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A number of marquee fashion brands such as H&M, Uniqlo and GAP are waiting to take a plunge in the Indian market with the government allowing 100 per cent foreign direct investment in single-brand retailing. And domestic and global brands, which are already present in the casual-wear segment in India, admit they are getting ready for tougher competition.
"The game will change substantially for brands selling products in the Rs 2000-plus bracket. Brands such as Lee and Wrangler will see a new set of competition and private label brands of department stores will see new rivals," says Darshan Mehta, chief executive of Reliance Brands, a unit of Reliance Industries which has agreements with international brands such as Diesel, Paul & Shark, among others.
Department stores such as Pantaloons and Tata-owned Westside have private label-led strategy wherein over 80 per cent of their merchandise comes from private labels. About 15 per cent of Shoppers Stop's revenues come from private labels.
Jaideep Shetty, chief executive of fashion chain Mineral, says the entry of new fashion chains will open up new markets, forcing Indian retailers to review their strategies.
"Most Indian retailers have diffused positioning today whereas chains such as H&M, Zara, Uniqlo have crystal-clear positioning. That's why when Zara came in, women were forced to go and shop at its stores," Shetty adds.
Arch rival of Zara, and known to replace fashion frequently like its competitor, Swedish retailer H&M Is known for competitive pricing and tieups with fashion designers and celebrities for new lines. H&M has already applied for a single brand retailing operations in India and believed to have booked stores here.
H&M, which opened its first store in the same year when India got independence, runs 2,800 stores spread across 49 markets. The H&M Group includes H&M and H&M Home as well as COS, Monki, Weekday, Cheap Monday and & Other Stories.
Uniqlo, owned by Japan-listed Fast Retailing, is known for basic, functional and technologically advanced clothing and new clothing materials such as HEATTECH and Silky Dry. It rose from roadside chains to one of the biggest apparel retailers in Asia. Uniqlo runs 2327 outlets worldwide. Though not announced, Uniqlo is believed to be in talks with textile and apparel company Arvind for Indian entry.
Gap Inc, one of the largest casual-wear brands is also believed to be entering India next year. It has brands such as Gap, Banana Republic, Old Navy, Piperlime, Athleta and INTERMIX - and runs 3,100 stores world over.
Incidentally, Zara, the global rival to H&M, Uniqlo and Gap, already runs 10 stores in the country in a joint venture with Tata's Trent. The Spanish brand has already achieved profitability despite being here for just three years.
Prashant Agarwal of Wazir Advisors says: "The existing retailers have to catch up with the new chains in terms of better ambience, compeititive pricing, better service, otherwise they are dead."
But Indian retailers say they are ready for the challenge.
"The strong and established brands will have to consistently strengthen their core positioning while upgrading retail experience," says Sooraj Bhat, brand head at Allen Solly, a brand of Madura Fashion & Lifestyle. Bhat says as a part of brand enhancement, Madura has created a new retail identity a year ago. This was followed by Allen Solly's new logo and brand identity. "And we will continuously come up with the latest products that are in trend such as the 'Colour Lab' launched for Spring Summer 13 season," Bhat says.
Others are looking at business opportunities when the new chains come in. Adds Govind Shrikhande, managing director of Shoppers Stop: "If single brands like Uniqlo comes in, we would be happy to create a shop-in-shop for them. We do not see them as counter competition but as co-competition," Shrikhande adds.
Retailers such as Shetty say mall developers will bend over backwards to lease their space to brands such as H&M and Uniqlo which have high brand recall. Zara gives a percentage of sales to mall owners wherever it is present and never gives fixed rent. I believe even its rivals get good rates from malls," Shetty says. According to industry sources, Zara pays 6 to 7 per cent of its sales to mall owners as rent.
Challenges
Consultants, however, say the import-led business model could throw some challenges for the leading global fashion chains coming here. "Price ranges need to be tweaked as per the price perception of Indian customers. "If you import products, prices will be 30 per cent higher due to duties," says Agarwal of Wazir, giving the example of Marks & Spencer, which had to cut prices by 20 per cent in India to woo buyers.
Hemant Kalbag, head of consumer and retail, Asia Pacific at AT Kearney, believes global brands may have to tweak their models beyond the big cities. "Each of them has enough brand recognition to open eight to nine flagship stores in big cities. But beyond these cities, they may have to tweak their model," Kalbag says.
