FEATURE RETAIL TAKING THE HIGH ROAD Indians are willing to pay more for foreign apparel brands. The brands themselves have lowered prices. And the resultant boom is attracting more players into India. Taneesha Kulshrestha ENTER THE BRANDS: Foreign brands are lining up to enter the Indian HEN JESUS SAW THE MULTITUDE, come prudent enough to ensure that the market. Although many have positioned themselves as premium brands, prices are not beyond the reach of the Indi- most have become prudent enough to ensure that the prices are not he was well pleased. And he hoped to sate an consumer. And the timing of their entry beyond the reach of the Indian consumer. the hunger in each one of those who milled has been perfect. Over the last few years, PHOTOGRAPHS BY VISHAL KOUL around him. As he made his way around Indians have shown a willingness to spend South Delhi’s City Walk mall, Jesus Echevarria, spokesperson more for value. “A customer who would W quibble over parking charges a few years for Inditex, the parent of apparel brand Zara, was all smiles. ago now pays Rs 50 for parking, Rs 300 “Indian customers seem ready for Zara. up to enter the Indian market. In addition for a movie ticket, Rs 20,000 for a mobile Th eir choices of colours, the attitude, all to Zara, others such as Diesel, Vero Moda phone and Rs 1 lakh for an LCD TV. Why makes me confi dent that we will do well and 7 For All Mankind have also set up then can’t he pay Rs 2,000 for an interna- here,” he says. shop in India this year. Th ey join Tie Rack, tional fashion brand? He surely can!” says Not long aft er, Zara opened its fi rst Indian Promod, S Oliver, FCUK, Guess, Next and Gaurav Sehgal, S Oliver, India COO. store in the same mall on May 28, 2010. By Calvin Klein, among others, who have been In a sense, the premium segment is seeing 1.30 pm that day, nearly 500 women had in India for the last three or four years. a confl uence of sorts, where brand price visited the store. Th ree days on, the steady Indian shoppers, long starved of genuine points, consumer incomes and the market stream of people continued and there were international designs, have the country’s ecosystem have dovetailed to create scenes long queues extending to the store’s doors. WTO membership to thank for the sud- such as the one in Zara’s Delhi store. “I came on the fi rst day and I cannot fi nd den spurt in choice. Th e sharp reduction Consulting fi rm Technopak puts the the designs I saw then. I should have just in import duties on apparel (from around worth of the premium fashion retail seg- bought them that day,” laments one lady. 100% in 1990 to around 30-35% across ment at around Rs 2,000 crore today. Th e Jesus would have been well pleased to hear categories now) and the government’s de- segment’s value has doubled since 2005, her. Zara, clearly, had arrived. cision to allow 51% FDI in single-brand when it was worth about Rs 1,000 crore, Th e Spanish brand’s entry symbolises stores in January 2006 have resulted in sev- says the consultancy. Technopak expects a change that is quietly sweeping India’s eral foreign apparel companies making a it to grow 25-30% annually over the next high-end apparel segment. What began beeline for India. fi ve years to over Rs 6,000 crore. as a trickle in 2004-05 has now become a Although many have positioned them- Th e premium segment’s growth has been steady stream—foreign brands are lining selves as premium brands, most have be- driven by the economic boom of the last 30 OutlookBusiness > July 10, 2010 FEATURE RETAIL decade, which has resulted in a surge in the There is a lot of money in If a customer can pay hgal. His words ring true if one looks at personal privileges and services. country’s middle-class and upper middle- the country’s premium jeanswear market. Focusing on the store as the brand builder class numbers. Th e tremendous potential of tier-2 towns. And there is an Rs 20,000 for a mobile phone, In 1999, Levi’s 501 jeans, an “international is another strategy. “We do not advertise. the market has made foreign brands fl ock aspiration to sport a lifestyle why can’t he pay Rs 2,000 for bestseller”, cost Rs 995. Today, they cost We let our store work for us,” says Zara’s to India, giving consumers the benefi t of that is global. an international fashion brand? around Rs 3,000. Th e willingness to spend Echevarria, referring to its plush interiors. greater choice. Surely, he can. is also refl ected in the increasing average He says that the brand will also churn in- —Shailesh Chaturvedi bill value and average basket size fi gures. ventory twice a week. “Customers will fi nd Getting The Price Right CEO, Tommy Hilfi ger India —Gaurav Sehgal As per industry estimates, the average bill fresh styles every time they come to the Ironically, although they are considered COO, S Oliver value has risen from around Rs 1,500 in Zara store,” he explains. Currently, most premium brands in India, many foreign Result: M&S stores had barely any footfalls. 