Laduree, UK’s JD Wetherspoon and Frank HotDogs are among those to have inked collaborations with Indian partners, while newer homegrown ones such as Harley’s, Paper & Pie, abCoffee and First Coffee are expanding with first-time investors and mid-rung store rollouts.
“A combination of factors is driving this change of newer, smaller launches,” said Devangshu Dutta, chief executive of retail consultancy Third Eyesight. “There are niches the newer chains are addressing as consumers’ choices evolve and get more specific. Also, there’s a broadening of a wealth base in India leading to mid-sized business houses having capability to invest and willingness to try out newer segments,” he said.
With the big-bang launches in food services drying up, there’s been a mushrooming of small deals that is expected to surge.
Bake & Brew, which has inked a master franchise agreement with Belgian bakery chain Le Pain Quotidien to re-enter India, is investing Rs 35 crore in the first year. “We’ll start in metros and may expand to smaller towns later. We also see potential in travel retail, airports and larger train stations,” Annick Van Overstraeten, chief executive of Le Pain Quotidien, told ET. Bake & Brew is backed by the Nalanda group with core business interests in automotive metal parts.
Earlier this month, the French patisserie chain Laduree said it was launching its cafe at Ritz-Carlton, Pune, in collaboration with CK Israni Group which has business interests in home decor and construction. Its Managing Director Chandni Nath Israni said in a statement that the CK Israni group planned to expand Laduree’s presence across other Indian cities.
Experimenting in newer cuisines is also driving the change. “Our decision to expand in India stems from a deep appreciation for variety and a passion for bold flavours. We see great potential in the Indian market,” said Benjamin Attal, founder of US chain Franks Hot Dog.
Smaller and newer homegrown chains, in contrast, are expanding, backed by mid-ticket investors and business houses, many of whom are foraying into food services for the first time.
Last week Brigade Group, a realtor, announced a partnership with specialty coffee chain abCoffee to set up six outlets within Brigade properties.
“We partnered with abCoffee to enhance the F&B offerings at our office parks. abCoffee is able to retrofit into operational buildings without requiring additional water or gas points,” Arvind Rao, vice president – commercial business, Brigade Group, said.
Specialty coffee startup First Coffee plans to open 35 stores by 2024-end “focused on delivery and minimalist store aesthetic,” according to a company statement, to sell flavoured coffees, cold brews and bubble teas.
(Published in Economic Times)
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August 10, 2024
Faizan Haidar, Economic Times
10 Aug 2024, New Delhi
Japanese apparel major Uniqlo’s sales growth in India slipped by more than half to a still-strong 32% last fiscal year while its net profit expanded by 25%.
The Indian unit of Asia’s biggest clothing brand posted a net profit of ₹85.1 crore for the year ended March 2024 with net revenues of ₹824 crore, according to its latest filing with the Registrar of Companies (RoC). Uniqlo India had posted a profit of ₹68.1 crore with sales of ₹625 crore in the previous year. Its on-year revenue growth was 69% in FY23 and 64% in FY22.
Uniqlo opened its first door in the country in September 2019, but lockdowns and other constraints during the Covid-19 pandemic delayed its store expansion plans. At present, it has about 13 outlets in the country. Overall retail sales growth rate across segments such as apparel, footwear and quick service restaurants (QSR) fell year-on-year every month in FY24, reflecting comparatively weaker consumer sentiment.
Last fiscal’s comparatively slower 4-7% growth rate sustained this year as well, with May and June seeing a 3% and 5% rise each, Retailers Association of India (RAI) recently said after a survey of top 100 retailers.
“The market was sluggish for the industry as a whole last year, and that will reflect in practice every brand P&L, whether Indian or international,” said Devangshu Dutta, chief executive of retail sector consultancy Third Eyesight. “However, any brand that is committed to the Indian market as a strategic market for its future growth will take the ups and downs in its stride,” he said.
“Uniqlo’s expansion plans now include store sizes that would be smaller both in the cities it is already present in and in newer cities, which should help it tap into the demand at operating costs that are appropriate to each location,” Dutta said. Inditex Trent, Spanish fast-fashion major Zara’s joint venture with Tata that runs 23 stores in the country, saw its revenue rise 8% to ₹2,775 crore last fiscal, significantly down from 40% growth a year earlier, according to Trent’s annual report. Its net profit fell 8% on year to ₹244 crore.
Over the past decade, global brands Zara and H&M have become market leaders in the fast fashion segment in India.
