With a US$200 billion retail market being open to foreign direct investment, India is seeing a plethora of foreign brands entering the country. The Rs 2,000 crore footwear market in India seems to be attracting a lot many foreign brands, but what is probably a matter of worry is whether or not the Indian market is ready to accept them. A report by Zainab Morbiwala.
Nine West, Aldo, Bally, Charles & Keith, Salvatore Ferragamo, Hugo Boss, Clarks, Lloyds, Carlton London, and a dozen more – you name ‘em and we have ‘em right here in India. Five years ago, though, owning a foreign footwear brand meant a trip abroad, a gift from overseas friends/family, or at the most, an online purchase. It is only now that the retail revolution in India is attracting a lot many foreign footwear brands, with a majority of these high-end brands choosing to set up their own retail presence here. Nearly one-fourth of the total footwear sales in India happens through organised retail outlets, making this the second-most organised retail segment in the country, next only to organised timewear retail. And the credit for having set the ball rolling goes to players like Bata and Liberty.
Although fashion footwear has had a slow entry, the branded sports footwear market is perhaps the only retail sector in the country wherein all three top global brands have a presence. Reebok opened its first exclusive store in India in 1995, followed by Nike and Adidas. While the first exclusive brand outlets of foreign footwear brands took time to arrive, the grey market filled the fashion footwear void with low-priced offerings from the South Asian markets of Malaysia, Vietnam, Thailand and China.
One of the early entrants with their exclusive outlet was Nine West in 2002. Says Sandy Walker, vice president, marketing, Nine West International, “Since the launch, Nine West today operates four stores in India – at Linking Road (Khar), Atria Mall (Worli) and High Street Phoenix Mills in Mumbai, and at South Extension, New Delhi. Nine West customers are well travelled, fashion-aware and loyal to the brand. We now wish to tap additional consumers in India. Our initial strategy while setting up our first store was to tap the existing customer base of Nine West, before broadening the base with new customers. The aim at present is to create product awareness and build synergy with a global customer body.”
Sharing his views on whether the Indian market is currently ready for foreign brands, Walker says, “Yes, we are of the view that the market is open to the entry of international brands; and this has been proven by our continued presence for the last five years in the country. The organised retail sector in India is very small and, therefore, there is enough room for the growth of international as well as domestic players.”
Fashion footwear brand Bally entered India in 2004 and their retail presence so far has been restricted to Mumbai. The brand will now be available in New Delhi and a couple of more cities in a few years’ time. Marco Franchini, CEO, Bally Group, relates the brand’s experience in India : “ India is an incredibly important expanding market, so it is necessary for Bally to have its presence here. The Indian consumer is not completely unaware of Bally; international travellers – especially those visiting Britain – are already loyal customers. For the brand, this is an opportunity to provide the Indian consumer with products that have a classic elegance – tasteful luxury, enduring quality and beautiful craftsmanship have always been the hallmarks of Bally. The response here has been very positive.”
Targeting mid- to high-end customers, Aldo inaugurated its first store in India at Mumbai, in 2005. A year later the brand opened its second store. Says Angie Deliva, marketing manager, ALDO Group International, “ Through our market-gap analysis, we found out that no global footwear retailer offered international fashion at affordable prices for all categories and genders, with an add-on accessories collection.” “Looking at major international retailers striving to get a foothold in the country (with Tesco, Wal-Mart, Debenhams, etc.), we strongly believe that the Indian market is ready to accept international brands. India is already a major market for international brands in sports retailing and is now fast moving forward with fashion footwear, too.”
“Eventually, the large unorganised market will be consolidated and acquired by major national or international retailers. Retail space shortage along with cutthroat competition will become the key factors leading to the consolidation of local players.”
Talking about expansion plans, Deliva says, “It is clear through our two stores in Mumbai that our Indian customers love the brand. We are constantly asked about our next store launch in other cities. Keeping in mind the slow pace of getting it right in any retail environment, it is taking us a little longer to open stores in line with our strategy – we are looking at all major cities. Our plan is to open more than 30 stores within the next couple of years.”
German brand Llyod entered India along with Tata International; and unlike other foreign brands, they decided to make the brand available through MBOs and prominent footwear retail chains. Says Sushen Roy, head of marketing, leather global business unit, Lloyd, “We entered India in 2005 and decided to follow a completely different marketing strategy. We did our research and found out that there existed six superbrands in the market. And so we adopted a three-tier strategy, making our brand available through traditional multi-brand outlets like Regal, Metro and Lords, as well as through retail chains like Shoe Tree and Loft. We also opted for a neo-traditional approach whereby Llyod would be sold through luxury fashion outlets like Gabbana. Now we are available across seven Indian cities. Very soon we plan to have our exclusive brand outlets as well.”
Where a majority of these foreign footwear brands have not expanded their retail reach beyond four stores despite being present in India for over four years, Clarks is perhaps the only brand to have six exclusive outlets within less than two years of launch in India. Launched in October 2005, Clarks was initially available through MBOs and store-in-stores; the brand has since revised its strategy, and except for Loft, a pair of Clarks is now sold only through its exclusive brand outlets. Aldo has also been following a similar strategy.
