The debate on multi-brand FDI can wait, but the big fashion brands can’t. Nearly a dozen global fashion brands are poised to enter India and are in talks with domestic players for distribution arrangements. British clothing brand Jack Wills, Italian Rifle jeans, American fashion designer Michael Kors and several others will enter Indian cities soon, following licensing agreements with local partners.
Indian regulations allow 51 per cent FDI in single brand retail while no foreign investment is allowed in multi-brand retail. However, these fashion brands prefer the licensing route. Under this, the local retail partner invests in branding, marketing and expansion. “FDI norms do not really matter to these brands for now. Also, the licensing mechanism provides the necessary flexibility to add or change local partners,” a retail expert said.
“Several international brands will stock stores in Delhi, Mumbai, Bangalore, Hyderabad and Chennai very soon. Some deals are in the advanced stages of getting vetted by both partners,” a senior executive representing a legal firm said. A number of legal firms are currently negotiating with Indian retail chains for exclusive tie-ups.
While not going official, top executives of domestic chains like Reliance Retail, Shoppers Stop, Lifestyle, and Future Brands privately confirm being ‘in talks’ with overseas fashion brands. According to Anand Ramanathan of KPMG Advisory, falling demand for these luxury brands in their home countries is pushing them to India. “India is a huge market in retail, be it single or multi-brand,”Ramanathan said.
“No global fashion brand wants to miss out on the Indian opportunity since demand in the developed world is slipping,” Ramanathan said. According to various estimates, the luxury branded clothes market is pegged at R2,000 crore or 10 per cent of the overall organised branded garments market. However, it is growing at over 30 per cent year-on-year, making India an attractive destination. Agrees Dipak Agarwal, CFO, DLF Brands: “The business of retail fashion brands is worth $3 billion in India, out of which these luxury brands can easily capture half-a-billion dollars in next 3-4 years, provided they put in the right strategy.”
Following the licensing arrangement, Jack Wills will be available in metros and target university students, sources said. The brand is partly owned by Jack Wills Ltd, a private limited company registered in the UK, while a minority stake is held by private equity firm Inflexion. Rifle Jeans had entered India in 2006 without much impact. Sources said it will be relaunched shortly through a new local partner.
But for those who are already present here, it is time to change or add more distribution partners. Sources say Calvin Klein, DKNY, Hugo Boss and others are looking to change their retail partners while GAS is scouting for a distribution partner.
Diesel and Italian brand Miss Sixty group which recently switched partners — Diesel switched from Arvind Brands to Reliance Brands while Miss Sixty group switched from Reliance to Arvind — are again looking around to add more distributors. Same is true for a number of other luxury brands including Mango and DKNY (currently with DLF), and Brioni among others.
When asked about DKNY looking to add or change its partnership with DLF, Agarwal declined to comment. “They continue to remain with us. Rather, we are aggressively building up stores for them and are looking forward to opening a few soon,” he told FE.
Source : Financial Express