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Following IKEA announcing the purchase of 13 acres in Hyderabad for its first store in India on Friday, it’s the turn of another Swedish chain, Hennes & Mauritz (H&M), to go for a big rollout in the country. H&M, rival to another European fast fashion brand, Zara, is likely to open as many as 30 stores in India by early next year, sources say.
The Swedish fashion chain, in the middle of major global expansion, is learnt to have already closed about 15 real estate lease deals in India, and is in the process of raising this count. The group, with $22 billion in global sales and 3,600 outlets across 59 markets, recently announced it would launch its first India store in the national capital. The store, of about 25,000 sq ft, would be located at a popular mall.
At the time of making its application for investing about Rs 750 crore into the country, H&M had said it planned to open 50 outlets across India through the next few years. Zara, in a joint venture with Tata group’s Trent, has 16 stores across the country; it posted $114 million in sales for the year ended March this year.
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H&M did not reply to a Business Standard questionnaire on store openings and lease deals.
According to H&M’s latest quarterly report, the company plans to open as many as 400 stores across the world this year. Besides India, the group’s expansion thrust is on the US and China. In fact, in North America, both H&M and Inditex’s Zara are giving stiff competition to the US-based Gap. Recently, Gap announced its plan to shut 175 stores in the US.
Besides international expansion, H&M is also focused on going online. Of late, the group has gone online in Poland, Portugal, Romania, the Czech Republic, Bulgaria, Slovakia, Hungary and Belgium, among others.
Though the company secured the government’s approval to invest in India early last year, it has delayed its launch partly due to a slow retail environment in its home market, pressure on margins and focus on some other key markets. Analysts said general elections in India, as well as political uncertainties, might also have added to the delay.
H&M’s big India play at this point is significant because there has been no action in the international brick-and-mortar retail scene for about a year, except Gap launching its store recently.
The National Democratic Alliance government at the Centre is opposed to foreign direct investment (FDI) in multi-brand retail. The UK’s Tesco, in partnership with the Tata group, is the only entity in multi-brand retail to have invested in India (Maharashtra and Karnataka). In 2013, American major Walmart parted ways with its partner, Bharti group.
While limiting its business to wholesale, Walmart has not shown any interest in entering India’s multi-brand sector. French chain Carrefour, which also had wholesale stores in the country, made an exit last year, in the absence of a favourable multi-brand policy.
In multi-brand retail, FDI is capped at 51 per cent, while 100 per cent foreign investment is allowed in single-brand retail. However, despite the fact that there’s no cap on FDI in single brand retail, companies such as IKEA and H&M are believed to have been worried over a clause pertaining to mandatory 30 per cent sourcing from India.
