Top global apparel brands and retailers doubled sales in India over the past two years

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January 5, 2024

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)

Luxury brands script clause to share space with equals at Jio World Plaza

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November 4, 2023

Faizan Haidar, Economic Times
4 November 2023

Some of the super-luxury brands that have opened stores at the recently inaugurated luxury mall, Jio World Plaza in Mumbai, have put in a condition that at least four top brands – such as Louis Vuitton, Gucci, Cartier, Burberry, Tiffany, Valentino, Bulgari, Zegna, Giorgio Armani and Bottega Veneta – should be present in the same complex, to ensure the position of their brands is not diluted.

ET has seen copies of the agreements between Reliance Industries, the owner of Jio World Centre, and five brands, accessed through data analytic firm CRE Matrix.

Reliance Industries and the brands did not respond to emails seeking comment till press time on Friday. Brands often have an exclusivity clause with the mall where they don’t want competing brands near their stores. However, in the high-end segment, to ensure a similar buyer profile, they want similar stores nearby. Jio World Plaza already meets the condition with several of these super-luxury brands having opened their outlets there.

“If at least four among the mentioned brands are not open within six months of us starting the operation, we should be entitled to a reduction of the licence fee by 25% for the period that this criteria remains unfulfilled,” Christian Dior Trading, which will operate Dior, has said in the agreement.

Dior will pay ₹21.56 lakh in monthly rent for a 3,317 sq ft space in the complex. Gucci has given a list of six luxury brands – Louis Vuitton, Dior, Cartier, Bulgari, Valentino and Burberry – and demanded that at least four have to be represented in the shopping centre.

Louis Vuitton, Cartier and Bulgari have also put in similar conditions. Most of them have kept the right to terminate the agreement after serving the notice for nine to 12 months.

“In the super-luxury segment, most of the brands complement each other and that is why they want the presence of these brands next to each other. Good mall developers also go with zoning of brands and don’t want to mix the super-luxury brands with the premium or mid to premium brands. As more luxury brands are contemplating India entry, we will see more luxury spaces coming up,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight.

India only has a handful of malls that give space exclusively to super-luxury brands.

Outlet malls: new centre for discount sale by big brands

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August 28, 2023

Bindu D. Menon, Financial Express

August 28, 2023

Calvin Klein, Levi’s, Adidas and Lacoste are among the several players who are looking to tap the potential of Outlet malls, which are generally located on the peripheries of cities and major highways. These malls are fast replacing the old factory outlets of major brands, which were located in the cities in crowded places.

Real estate developers are also strategically choosing such locations to attract a wider customer base. Value-driven customers are thronging to such malls as it offers branded products at a discounted price ranging from 30-70%.

A few companies FE spoke to said Outlet malls are refined version of factory outlets and companies are able to generate revenue by liquidating stocks at a lower price.

Outlet Malls are a concept popular in the international market and are a huge hit among travellers. They are typically large group of shops outside city periphery that sell apparel, shoes and luggage at a discounted price. In the last decade, Outlet malls have sprung all over the country especially adjoining highways.

In New Delhi’s Jasola district, Pacific Premium, real estate firm has opened premium shopping space. Pacific Group operates around six malls spread across Delhi and Dehradun. Its new premium outlet mall is its largest to date and has four storeys and sizeable parking area.

The mall houses aspirational brands such as Birkenstock, Tommy Hilfiger, CalvinKlein, Levi’s, Adidas, Madame, Lacoste, Vero Moda and American Eagle among others. Other leading brands such as Nykaa and CaratLane, too have signed lease for occupying mall space.

Players like Village Groupe are developing mixed use development space in off location like Khapoli on Mumbai-Pune highway, Ludhiana and even Jaipur highway. A company disclosure says that it is developing over 500,000 sq feet mixed use space off-city limits.

“Outlet malls are a great opportunity for consumers who want to get the touch and feel experience. To that they offer brands at a discounted price is huge attraction for consumers,” said Susil S Dungarwal, promoter, Beyond Squarefeet Advisory, a mall management advisory firm.

Asked if online companies will pose a challenge to Outlet malls, Dungarwal says that there is no competition. “Outlet malls are an impulse destination. A consumer may be travelling along a highway, a good mall with discounted brands will be sure shot attraction,” he said adding growth in private vehicles has given a shot in the arm to Outlet malls.

“Till mid 1990s only 20% of vehicles on highways were private vehicles (cars and buses) and the rest were commercial vehicles (trucks and lorries). However, in 2023, almost 60% of the vehicles on highways are private vehicles,” he said.

Devangshu Dutta, Founder, Third Eyesight, said, “Outlet (discount) stores sit at the confluence of a mutual need. Branded chains with excess inventory to liquidate which they don’t want to carry at their primary stores, and consumers who want lower prices for their purchases”.

He points that outlet malls can offer brands some of the same advantages as regular malls, in terms of acting as footfall magnets, and offer shared services, but at lower costs due to a cheaper location.

“Rather than creating their own standalone outlet stores, brands can take up spaces in an outlet mall. The challenge of maintaining and managing footfall is shifted to the mall. However, as with regular malls, outlet malls need to be located well and need to be also managed well,” he added.

According to consultancy firm Anarock, top cities have over 51 million sq feet of mall stocks across the country with Delhi-NCR, Mumbai Metropolitan Region and Bengaluru accounting for 62% of the total stock.

