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November 28, 2022
Sagar Malviya, ET Bureau
November 28, 2022
About half a dozen global apparel and lifestyle brands expanded anywhere between 30% and 70% to garner combined annual revenues of nearly $2 billion in FY22, reversing the performance from a year ago when Covid-induced curbs on mobility and business operations caused sales to shrink.
Sales of Swedish fashion retailer H&M expanded 49% while rival Zara reported a 61% increase in its topline. Japanese brand Uniqlo saw a 64% jump in sales while American denim maker Levi Strauss posted a 58% increase, latest filings with the Registrar of Companies showed. Dubai-based department store Lifestyle International, too, saw a 38% jump in revenues on a large base while German brand Puma expanded 68% despite being the biggest firm in the sporting segment.
“This is a combined impact of a rebound in industry-wide demand in India, a low base effect for some brands, and the visibility and mindshare advantage global brands have,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm.
Big Focus on Online Sales
“Global brands are aspirational not only for consumers but also for real estate developers. Perceived as anchor tenants, they get their choice of the best locations – this provides more impetus to their stores vis-a-vis Indian brands, which are shunted to higher floors in multi-level shopping spaces,” Dutta said.
The revenue surge comes at a time when most of these retailers are facing intensifying competition from both local and global rivals in an increasingly crowded market where web-commerce firms continue to offer steep discounts. Even multinational companies have upped their online focus and for some, web-based orders make up more than a third of their revenues.
For instance, Puma India’s online sales make up nearly half its total business, while for H&M the share is 42%.
Abhishek Ganguly, managing director, Puma India and Southeast Asia, said the affinity of young Indian consumers toward ecommerce is extremely high and that adoption of the online mode of shopping continues to accelerate even after the resumption of normal business operations.
“Consumers may have bought online for the first time during the lockdowns, but they have embraced ecommerce in their shopping journey,” said Ganguly.
“Almost half of our business is in the form of digital commerce today. Having said that, we are witnessing equally strong growth – both in our offline and online channels,” he said.
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 performance by global brands is also in line with the overall trend within the home-grown apparel and lifestyle segment, with Shoppers Stop, Tata-owned Trent and Aditya Birla Fashion & Retail also reporting smart performance rebounds, indicating a secular demand for discretionary products.
(Published in Economic Times)
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September 23, 2022
Sagar Malviya, The Economic Times
September 13, 2022
Uniqlo, Asia’s biggest clothing brand, has turned profitable in India in less than three years after it opened its first store in the country despite operating in a period marked by Covid-led lockdowns and restrictions.
The Japanese brand posted a net profit of ₹21.4 crore for 2021-22 compared to a loss of ₹36.1 crore in the previous year, according to business intelligence firm AltInfo. Its sales rose 63% year on year to ₹391.7 crore for the year to March 2022, a slower pace compared to FY21 when it clocked 86% sales growth on a low base.
Experts feel Uniqlo’s strategy of pricing its merchandise at least 20% higher than rivals Zara and H&M has helped it earn better margins despite inflationary pressures in terms of raw materials.
“The market is not easy and turning profitable at a time when most rivals are spending aggressively is a good indication of success. As an international brand, they (Uniqlo) are able to get good locations and are preferred tenants, which helps in generating sales, especially in top cities,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm. “However, the pricing is a bit premium and until they are able to source locally, selling products at a right value for the market will remain challenging.”
The Japanese brand opened its first door in the country in September 2019, but stringent lockdown measures announced in March 2020 to contain the Covid-19 outbreak delayed its store expansion plans, restricting its store count to about seven outlets so far.
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. “India is an important and very big priority market,” Tomohiko Sei, CEO of Uniqlo India told ET in June.
(Published in The Economic Times)
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July 8, 2022
Akash Podishetty & Krishna Veera Vanamali, Business Standard
New Delhi, 8 July 2022
India’s $900 billion retail market has emerged as one of the most dynamic industries and is expected to reach anywhere between $1.3-$1.5 trillion by 2025. The organized retail is seen gaining 15% market share in the overall retail space, while food & grocery and apparel and lifestyle may account for 80% of India’s retail market by 2025.
Large market offers big opportunities. And it looks like Reliance Retail has seized it, with its massive omni-channel retail play of physical stores, B2B with kiranas and e-commerce.
The company went on an acquisition spree and partnerships in the last three years, adding to its portfolio some of the biggest names, including Hamleys, Dunzo, Zivame etc.