Says Deliva of ALDO Group, “It is best to have standalone stores in the best locations. It might take a little while to get the right place, but once you have the right location, there is nothing to worry about. Ideally, a high street location or a place within a major mall works very well.” Adds Roy, “ India is a complex market in comparison to other emergent markets; it requires a high level of customisation to suit the Indian market. For international brands, a mix-and-match of mono-label stores and channel strategy is always a good option.”
Commenting on the required gestation period for gaining a stronghold in India, Franchini says, “Considering the encouraging retail environment, we believe that the gestation period should range anywhere between two and four years. We will certainly attain our objective of increasing brand awareness among our target clientele through aggressive marketing and PR campaigns. Of course, this will be coupled with high-quality products and unmatched customer service.” He adds, “Considering the present retailing structure in India, one of the best retail formats is having your own boutique. That way, you have the opportunity to maintain service levels, ensuring that every customer receives the Bally experience.”
Tse Ling, corporate communications manager, Charles & Keith, informs, “Looking at how the retail market in India is growing, it takes a year or two to cover maximum market share. At Charles & Keith, we make sure that we maintain personal rapport with our customers and keep them up-to-date with our latest collections, trends and promotions.”
Commenting on the response received since their launch in India, Vikas Gupta, president and CEO, Lacoste India, says, “We have received a phenomenal response to our launch. We expect to see the footwear line achieving complete results in another three to six months. We will also be launching seasonal collections in line with global fashion trends, and expect this to keep the sales momentum going. We plan to expand our stores and by 2009, may open around five to 10 outlets of over 3,500 square feet each. We will mainly locate the stores within malls, with a few specific high street locations thrown in.”
Been There, Done That: Brand Lessons
Nine West: Initial marketing strategy of tapping existing customer base, before broadening the base with new customers, followed by creating product awareness
Aldo: Market analysis to tap existing voids in product offerings and sub-segment gaps; standalone stores at the right location – such as a high street or a place within a major mall
Carlton: Creating initial brand awareness through presence in MBOs and store-in-stores; followed by the retail strategy of selling only through exclusive brand outlets
Llyod: A high level of customisation to suit the Indian market; a mix-and-match of mono-label stores and channel strategy to market global brands
Bally: Allowing for a normal gestation period of approximately two to four years, coupled with high-quality products, customer service and aggressive marketing to increase brand awareness. One of the best retail formats for this segment is arguably a boutique, which allows for individual customer attention
Charles & Keith: In the present retail scenario, allowing for a year or two to cover maximum market share; always maintaining personal relationships with customers and keeping them abreast of latest collections, trends and promotions.
The duty structure in India is considered to be the highest in the world; and this has been one of the major factors restricting the entry of foreign brands. India’s political division into 29 states, each with a different tax system, also impedes the smooth transport of goods as each frontier levies its own set of export and import taxes. Says Roy, “The duty structure has affected our pricing strategy. The entry price point for the womenswear market is a hindrance, too, because of the extremely high custom duty.
“But things are looking up slightly, and we are hoping to have duties being reduced by 30-40 per cent about five years down the line. Presently, our pricing in India is 20 per cent less than that in other countries. ”
There is no dearth of foreign players in the segment eager to enter India, but finding the right location is always a challenge. Says Franchini, Bally Group, “Lack of quality retail space, especially for luxury brands like Bally, does become a hindrance to expansion plans. Mumbai still does not have a speciality mall for premium/luxury brands. However, India being a new market for the luxury segment, we are sure that the situation will improve in the next few years. Good infrastructure is also a problem.”
Since these brands do not have their manufacture bases in India, the issue of continuous replenishment also causes a problem – though the majority of these brands maintain that they have systems in place to take care of such issues. Shares Walker, Nine West International, “To take care of such requirements, there is a constant shipment of products every 7 to 10 days. For urgent requirements, replenishments are sent by air to meet customer needs.”
Current market overview
Footwear retail registered a growth of 9.2 per cent in 2006 and stood at Rs 11,900 crore at 2003-04 constant prices, as against Rs 10,900 crore in 2005 and Rs 10,000 crore the previous year. The branded organised segment grew much faster at year-on-year rate of 34.2 per cent during 2005-06, and was estimated at Rs 4,500 crore in 2006. Men’s footwear comprises the largest share of the organised market, accounting for about 52 per cent in value terms. The women’s footwear segment still remains the most untapped segment, with nearly 80-90 per cent of purchases taking place in the unorganised market. This is largely due to the dressing habits of women, for whom considerations of durability or comfort are less important than coordinated colours and designs.
Commenting on the demand for foreign footwear in the country, a spokesperson from footwear chain The Loft remarks, “The demand for foreign footwear is only among top-end consumers since these are sold through a few exclusive shops. Because of their high price points, these are not preferred by shoppers of all classes. Product awareness of these high-fashion brands is also inadequate.” Talking about the highest-selling foreign footwear brand at The Loft, he informs, “Florsheim is the largest-selling foreign footwear brand in The Loft currently.”
India is fast emerging as an important fashion centre on the global map; and the potential of the Indian footwear market is evident from the presence of a range of international high-fashion brands, which are now ready to embark on expansion plans.
The Indian footwear market has just recently seen a demand shift from low-priced footwear to medium- and high-priced products – with this demand potential remaining unexplored to a large degree. In a country with a population of over one billion, the magnitude of the market is unimaginable, even if a third of the population buys a pair each! It is exactly this market size that has resulted in almost every national and international brand focusing on the domestic Indian market.