India: Despite challenges, the retail market offers vast potential

Growing acceptance for an interesting combination of brick-and-mortar and ecommerce is paving way for major players in Indian apparel to chalk out ambitious growth plans. On the other hand, India is emerging as the second-most attractive market for global retailers to expand, after China, states the 2016 Global Retail Development Index by consulting firm AT Kearney. The report notes that despite the complex challenges, the potential is vast as the country presents a one trillion dollars retail market.

Infrastructural challenges vis-à-vis growth potential

While prominent global names such as Massimo Dutti, Longchamp, Cole Haan and Hunkemoller along with already existing chains like Zara, H&M, GAP and Marks & Spencer have entered the Indian market, strong domestic players, who understand the Indian consumer well, as well as the complexity of the market, remain major competitors for foreign retailers.

Understanding the dynamics at a local level is important as the country’s 29 states have the power to opt in or out of FDI reforms, regional infrastructure bottlenecks, including archaic labour laws, complex regulations, high attrition rates and high quality retail space is limited. As the AT Kearney report points out these are the most important areas of concern for retailers and demonstrates that India is a complex market to enter. However, the growth of e-commerce has played an important role in expanding fast fashion culture, with many international brands selling exclusively online, while others inking franchise deals to plunge into the brick and mortar format. Also, India has, AT Kearney says, in the past couple of years, improved the ease of doing business and clarity on foreign direct investment (FDI) regulations has further helped.

Further backed by robust economic growth and rising household incomes, consumer spending in India is expected to touch 3.6 trillion dollars (about Rs 240 trillion) by 2020, increasing India’s share in global consumption to 5.8 percent—more than twice its current levels, says a joint report titled ‘Shaping Consumer Trends’, released by Ficci and consultancy PricewaterhouseCoopers.

No wonder that Indian conglomerates such as Aditya Birla Group, Arvind, Raymond, Reliance, and Future Group among others, along with home-grown ecommerce players like Flipkart and Snapdeal are bracing themselves for a stiff competition ahead. FashionUnited finds out more about the established stakeholders of the present day apparel retail market in the country.

Aditya Birla Fashion & Retail

Aditya Birla Fashion & Retail (ABFRL) is one of India’s largest and fastest growing branded apparel companies and a premium lifestyle player. It recently made a foray into the Rs 7-000-crores men’s innerwear and athleisure market that is growing at 13-14 percent per year.

Aditya Birla Fashion and Retail (ABFRL) was formed after the consolidation of the branded apparel businesses of Aditya Birla Group comprising Aditya Birla Nuvo's (ABNL) Madura Fashion division and ABNL's subsidiaries Pantaloons Fashion & Retail (PFRL) and Madura Garments Lifestyle Retail Company (MGLRCL) in May 2015. Post the consolidation, PFRL was renamed as Aditya Birla Fashion and Retail. ABFRL altogether hosts a fashion network with over 7,000 points of sale across 375 cities and towns, which include more than 2,000 exclusive ABFRL brand outlets.

Madura F&L is a powerhouse of several top fashion brands including Louis Philippe, Allen Solly, Peter England and People. It also includes fully integrated fashion multi-brand outlet chain Planet Fashion; premium international brand retailer, The Collective and holds the licenses for selling PVH owned Van Heusen and British fashion icon Hackett London in India.

ABFRL has also signed an exclusive deal to bring London-based designer wear brand, Simon Carter into the country and has acquired the online and offline rights for US-based fast fashion chain, Forever 21 in India. In 2015-16, ABFRL reported revenue of Rs 6,060 crores, representing a growth of 11 percent over the year-ago period, led by Pantaloons which grew 17 percent.