It has also partnered with famous global retail chain 7-Eleven. Catering to India’s affluent consumers, Reliance, meanwhile, houses some of the most iconic brands such as Versace, Armani Exchange, GAP, GAS, Jimmy Choo, Michael Kors among others. The premium segment has become one of the fastest growing categories.
Also firming up its inorganic play, the company is planning to acquire dozens of niche local consumer brands to build a formidable consumer goods business.
Arvind Singhal, Chairman and Managing Director, Technopak Advisors says, there’s focus on physical retail expansion. Reliance is looking to cater to both price conscious and brand conscious customers, while trying to capture as much of the private consumption market as possible, he says.
Reliance Retail’s competitors are nowhere close to even put up a fight. The company has over 15,000 offline stores across categories, compared with DMart’s 294 stores or Aditya Birla Fashion’s 3,468 outlets.
Reliance retail’s revenue has grown five times in the last five years and the core retail revenue of $18 billion is greater than competitors combined, according to a Bernstein report.
Speaking to Business Standard, Devangshu Dutta, CEO, Third Eyesight, says, Reliance wants a decent share of Indian consumers’ wallet. From that perspective, Reliance still has a long way to go, he says. As consumer preferences evolve, Reliance too should adapt.
An undisputed leader in the domestic market, the aim of Reliance, according to Mukesh Ambani, is to become one of the top 10 retailers globally. Part of this bet is based on the premise that incomes and consumption power of Indians will increase across the board in coming years. However, could the uneven recovery that different segments of the population have seen stop the pie from growing larger and prove to be a dampener for Ambani’s ambitions?
(Published in Business Standard)
Devangshu Dutta
December 5, 2013
(Published in ETRetail.com on 6 December 2013)
Franchising isn’t rocket science, but advanced space programmes offer at least one parallel which we can learn from – the staging of objectives and planning accordingly.
A franchise development programme can be staged like a space launch, each successive stage being designed and defined for a specific function or role, and sequentially building the needed velocity and direction to successfully create a franchise operation. The stages may be equated to Launch, Booster, Orbiter and Landing stages, and cover the following aspects:
Stage 1: Launch
The first and perhaps the most important stage in launching a franchise programme is to check whether the organisation is really ready to create a franchise network. Sure, inept franchisees can cause damage to the brand, but it is important to first look at the responsibilities that a brand has to making the franchise network a success. Too many brands see franchising as a quick-fix for expansion, as a low-cost source for capital and manpower at the expense of franchisee-investors. It is vital for the franchiser to demonstrate that it has a successful and profitable business model, as well as the ability to provide support to a network of multiple operating locations in diverse geographies. For this, it has to have put in place management resources (people with the appropriate skills, business processes, financial and information systems) as well as budgets to provide the support the franchisee needs to succeed. The failure of many franchise concepts, in fact, lies in weakness within the franchiser’s organisation rather than outside.
Stage 2: Booster
Once the organisation and the brand are assessed to be “franchise-ready”, there is still work to be put into two sets of documents: one related to the brand and the second related to the operations processes and systems. A comprehensive marketing reference manual needs to be in place to be able to convey the “pulling” power that the brand will provide to the franchisee, clearly articulate the tangible and intangible aspects that comprise the brand, and also specify the guidelines for usage of brand materials in various marketing environments. The operations manual aims to document standard operating procedures that provide consistency across the franchise network and are aimed at reducing variability in customer experience and performance. It must be noted that both sets of documents must be seen as evolving with growth of the business and with changes in the external environment – the Marketing Manual is likely to be more stable, while the Operations Manual necessary needs to be as dynamic as the internal and external environment.
Stage 3: Orbiter
Now the brand is ready to reach out to potential franchisees. How wide a brand reaches, across how many potential franchisees, with what sort of terms, all depend on the vision of the brand, its business plan and the practices prevalent in the market. However, in all cases, it is essential to adopt a “parent” framework that defines the essential and desirable characteristics that a franchisee should possess, the relationship structure that needs to be consistent across markets (if that is the case), and any commercial terms about which the franchiser wishes to be rigid. This would allow clearer direction and focussed efforts on the part of the franchiser, and filter out proposals that do not fit the franchiser’s requirements. Franchisees can be connected through a variety of means: some will find you through other franchisees, or through your website or other marketing materials; others you might reach out to yourselves through marketing outreach programmes, trade shows, or through business partners. During all of this it is useful, perhaps essential, to create a single point of responsibility at a senior level in the organisation to be able to maintain both consistency and flexibility during the franchise recruitment and negotiation process, through to the stage where a franchisee is signed-on.