Uniqlo has said India is one of the most priority markets where consumers are increasingly shifting from ‘fast fashion’ to long-lasting essentials and functional wear. As the world’s second most-populated country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing.
Uniqlo is globally popular for functional basics like T-shirts, jeans and woollen wear, unlike fast-fashion rivals which are associated with designs that move quickly from the catwalk to the showroom.
(Published in Economic Times)
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July 20, 2024
Gargi Sarkar, Inc42
20 July 2024
The Indian government’s ban on Chinese apps and products in 2020 saw two massive casualties. Everyone knows about TikTok, but fast fashion brand Shein was equally as big in India four years ago.
But the India setback did not halt Shein’s global momentum, just as it did not stop TikTok from becoming what it is today. Shein became the world’s largest online-only fashion company in 2022.
Valued at a staggering $10 Bn, the brand accounted for nearly one-fifth of the global fast-fashion market in 2022, outpacing giants such as Zara and H&M. To put things in context, Shein was founded in 2008, whereas Zara was incorporated in 1975 and H&M in 1947.
In India, Shein set the market on fire. Launched in India in 2018, the brand was already a major player by 2020, dominating online searches and influencer-led content. But the ban in 2020 meant all that came to a halt.
The Indian government’s ban stemmed from fears of Shein’s Chinese parent company storing or transferring data of Indian customers to China. While the ban itself came under a tense geopolitical climate, one could say that Shein’s exit left a gap in India’s fashion market which D2C brands quickly filled.
Brands such as Urbanic, Twenty Dresses, Cilory, attempted to fill the void but couldn’t quite match Shein’s popularity. Indeed, VCs also backed fast fashion and casual wear startups such as The Souled Store, Virgio, NewMe and others which looked to replicate the Shein formula.
Ecommerce unicorn Meesho has also looked to fill the gap with affordable fashion and a similar content-led sales strategy that worked wonders for Shein.
While many of these brands have grown in scale over the past four years, none of them — at least so far — have quite replicated the magic of Shein and how quickly it disrupted the market.
And that’s arguably why Shein’s re-entry into India through a partnership with Reliance Retail is a big deal.
Shein joins the Mukesh Ambani-led conglomerate’s exclusive portfolio of over 50 brands, including Silk Feet, Jivers, Xlerate, Feet Up, Dhuni by Avaasa, Riva, John Player Select, Kidlyboo, and Altair. Besides this, Reliance Retail has similar deals with designer labels such as Kenzo, Y3, Marc Jacobs, Coach, Steve Madden, Kate Spade, among others.
It’s clear why Shein has looked to re-enter India, where the fast fashion industry is projected to reach a size of $30 Bn by FY23, as per a Redseer report. The overall fashion segment grew at a modest 6% YoY in FY24, whereas the fast fashion subsegment surged by up to 40% in the same period. Now, Shein is back to grab a large chunk of the market once again, though there’s definitely a lot different about this Shein.
Reliance Punches Shein’s Ticket To India
The first thing that we need to note is that Shein is not back as a standalone entity, but its products will be available on Reliance Retail’s apps and physical stores. Shein is not operating business in India — Reliance is said to be bringing in former Meta director Manish Chopra to lead the brand.
Shein’s parent entity will receive a licence fee as a share of profits generated solely within India. The operations will be managed by a company wholly owned by Reliance Retail. Crucially, all data and the app itself will be hosted and stored within India, ensuring that Shein has no access to or control over this data.
These are some of the key factors behind Shein’s comeback to India being approved by the government nearly one year ago.
Reliance Retail is set to launch the Chinese fast-fashion label Shein within the coming weeks. Further, to diversify its supply chain and promote domestic industries, Shein reportedly will be sourcing goods from India for its global operation in the Middle East and other markets.
More than anything else, fast fashion brands and indeed other some of the more premium brands need to worry about the Reliance factor. Shein’s brand name and Reliance’s massive resource base are a deadly combo.
Reliance Retail’s fashion ecommerce app Ajio directly competes with Myntra, Nykaa Fashion, Meesho, Amazon India, Flipkart, Tata Cliq, and other platforms. From a distribution point of view, Ajio will be the exclusive storefront for Shein, and exclusivity is a big deal in fashion ecommerce.
Ajio commands around 30% market share based on monthly active users (MAUs), data sourced from AllianceBernstein shows.
Flipkart Group’s Myntra maintains the highest market share in terms of active users, surpassing 50%. However, the report notes a decrease in transaction frequency, with Myntra’s GMV growing only 12% in FY23 compared to 35% in FY22.
