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Organized Clothing Retail In India
Mumbai | Saturday, 16th November | By Shruti Karthikeyan
Adapting strategies to meet Indian consumer demand
Over the last decade, the Indian retail sector has witnessed an unprecedented expansion driven by robust economic growth, rapid
urbanization and changing lifestyles and aspirations of the Indian retail consumer. From less than 1 mln sq. ft. of mall space in 2001, the
Indian organized retail sector has increased manifold. The growth of organized retail in India is not only limited to urban areas but is
growing rapidly in rural areas too. Indian clothing and apparel sector accounts for 33% in modern retailing. Clothing & Apparel
followed by the Food & Grocery sectors make up for a large share of the organized retail market, and are also the areas where foreign
retailers are entering the fastest.
Since the opening up of India's economy in the late 1980s, fashion is one consumer sector that has drawn the largest number of global
brands and retailers. International brands that have been drawn to India by its large "willing and able to spend" consumer base and the
rapidly growing economy, have benefitted in attaining quick acceptance in the Indian market and given their high desirability meter, most
international brands have positioned themselves at the premium-end of the market, even if that is not the case in their home markets.
In addition, Indian companies - manufacturers and retailers - have been more than ready to act as platforms for launching these brands
in the market and today there are over 200 international fashion brands in the Indian market for clothing, footwear and accessories alone,
and the numbers continue to soar, as higher disposable incomes and the availability of credit significantly enhance the consumers'
buying power. Growth in good quality retail real estate and large format department stores also allowed companies to create a more
complete brand experience through exclusive brand stores in shopping Centers and shop-in-shops in department stores.
Though the number of new brands entering the Indian shores in 2011 and 2012 may not have matched the numbers in the peak years,
both years have been healthy and the list of new brands ready to enter in 2013 already seems promising. Retailer demand strengthened
across the country in the first half of 2013, and the period saw significant enquiry levels from international retailers and also several major
new store openings. Recent months also witnessed a number of well-established international mass market brands enter Tier II
locations, partly due to the lack of space options in Tier I markets.
Many groups are eyeing the new retail supply set to come on stream this year and in 2014, which will give them opportunities to further
expand their footprint. On the legislative side, while clarity has been provided on sourcing and city spread, there is still confusion over the
regulations concerning limitations on minimum investments and creation of back-end retail infrastructure as pre-conditions. It is expected
that the government will continue to resolve the concerns of overseas retail groups willing to invest in the country.
Supply infusion was sporadic, with only about 2.6 million sq ft of new retail space being added, concentrated in Chennai and Mumbai
only. New completions included Viviana Mall in Thane (Mumbai), Phoenix Market City (Chennai) and Forum Mall (Chennai); these mall
developments became operational with healthy commitments from prominent anchor tenants such as Starbucks, Shoppers Stop, Big
Bazaar, Lifestyle and Globus. Few large scale mall completions were further delayed to the subsequent quarters as developers remained
focused upon attracting tenants in completed properties and reducing existing vacancy levels.
Mumbai witnessed considerable activity in its retail segment in the first half of 2013, with an increase in absorption of retail space across
high streets and prominent mall developments. In the organized retail segment, values appreciated by 6-9% in West Bengaluru and
South Bengaluru, largely due to an increase in demand for retail space in this region. Rental values were stable in South Bengaluru and
ORR stretch due to limited retail enquiry in these micro-markets.In the organized segment of Chennai, rental values across most of the
mall developments remained stable as compared to the second half of 2012. However, values in Express Avenue Mall declined by 5-6%
as compared to H2 2012, largely as a consequence of retailers preferring to expand in mall developments located in the cost-effective
emerging micro-markets of the city.
Gucci recently opened its largest store in India's Delhi-NCR after two failed joint ventures. All of its five stores are now run directly by the
company and the Indian business is reported to have turned profitable this year. Brands such as Mango who have chosen the franchise
route are tying up with additional partners (e.g. DLF) in the hope of making the Indian business contribute significantly to the overall
revenue of the company. UK-based apparel chain Marks & Spencer is accelerating its expansion in India with plans to add ten stores in
the next six to eight months in the country. The company has identified India as one of the key markets to become the world's most
sustainable retailer by 2015. It plans to increase the number of stores in India from 24 currently to over 30 through the 51:49 joint venture
with Reliance Retail.
Puma SE, the global sports lifestyle company for athletic shoes, footwear, and other sportswear aggressively set out to gain 30% of the
Indian organized retail sportswear market within a year, from a share of 18-20%, and was among the top four branded sportswear
segments in 2011. To this end the company targeted opening nearly 100 more stores during 2012. While the actual numbers are
reportedly short of target, the brand has been opening amongst the largest stores during the year.
It is not only international brands that are more optimistic. Indian partners are also reviewing their approach. For instance, the Arvind
Group that had looked at reducing its emphasis on international fashion brands in 2007-08 has recently acquired the business operations
of Planet Retail which operated the franchises of British fashion retailers Debenhams and Next, and American lifestyle brand Nautica in
India. Arvind Limited, one of the largest integrated textile and branded apparel players posted a 44% growth its standalone net profit for
the second quarter of current fiscal 2013-14. From Rs 648 million in the second quarter of previous financial year 2012-13, the textile
conglomerate's standalone net profit grew by 43.95% to Rs 932. 8 million for the Q2 ended September 30, 2013.
The company termed Debenhams' franchise as a significant acquisition as it provided an entry into the department store segment. Arvind
plans to increase the India presence of Debenhams from two stores to eight over the next three years. It also plans to grow the network
of Next, the large-format speciality stores, from 3 to 12 in the same period. As customer footfall and conversions pick up, international
brands are also shoring up their foundations for future expansion in terms of better processes and systems, closer understanding of the
market, and nurturing talent within their team. India shows signs of a healthier business outlook for international brands but with
increased competition and government norms, it seems like a roller-coaster ride ahead.