2007 to Rs 4,000 in 2010. brands churn inventory twice a month. labels, including Mango, Zara, Promod Now, the British retailer is working to cor- Th e average age of the premium buyer has and FCUK, sell as mid-market brands rect that and making eff orts to woo mid- also come down. Pradeep Hirani, owner of Challenges Aplenty in their home countries. According to to-premium segment shoppers. In 2009, premium and luxury fashion stores Kimaya Despite the optimism, new entrants will still Devangshu Dutta, CEO of Th ird Eyesight, it formed a 50:50 joint venture (JV) with and Viva Kimaya, says that earlier, 30-plus face many challenges in the Indian market. a Gurgaon-based retail consulting fi rm, Reliance Retail to expand its network. It women made up the premium and design- With organised retail space in short supply, they have been forced to go premium in also cut prices by 20-30% across categories erwear segment. “Now, it is the 20-plus age getting the ideal location for a store will India for two reasons. One: import duty, and repositioned itself as a mid-to-pre- segment that drives growth,” he adds. Th e be diffi cult. And while the downturn did which can be as high as 30-35%. Two, the mium segment retailer. consumer’s profi le has also undergone a correct rentals for existing players, the new market itself has lower price levels. For Benetton, which entered India in 1991 change. “Earlier you expected only a cer- ones may fi nd themselves paying more as instance, a basic white shirt would cost through a 50:50 JV with the DCM Group, tain set to visit a store like Kimaya. Today, the real estate market has picked up. a girl may come in a Maruti 800 and pick FULL STEAM AHEAD up a dress for Rs 5,000 or Rs 10,000,” says While the brands have High street fashion brands are looking at major expansion in the next few years. Hirani. A clear indication of how the cus- tomer base has expanded. cut costs and are Brand Year of Store Count Expansion Plans Entry Spreading Out rationalising prices, 2007 Five stores in Delhi, Mumbai, Gurgaon and Pune. 70 point-of-sale outlets, 39 standalones S Oliver and 38 shop-in-shop outlets by 2012. Expansion is next on the anvil for most players. Tommy Hilfi ger, for instance, plans the Indian consumer, Mango 2001 Six stores in Delhi, Mumbai, Bangalore and Gurgaon. Four stores in 2010. to open 35 new stores this year, while Lerros too, has moved up to M&S 2002 17 stores. 6-8 stores in 2010. 50 stores by 2014. plans to add 10 more to its current count Tommy 2004 51 stores —23 standalones, three factory outlets and 35 standalones and shop-in-shop (see: Full Steam Ahead). And, it’s not go- higher price points. Hilfi ger 25 shop-in-shop outlets. outlets in 2010 ing to be restricted to the metros and large 2005 50 stores in Mumbai, Delhi, Ahmedabad, Chennai, Plans new outlets. models or the social elite were seen sporting cities—tier-2 towns are also on the radar. Investment per store remains high. S Ol- Esprit Chandigarh, Pune, Hyderabad and Bangalore. its threads. In 2007, in an eff ort to record Benetton says its sales in tier-2 towns are iver spent Rs 3 crore for a 7,000 sq ft store in Lerros 2008 10 standalones and 40 shop-in-shop outlets. 100 standalones over the next 5 years. more footfalls, the brand rationalised pric- growing faster than in metros and Sec-A South Delhi’s Select City Walk mall. But a Diesel 2010 Two stores in Mumbai. 30 stores over the next fi ve years. es, cutting them by nearly 25%. Today, the cities. Market experts say that small towns similar store in Pune cost Rs 80 lakh. Th ere’s starting price of a Mango T-shirt can be as are coming of age. Income and awareness also room for improvement in sales.