“Shein’s re-entry may have a somewhat negative impact on Nykaa Fashion, as Nykaa primarily targets the premium fashion segment. In contrast, Myntra caters to both the mass and premium fashion markets and already has strong brand recognition in the fashion industry. Therefore, the impact on Myntra might be mild, whereas Nykaa Fashion could feel more significant effects,” Karan Taurani, SVP, at Elara Capital said.
He added that Shein is part of a broader strategy by Reliance Retail to expand its portfolio of brands. In that sense, Shein is just another addition to its portfolio.
A Myntra executive admitted to Inc42 that Ajio has an edge when it comes to exclusivity, but added that Myntra has also introduced Gen Z-focussed features which are gaining fast traction. Myntra’s focus on in-house brands or private labels is paying off, however, at the same time, the company is also looking to snap up more exclusive brand partnerships.
Should D2C Brands Worry?
One thing that Ajio cannot afford to do is give Shein more prominence. Fashion ecommerce marketplaces are quick to see gaps in terms of sales of particular brands and look to woo them to their side. In this regard, Shein will be competing with a number of D2C brands as well as international labels in fast fashion.
As per Inc42 data, between 2018 and 2023, D2C fashion brands captured almost 93% of the total funding raised in the Indian fashion ecommerce space.
The Myntra executive quoted above believes that Shein will definitely disrupt D2C fashion brands in India as many of them target the Gen Z audience, but they are also looking to protect margins and break into the premium segment.
The D2C landscape in fashion includes the likes of Andamen, House Of Rare, Bombay Shirt Company, Snitch, Damensch, The Souled Store among others. And there are houses of brands such as Mensa Brands, TMRW and others which combined have dozens of brands across categories in fashion. It’s not easy to stand out, and Shein will have to fight for its space on the aisles.
Most of these brands are looking to widen their net margins by adding premium products. Premiumisation is a major thesis among Indian D2C brands right now as they realise many of them are targeting a very limited cream of the market.
On the other hand, Shein has built its reputation on affordability. So is Shein actually directly competing with these players? Market experts believe that Shein is not successful just because of its pricing, but its use of data.
“Brands with the right product and high-quality service should attract customers who are not price-sensitive. A price-oriented brand is not a major threat; the real risk is if your product fails to keep up with market trends. Fashion-driven brands could take your business away if your product quality and service do not meet customer expectations. However, if your product is trendy, the quality is high, and your service is good, you should be safe in retaining customers who are not focused on price,” Devangshu Dutta, founder and CEO of Third Eyesight, said.
Those in the industry do believe that one brand cannot conquer the fashion market. That simply does not happen with the fashion industry, which is why there is so much depth in the market. Shein’s success will lead to the emergence of more D2C brands that look to mimic the data-led, trend-first model.
“The potential of the Indian market is evident, and it’s becoming increasingly exciting. This means that many companies will emerge in this category to serve this customer base. It validates the hypothesis we had two and a half years ago: the Indian consumer is evolving, and fashion should evolve along with them. From that perspective, Shein’s entry justifies and validates our hypothesis,” the founder of a Bengaluru-based GenZ-focussed fashion brand said.
Good brands always emerge from intense competitive churn, and Indian brands have the potential to go global if they hit it big. “Competing against Shein and building a successful business will open new opportunities for us and strengthen our execution and agility,” the founded quoted above added.
Is Shein Ready For Second Innings?
Now, coming back to Shein, it remains to be seen if it will be able to gain popularity like its first stint in India. One must remember that Shein tried to make a comeback in India in 2021 after the government’s ban through ecommerce giant Amazon, but the brand supposedly did not get much traction.
“I think the case of visibility is different when comparing Amazon and Reliance Retail. Through Reliance Retail, the visibility could be much higher compared to Amazon because Reliance Retail already has a very wide portfolio of fashion brands, including more than 25-30 luxury brands across various categories. It’s all about creating visibility, generating buzz, and going to market together in terms of marketing efforts. Reliance has a very strong omnichannel presence, both online and offline,” Elara Capital’s Taurani said.
While Amazon is, of course, a large ecommerce phenomenon, the platform is not a primary port-of-call for online fashion shoppers. This is why Shein could potentially perform better with Reliance Retail.
“We have to wait and see how Shein performs in India. We will need to observe how this unfolds to comment on its visibility and performance, both online and offline. In marketplaces, brands compete daily, and Shein’s strength has always been its designs. We’ll have to closely watch how Reliance leverages this strength,” an industry analyst said.
