Stitch in time

With the entry of global fashion brands, Indian designers need to set their house in order.

Zara, the high-street fashion label owned by Galician tycoon Amancio Ortega, was once described by a rival as “the most innovative and devastating retailer in the world”. Not without reason. When it opened its first stores in India in Delhi and Mumbai last year, it did Rs 1.25 crore in sale in the very first weekend. Though the momentum has ebbed since then, this is way beyond what any Indian fashion label has done. It was a wake-up call of sorts. And the days ahead could be tougher. International fashion brands such Gucci, Versace, Dior and Ermenegildo Zegna have been around for some years now, but there are more coming every other day.

 

“When the big labels entered markets like Hong Kong and Singapore, the local designers were almost wiped out,” says designer Suneet Verma who fears Indian fashion could meet a similar fate. “We don’t have the money to match their advertising and promotion budgets. You will rarely find an Indian label on the cover of any fashion magazine. That space has been taken over fully by foreigners.” To hedge himself against the onslaught, Verma has tied up with Judith Leiber to design bags. His association with BMW has given him some visibility abroad.

Others are not as candid as Verma and play down the threat, whether from high-street brands such as Zara or designer labels like Versace. “There’s enough room under the sun for everyone,” says Ranna Gill. “Our line, primarily wedding and evening wear, has a distinctly traditional identity, while foreign designer brands are overtly Western. So they hardly pose a threat to us,” adds JJ Valaya. There is some truth in this. The likes of Dior and Versace have not made public any plan to “go native” — at least not yet. So, those designers who do ethnic wear, especially for women, are safe. Couture will not be affected, says Fashion Design Council of India (FDCI) President Sunil Sethi, where Indian designers showcase Indian sensibilities and craftsmanship; but younger designers who do Western prêt (ready-to-wear) could be in trouble.

“Big designer labels stick to what they have perfected over the years,” says Valaya, adding that were a Dior to make an embroidered sari, it would have to price it at a crore, considering its gowns sell for at least Rs 40 lakh. The price of a Valaya outfit, in contrast, starts at around Rs 5 lakh. Italian design house Etro, some designers like to point out, had come with a burqa for West Asia but discontinued the line because it wasn’t commercially viable. But things could change in the future. Canali, the 75-year-old Italian design house, launched the bandhgala, labelled the Nawab Collection, exclusively for its Indian operations in September 2009.

What this has done is exposed the weak business model of Indian designers and their austere financials. “We are very small,” says Rajesh Pratap Singh, one of India’s most respected designers, on the size of his business, “no bigger than a cottage industry.” Agrees Ritu Kumar, one of the biggest names in the business: “It’s a nascent industry.” Estimates of the fashion market in India vary from Rs 500 crore (Ernst & Young) to Rs 1,100 crore (Kimaya Fashions) and Rs 2,500 crore (Suneet Verma). Even FDCI, the apex body of designers with over 300 members, does not offer more than estimates. Few designers get back on the survey questionnaires sent out after fashion week, says Sethi. Perhaps, it is as Sethi surmises that “the image of a fashion designer does not equate with his actual business”.

Business, mind you, is growing on the back of a booming economy, the rise of newer and glitzier organised retail formats and, internationally, a new respect for India and its craft traditions. Speak to any designer and s/he will tell you about new stores opening/being planned or tie-ups with store chains. Gill, who does a line of Western women’s wear, says her business is growing 20 to 25 per cent a year. Jatin Varma, another designer of Western-styled women’s wear, claims his recent tie-up with Fashion and You, the online discount store, is getting him brisk sales. “I had put up around 45 pieces for sale, and by half a day, had sold 18 of them.”

Anita Dongre’s AND line of Western women’s wear, which launched in 1999, today retails at 121 standalone stores and 127 shop-in-shops at chains such as Shoppers Stop and Lifestyle; Global Desi, which began just two years ago, is 17 stores and growing. “We crossed Rs 100 crore last year, and will be closing this year at Rs 115 crore,” she says. To put the figure in perspective, Kimaya Fashions, which runs a chain of 16 stores in India and abroad stocking merchandise from 100 designers, will clock sales worth Rs 75 crore this year.

