Early this month, the super-premium garments segment in India saw a new player. Donna Karan International (DKI), part of the luxury goods group Louis Vuitton, signed a joint venture agreement with textiles maker and retailer S Kumars Nationwide.
DKI designs and sells mainly women's apparel, sportwear, accessories and shoes under the DKNY and Donna Karan brands. But none of these would be part of the joint venture, which will be restricted to menswear only. Under the deal, which is valid until 2015 with an option to extend for seven more years, S Kumars will source, design and distribute DKNY menswear globally.
Apart from DKNY stores, S Kumars will be supplying DKNY menswear products to all the departmental stores worldwide, large format stores and multi brand outlets. SKNL UK will work with the DKNY team to conceptualise and design products, which will then be sourced from various places like China, India, Japan, Vietnam, Italy and Paris.
Nitin Kasliwal, vice chairman of S Kumars, says the tieup will allow the company to spread its wings across the world with a highly recognised and recalled brand. The JV is targeting revenues of $300 million in five years and S Kumars Nationwide is investing $20-$25 million in working capital over three years. “It’s a high margin business, EBITDA (margins) would be over 20 per cent,” Kasliwal says.
Kasliwal’s optimism may not be off the mark. Here’s why. CRISIL Research head Sridhar Chandrasekhar says “global garment brands have been making an entry into the Indian market and it’s only natural for a textile player like S Kumars to look for an opportunity like this, as the segment offers high margins.
Rough estimates suggest that the super-premium segment in India is around 5 per cent of the overall Rs 30,000 crore garments market but is expected to reach 15-20 per cent in the next five years. “This segment caters to the elite class who are frequent fliers abroad,” says Rahul Mehta, president of Clothing Manufacturers' Association of India (CMAI).
That’s a market with a huge potential, says Kasliwal. Competitors like Raymond agree too. For example, Ram Bhatnagar, president (international marketing), Raymond, says “There are several international brands which are licensed to Indian textile players. Around 300 million people in the country prefer branded apparels as household income is on the rise. The domestic textile market is likely to grow by over 15 per cent per annum”.
“Demand is picking up for super-premium products as the market is steadily developing in India. But from the competition point of view, the space is not yet crowded,” says Rakesh Dalmia, president, Century Textiles. Other ready-to-wear brands operating in the same segment include Tomy Hilfiger, FCUK, Diesel and Hugo Boss among others.
Though Raymonds is a strong competitor, it is more into formals and does not have presence in the casual wear segment, something that is catching up fast in India.
Suits of DKNY are being retailed worldwide in the range of $ 500-700 whereas shirts are available in $ 70-140. Among other offerings,
T-shirts and jeans are in the range of $ 30-75 and $ 50-100, respectively. “DKNY's menswear that we will supply would include formals, casuals, suits, jackets, trousers, knitwear, jeans, autowear and sports jackets among others. The range is huge,” says Kasliwal.
What will work in S. Kumar’s favour is that it is not new to tieups with overseas companies. In February this year, S Kumars group firm Brandhouse Retail formed a joint venture with Italian apparel brand Oviesse.
In August last year, S Kumars bought Chicago-based clothier Hartmarx Corp., now called Hartmarx Operating Co. Llc, its largest acquisition in recent times. Hartmarx is developing a wholesale and retail channel in Europe and has identified around 100 points of sale. The company also sells UK’s Stephens Brothers menswear line in India through 10 outlets.
It is not new either in the premium end of the Indian market with dominant brands like Reid & Taylor, Belmonte and Stephens Brothers, which are doing quite well in India.
However, some analysts say bringing in a new brand in the super-premium segment is not an easy task as the market, though growing, is still limited in its size,
There is already a clutch of other foreign super-premium brands like Salvatore Ferragamo, Canali and Boggi are also in India – all targeting young urbanites in mega cities across the age group of 25-45 years with a focus on professionals, corporate and businessmen alike.
Also, the presence of these brands has been quite limited for several reasons, the most important being India is an extremely price-sensitive market. Menswear players operating in the Rs 800-plus clothing category often find the going tough as far as expansion is concerned.
So S Kumar has its task cut out.