Stage 4: Landing
Congratulations – the destination is in sight. The search might have been hard, the negotiations harder still, but you now – officially – have a partner who has agreed to put in their money and their efforts behind launching YOUR brand in THEIR market, and to even pay you for the period that they would be running the business under your name. That’s a big commitment on the franchisee’s part. The commitment with which the franchiser handles this stage is important, because this is where the foundation will be laid for the success – or failure – of the franchisee’s business. Other than a general orientation that you need to start you franchisee off with, the Marketing Manual and the Operational Manual are essential tools during the training process for the franchisee’s team. Depending on the complexity of the business and the infrastructure available with the franchiser, the franchisee’s team may be first trained at the franchiser’s location, followed by pre-launch training at the franchisee’s own location, and that may be augmented by active operational support for a certain period provided by the franchiser’s staff at the franchisee’s site. The duration and the amount of support are best determined by the nature of the business and the relative maturity of both parties in the relationship. For instance, someone picking up a food service franchise without any prior experience in the industry is certainly likely to need more training and support than a franchisee who is already successfully running other food service locations.
Will going through these steps guarantee that the franchise location or the franchise network succeeds? Perhaps not. But at the very least the framework will provide much more direction and clarity to your business, and will improve the chances of its success. And it’s a whole lot better than flapping around unpredictably during the heat of negotiations with high-energy franchisees in high-potential markets.
Devangshu Dutta
February 24, 2013
Luxury is an ill-defined concept. There is no specific line or limit of price, quality or availability that separates the luxurious from all that is not.
However, like other similarly intangible attributes such as power or grace, we all immediately recognise luxury when we experience it.
In fact, experience — vague as that may sound — is key to differentiating luxury, more than the tangible product being consumed. It’s not just the person’s own direct sensory experience, but also the prestige and status granted by others around her or him that creates the luxury experience.
Surely, with such intangible notions of experience, power and prestige, luxury brands should be among the most influential in the market. They should be pioneers that set the tone for change in improving retail management practices, upping customer service standards, driving quantum leaps in quality.
But is it so? The response from the rest of the retail sector may not quite be “meh”, but I suspect that it would not be far off.
There are strong reasons why luxury brands would have a lower influence as benchmarks in India and why, in fact, they may draw in more influence from the market themselves.
Market presence and location
As an example, in physical presence, luxury brands seem to demonstrate a delayed response to changes in the market, both in terms of market entry and location selection.
Prior to the entry of global brands, luxury products and services in India were naturally defined by niche, largely owner-managed businesses. Business scale was curtailed by internal limitations, and due to the small size, its market reach was also limited. While there were some designer brands that would occasionally get copied by mid-priced retailers, by and large luxury brands lived in their own separate bubble, with little or no influence on the heaving mass of the market.
In contrast, in the Western economies, from where many of today’s luxury brands originate, they are looked up to for inspiration. So, it is natural to expect Western luxury brands to lead the charge into the newly emerging modern retail economy of India. However, according to Third Eyesight’s research of international fashion and accessory brands in India, in the last 25 years it is mid-priced and premium brands that have opened the market. It is only in the last 10 years, well after the economic and retail growth was underway, that luxury brands stepped up their presence.
Sure, during the so-called “retail boom” from 2004, luxury brands went up to one-quarter of all international fashion and accessory brands present in the market. Then, when practically the whole world was in a recessionary mood, and mid-priced and premium brands took a call to defer their India launch plans, luxury brands pushed ahead. In 2009, luxury fashion brand launches accounted for two-third of all foreign fashion brands launched in India. Maybe the brand principals felt that this market could take on the burden of slowing growth elsewhere, or perhaps it was their Indian counterparts who were the source of optimism. Either way, the optimism took a hit in 2010 and 2011 when it was luxury brands that became cautious.
In terms of store openings and location selection too, luxury brands seem to have waited for the overall market to upgrade itself, and have then latched on to that growth. Previously luxury brand stores, such as there were, largely restricted their presence to five-star hotel shopping arcades, while a few took up non-descript sites as they were confident of being destinations in their own right or clustered together to create a precious few bohemian locations in surroundings that were far from luxurious. As modern shopping centres emerged in recent years, these presented an environment where rich consumers — especially the ‘new’ rich — could flock to buy globally benchmarked lifestyle statements. While these were mainly targeted at mid-market to premium brands, some of them are now even attracting designer brands such as Canali at Mumbai’s Palladium mall rubbing shoulders with Zara. These new luxury stores in mid-market or premium locations are performing better than the original “luxury” sites.