Low price points have helped Gill, Varma and Dongre so far. Gill’s gowns, dresses etc retail for between Rs 3,000 and Rs 8,000. Varma sticks to prices in the range of Rs 2,000 to 5,000, and Dongre’s AND line doesn’t cross Rs 3,000. Since Western wear is under the biggest threat from global labels, price could be an interesting defence for them. “Pick up a well-cut jacket from an international brand and compare the prices with an Indian designer; it’s three times as expensive,” says Sethi.

That’s good but not enough. Indian designers need to evolve a proper corporate structure for their business. “If you take the top 15 names, most of them function like small, family businesses,” says Darshan Mehta, president and CEO of Reliance Brands which has licensing agreements with a clutch of international brands (it tied up with Steve Madden this week) and wants to make similar arrangements with Indian labels.

Mehta is right — Valaya’s brother, TJ Valaya, is the CEO of JJ Valaya Luxury Holdings; Rajesh Pratap Singh’s sister-in-law, Sapna, drives his business; Gill says she is in this with her parents; while for both Sabyasachi Mukherjee and Varma it is their father. “Being a family-owned business is not a bad thing in itself,” says Valaya. “But it is also true that all the foreign brands that have seen tremendous growth adopted the corporate language.”

“We do not have the economies of scale. Besides, the foreign brands are so far ahead in supply chain logistics, so organised and fast in production and distribution cycles,” adds Sethi. “We are still only planning six months in a season, while they are a year ahead. Few of our designers have international agents to source business from abroad.” Everybody is aware of the challenges. “If things don’t change,” warns Mehta, “Indian designers could get marginalised very quickly.”

No wonder, then, that some of the bigger houses have started to professionalise, separating out their creative and business operations. Valaya, for instance, has a chief operating officer, Frances Shenker, a 30-year veteran in the luxury business. Ritu Kumar is the other designer to have instituted a similar process, especially since the launch of LABEL, her prêt line, in 2002, and the entry of her son, Amrish, into the business. (This, incidentally, is the only clear succession plan in an Indian fashion house). But such instances are few. Experts also wonder if Indian labels have outgrown their creators — Versace survived despite Gianni Versace’s murder; are Indian fashion brands equally strong?

Genesis Colors and its label, Satya Paul, are an experiment in such a way of doing business. The label, which launched in 1985, retailed out of a single store in Delhi; in 2001, two ex-bankers, Jyoti Narula and Sanjay Kapur, came in to organise its operations. Today, Satya Paul is present in 40 stores (12 more to be added this year) and 60 to 70 multi-brand outlets; it manufactures out of state-of-the-art facilities in Mumbai and Gurgaon. Starting this year, the brand will be extending beyond saris to kurtis, accessories, scarves, bags, dresses and so on. “We want to be a complete wardrobe solutions provider,” says Narula, the managing director of Genesis Colors.

In 2008, Genesis Colors became the first fashion house to get private equity — Rs 110 crore from Sequoia Capital. Venture capital has been seeking other designers of late — Valaya acknowledges he has been approached for a stake sale, and says it will happen somewhere down the line — but there haven’t been too many deals. Not that there haven’t been setbacks. Genesis Colors wanted to bring under its folds other designers as well, but only one of these associations, young designer Deepika Gehani, survives. It had tied up with Valaya too three years ago to launch the Valaya Quantum line, but the deal fell through in around six months.

Some designers have diversified and done licensing deals to secure their future. Valaya, for instance, is betting big on Valaya Home, a furnishing and tapestry line, and a consolidated men’s wear line. Plans are on the anvil to enter accessories as well. Manish Arora has done shoes with Reebok under the Fish Fry line, eyewear with Inspecs, and makeup with M.A.C, and was recently appointed artistic director of Paco Rabanne. Sabyasachi has done bed linen for Bombay Dyeing, while Tarun Tahiliani has a line of women’s denimwear with Levi’s, and flower arrangements with Ferns n Petals. Rohit Bal does tote bags for Oriflame.

Winds of change are blowing through India’s fashion industry. But they’ll have to blow harder and faster, for something concrete to come about.