(Published in Financial Express)

CCD get some respite as bankruptcy proceedings stayed for now

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August 28, 2023

Viveat Susan Pinto, Financial Express

August 28, 2023

Coffee Day Global, which operates the Cafe Coffee Day (CCD) chain, has been given a temporary relief against bankruptcy proceedings initiated by lender IndusInd Bank last month. The Chennai bench of the National Company Law Tribunal (NCLAT) last week halted admission of IndusInd Bank’s plea against Coffee Day Global, a subsidiary of the listed Coffee Day Enterprises (CDEL), by the NCLT Bengaluru, till September 20.

What this means for CCD is that it get some more time at a time when it has swung into the black after struggling for the last few years, since the tragic demise of its founder VG Siddhartha in 2019. Coffee Day Global posted a net profit of Rs 24.57 crore for the June quarter of 2023-24 (FY24) versus a net loss of Rs 11.73 crore reported in the same period last year.

Revenue from operations stood at Rs 223.20 crore in the quarter under review, a growth of nearly 18% versus the year-ago period, CDEL results for Coffee Day Global showed.

More importantly, CCD outlets are down to 467 in the June quarter of FY24 from a peak of 1,752 stores in FY19, indicating that the company is shutting down unprofitable operations as it looks to manage its debt and other expenses. Group debt is down to Rs 1,711 crore, according to its latest annual report for FY23, versus Rs 7,214 crore reported in FY19.

“While the coffee retail market in India is growing, in CCD‘s case the need to downsize has to do with internal issues. Sometimes a smaller footprint just helps to manage operations better especially when you are dealing with larger problems such as a debt overhang,” says Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.

CCD’s financial health is critical for CDEL, which derives close to 94% of its group turnover from the coffee retail business, according to its FY23 annual report. In FY22, the contribution of the coffee retail business to group turnover was 85%. Losses of Coffee Day Global in FY23 narrowed to Rs 69.62 crore from Rs 112.48 crore in FY22. In FY19, the company had a net profit of Rs 10 crore.

Apart from cafes, CCD also has kiosks and vending machines installed in corporate offices, institutions and business hubs. While the number of kiosks has fallen over the last few years and is at around 265 now from a peak of 537 in FY19, the number of vending machines have been growing after briefly slowing down over the last few years. From a peak of 58,697 crore in FY20, it is now at 50,870 in number, the company’s latest results show.

CCD is also expected to fight the insolvency proceedings against it aggressively, according to industry sources. IndusInd Bank has claimed that Coffee Day Global defaulted on a loan of Rs 94 crore, which occurred on February 28, 2020. The company has disputed this in court.

(Published in Financial Express)

Ecommerce share in warehouse leasing falls to 3% due to declining demand

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July 19, 2023

Faizan Haidar, ET Bureau

19 July 2023

E-commerce companies’ share in warehousing space leasing has fallen to 3% amid declining demand from more than 20% during Covid-19. With the easing of the pandemic, demand faltered for e-commerce companies, even as bricks-and-mortar rivals rented 14% of space during the January-June period as they witnessed a demand resurgence.

In 2020, during the pandemic, e-commerce took more than a fifth of warehouse space while physical retailers had a 9% share, according to data by Savills India.

The overall leasing activity in India continued to grow, with a total space take-up of 22.4 million square feet in the first six months of 2023, up from 20.9 million sq ft a year ago.

“E-commerce companies had over-committed space during Covid, expecting the exponential growth they experienced at that time to continue. There are many facilities where they continue to pay rentals without utilising the full space,” said Gagan Randev, executive director, India Sotheby’s International Realty.

According to Savills data, after increasing demand for warehousing space over the past five years, tier-2 and tier-3 cities saw the share of e-commerce declining to 4% in the January-June period from 34% a year ago.

“In the past three years, year-on-year space absorption from e-commerce has undergone a significant change due to increased investments in their warehousing operations and footprint optimisation through automation, shelving and improved racking systems. These investments have enabled them to increase their existing storage space and enhance overall operational efficiency,” said Srinivas N, managing director, Industrial and Logistics, Savills India.

Experts said the companies are also looking to outsource the space they had taken during the pandemic.

“E-commerce overbuilt the capacity as Covid-led growth was harvested by them. Now that capacity is vacant. That’s why you see a lot of marketplaces trying to externalise their services. That is not coming out of a business model, that is coming out from vacant space,” said Ashvini Jakhar, founder of Prozo, which manages supply chains for companies.

In the first half of 2023, the third-party logistics sector continued to drive warehousing demand, accounting for 44% of the total absorption, up from 37% a year ago, followed by the manufacturing (22%), retail (13%) and fast-moving capital goods and consumer durables sector (6%).

“E-commerce, grew exponentially during Covid when physical retailers were constrained by prevailing conditions and immediately after that when chain stores were still recovering from the pandemic shock,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “However, the retail business in India is predominantly offline; as demand continues to grow overall, it is only natural for physical retailers’ own growth to be driven by the market’s momentum and that would be reflected in warehousing space taken up by them across the country.”

For most retailers, after Covid-19, the warehouse is the epicentre for omnichannel distribution network for offline as well as online clientele.

(Published in Economic Times)