(Published on Inc42)
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May 20, 2024
Sagar Malviya, Economic Times
Mumbai, 20 May 2024
Spain’s Inditex, the owner of fashion brand Zara, saw its slowest ever sales growth in India, excluding the pandemic year, in FY24 as the world’s largest fashion group faced rising competition from global rivals in the clothing market that is increasingly getting cluttered.
Inditex Trent, its joint venture with Tata that runs 23 of Zara stores in India, saw revenue rise 8% to Rs 2,775 crore last fiscal, significantly down from 40% growth a year ago, according to Trent’s annual report. Net profit was down too at Rs 244 crore, an 8% drop.
Zara has been a runaway success since its arrival in the country more than a decade ago but after initially doubling sales every two years, the brand’s rate of expansion had come down in the past few years. “The market is very competitive, and the challenges are real. Nevertheless, the opportunity pool and the size of the market means that there is space for multiple successful players. Trent remains well placed to navigate this next phase of growth by leveraging our platform and growth engines,” P Venkatesalu, chief executive officer at Trent, said in the report.
Trent that runs Westside has shifted focus on its lower priced fast fashion brand Zudio, which opened about four new stores every week on average last fiscal to take the total store count at 545 doors. Trent also has a separate association with the Inditex group to operate Massimo Dutti stores in India. The entity saw revenues rise 14% to Rs. 102 crore.
Experts said consumer demand has been affected in the past couple of years with brands having to work extra hard to get same-store growth and much of top-line growth has come for brands from store additions.
“Most international and premium Indian brands are competing for a relatively narrow slice of the population pie in the larger urban centres. While the Indian market is a bright spot amid the gloom in the world’s major economies, global pressures are likely to play a part in the confidence among brands to invest in expansion,” Devangshu Dutta, founder of retail consulting firm Third Eyesight, said, adding there is not necessarily “fatigue” for the brand.
“But if the contest for the consumer’s attention is more intense and the consumer’s choices are more fragmented across a wider choice of brands, that will definitely have an impact on any individual brand’s performance.”
Being the world’s second most-populous country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing. Most of Zara’s back-end and merchandise sourcing are handled by Inditex, while the Tata expertise is mainly for identifying real estate and locations.
(Published in Economic Times)
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April 15, 2024
Sagar Malviya, Economic Times
Mumbai, 15 April 2024
Spanish fashion company Inditex said it will launch youth clothing brand Bershka and Zara Home in India this year.
“Bershka will open its first store in Mumbai Palladium, and Zara Home will open in Bangalore,” it said in its latest annual report.
Inditex had launched fast fashion brand Zara in 2010 and premium clothing brand Massimo Dutti eight years ago. Its new offering, Bershka, will pitch it directly against Reliance Retail’s Yousta, which too targets the younger consumer segment.
Being the world’s second most-populous country, India is an attractive market for apparel brands, especially with youngsters increasingly embracing Western-style clothing. Fast fashion brands such as Zara and H&M became runaway successes soon after they entered the country.
Experts said Bershka’s target consumer profile is mostly teens to mid-20s, slightly younger than that of Zara, which is pitched at 20-40-year-old fashion-driven customers.
“The product assortment is different, with a higher share of knits, fewer dresses and more casual overall compared to Zara, keeping in line with the lifestyles of the customer group. So in that sense it wouldn’t cannibalise Zara in any serious way, though some of the younger set among Zara buyers could migrate some of their purchases to Bershka,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “The biggest question is, can they hit the price points that young Indian fashion consumers want as with domestic brands such as Zudio, Yousta and others, or will consumers overlook higher prices for the style mix and a European brand pull in significant numbers to make the brand viable.”
According to a recent report by Motilal Oswal, the ₹2.5 lakh crore value fashion segment accounts for 57% of the total apparel market and is one of the largest and fastest-growing segments. A substantial untapped opportunity beyond the metros and tier-1 cities, driven by better demographics, higher incomes and greater customer aspiration, has compelled several big players to enter a market that was previously dominated by regional and local operators.
Since its inception in 2016-17, Zudio has seen considerable expansion and reached nearly 400 standalone stores, outpacing most apparel brands primarily due to its competitively priced products with an average selling price of ₹300. Following the success of Zudio, a unit of the Tata Group’s Trent, the segment has seen the entry of national retailers in the affordable youth clothing segment such as Yousta by Reliance Retail, Style-Up by Aditya Birla Fashion and Retail and Shoppers Stop’s InTune.
(Published in Economic Times)