Thus, in terms of expressing confidence in the market, luxury brands seem to be following market trends rather than leading them. And far from being the anchors to create demand, they seem to be following where the demand goes.
Design and product development
The most important impact that luxury brands could have on the market is by influencing product design. This fashion trickle-down is supposed to work in two ways: one, through “inspiring” knock-offs by cheaper brands; two, making luxury customers act as opinion leaders and trend-setters for other consumers.
However, various factors dilute the luxury brands’ product and design influence in India: the preponderance of domestic (“ethnic”) style and colour, especially in womenswear, the existing domestic variety in products, the flood of premium (non-luxury) international brands and a customer base that is oblivious to the difference between the premium and luxury segments. In spite of their small size, Indian luxury and designer brands possibly have a larger direct impact, not to mention the massive Bollywood machine that drives mainstream fashion trends on a day-to-day basis. The international luxury giants are conspicuous by their small influence.
In fact, increasingly the influence is flowing the other way. A few luxury brands have attempted to create India-specific items to give the customer what they might want. Some of these may be indulging in superficial pandering such as putting an Indian image on a global product, but others have created Indian products that genuinely reflect what the brand stands for. While some use India as a production sweatshop to minimise the cost of high-skills jobs, others are now beginning to use Indian crafts to design products that are relevant to other global markets. A few examples, without passing judgement on which category they fit into, include: Lladro’s Spirit of India collection, the Hermès sari, the Jimmy Choo “Chandra” clutch bag, Louis Vuitton’s Diwali collection and Canali’s nawab jacket.
Slow, but not yet steady
Another issue with India is the sheer numbers, or the lack thereof!
China’s GDP is about four times the size of India’s but its luxury market size is estimated to be six times that of India. There are 1.7 million households in China that meet the high net-worth criteria, as compared to 125,000 in India. What’s more, according to industry estimates, only about 30 per cent of luxury consumers in China are actually wealthy, while the overwhelming majority are people with mid-market incomes who are given to conspicuous consumption, whether buying luxury goods for themselves or as gifts.
Indian consumers also have a penchant for buying overseas rather than shopping from the same brands’ stores in India. This is not just due to higher costs and import duties in India, but because of wider and more current selections of merchandise in stores overseas. Indians’ luxury shopping destinations include the usual suspects: London, New York, Paris, Milan, Singapore and Dubai. This has meant that while luxury brands recognise Indians as a large, emerging base of customers, for most brands India itself remains an operating market for the future.
Having said that, when compared to any other sector of business, luxury brands in India probably get the most media coverage for every rupee of sales earned. Although they are a small fraction of the sales, luxury brands rule in terms of column centimetres or telecast seconds. The coverage is not restricted to consumer-oriented media such as lifestyle magazines or mainstream newspapers, individual luxury brands are also extensively covered in business media.
One may argue that such is the nature of luxury: this disproportionate visibility and share of mind happen because luxury is not just aspirational, but inspirational. However, that inspiration and influence is yet to become apparent in the business at large. Until we see significantly larger numbers of upper-middle-income customers in India, luxury brands will find it difficult to expand their reach beyond the small base of ultra-rich consumers. The aspiration and price gap is just too wide for the Indian middle class, and there are very few who will emulate their Chinese counterparts and save up a year’s salary for a single luxury item.
And so…
One thing is beyond doubt: the luxury sector in India is undergoing significant change. We could even say it is in active ferment. There has never been so much interest among so many people, or so many brands so widely promoted, as now.
The question is still open on whether it is a good ferment such as the one that produces wine from raw grape juice and fine cheese from plain curds, or the unguided rot that results in a putrid, smelly mess unfit for consumption.
My bet is on the first possibility. In the short term, the luxury business appears to be a mess, littered with fractured partnerships and bleeding financial statements. But the brew needs time to mature. Gradually, as the luxury segment matures along with the rest of the market, we will see the influence trickling down into other segments. But remember, the finest brews do not only impart their flavour to the cask, but imbibe the cask’s characteristics into themselves. So it is with luxury and the Indian market. The message that we have given many other international businesses seems to hold doubly true for the global purveyors of influence, the luxury brands: “As much as you think you would change India, India will change you.”