Arvind Lifestyle Brands

Textile to retail company - Arvind has carved out an aggressive strategy to streamline its operations by setting up world-scale garmenting facilities and by offering global brands. Its vast brand spread includes its own labels Excalibur, Gant and Flying Machine in the mainstream category and Ruf & Tuf, New Port University among the popular category. Under the licensed brands, it has USA 1949, Energie, USPA, Arrow, Izod, Cherokee, and it has a joint venture partnership with Tommy Hilfiger, Gap, The Children’s Place and Calvin Klein.

Arvind also runs India's largest value retail chain – Megamart having brands like Ruggers, Skinn, Elitus, Donuts, Karigari, Mew Casa, Auburn Hill, Bay Island, Colt, Leisha and Edge under its belt. The company has set its vision of becoming a one billion dollars apparel company over the next five years.

After acquiring the business operations of British fashion retailers like Next and American lifestyle brand Nautica in India and inking a deal with Billabong Surfwear, Arvind is bullish about its future ahead. The company is now all set to step into India's 5.2-billion dollars footwear retail market. It has opened the first footwear store under the brand name of 'Stride' in Bengaluru. 'Stride' will sell Arvind's in-house footwear brands such as US Polo, Arrow and Flying Machine along with premium labels such as Cole Haan, Johnston & Murphy, Heatwave and Bugatti with which Arvind has entered into exclusive licensee agreements.

For the financial year, the company reported 8 percent growth in revenue at Rs 8,450 crores. Its recently launched omni-channel platform Nnnow will connect digital shoppers to every piece of merchandise from Arvind’s warehouses, 50-odd brands and a network of more than 1,200 stores across 200 Indian cities.

Raymond Apparel

Raymond Apparel entered ready-to-wear business with the introduction of Park Avenue in 1986 catering to the men’s formal wear market. Parx was launched in 1998 to address the growing trend of smart casuals. Identifying the vacuum for a high end, casual wear brand, it acquired ColorPlus as part of a strategic expansion plan for their ready-to-wear business. Crossing the gender divide, Park Avenue launched western-inspired women’s wear collections - ‘Park Avenue Woman’.

All brands are available at exclusive brand stores, and ‘The Raymond Shop’ retail outlets and multi-brand outlets across India and the Middle East. The company now plans to enter the ethnic wear and footwear category by end of this month. Simultaneously, process of revamping of its existing 1,000 Raymond Shop stores to Raymond Store of the Future is underway, as it plans to digitise the stores with smart features like providing tablets to customers inside the store to browse the entire collection.

Raymond's net profit for the full year was down 18 percent to Rs 92 crores as compared to the previous year's Rs 113 crores, although the overall revenue at Rs 5,702 crores grew 5 per cent this year as against Rs 5,428 crores in 2014/15.

Future Lifestyle Fashion

After selling a controlling stake in Pantaloon Retail to Aditya Birla Group last year, the Future Group is now looking forward to creating a new fashion and retail empire business under a new listed entity — Future Lifestyle Fashion. It operates more than 700 stores at present in 221 cities including 33 central stores in large cities.

Future Fashion operates fashion retail formats such as Central, Brand Factory, All and Planet Sports and retails apparel brands Indus League, Lee Cooper, Celio, Holii and Indus Tree. The company has also picked up 33 percent stake in KFC Shoemaker which has footwear brands like ‘Trèsmode’ and ‘Solovoga’.

For FY16, Future Lifestyle Fashions posted net sales of Rs 3,300 crores. The growth was mainly driven by stronger same-stores sales growth at about 10 percent for both Central and Brand Factory despite stiff competition by online rivals.

Shoppers Stop

Shoppers Stop - India’s largest and also the pioneers of organised retail in the country reported revenues of Rs 3,716.9 crores for the fiscal year 2016. The chain of large-format department stores is spread across 78 stores in 37 cities offering more than 400 international and national brands. It houses brands such as US Polo Assn, United Colors of Benetton, French Connection, Mothercare, Estee Lauder, MAC and Clinique along with an array of private labels like Haute Curry, Stop, Life and Kashish, among others.

Reliance Retail

Kewal Kiran Clothing

Tata Group

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