Competition is hotting up in India’s fashion retail segment. Even asseveral global brands like H&M, Gap and Children’s Place are finalising their India investment plans,Italian brand Benetton has overtaken Levi’s to emerge the largest international fashion brand in the country for the first time last fiscal, a report in TheEconomic Timessaid today.
While Benetton reported more than 20 percent increase in revenues for FY13 on year, US’ Levi’s saw a 35 percent fall in revenue after it cut down a few brands like Dockers, Sykes, Signature and Denizen as well as shut down a dozen of stores.
Clearly the company’s strategy has backfired since the cost-cutting has been conducted at a time when Benetton has identified opportunities in niche growth pockets such as airports and smaller towns to fuel growth whilemost of the other global rivals too are expanding their portfolio and store count in India.
“Rival brands have been more aggressive on growth, style and innovation, positioning them as younger brands by following global fashion trends,” Ruchi Sally, director at boutique retail consultancy Elargir Solutions, was quoted as saying in the ET report.
For instance, British retailer Marks & Spencer is focusing on Indiaaggressively. It plans to make India its biggest foreign market, increasing its store count there to 80 by 2016 from 36 currently.
Other international brands like Zara and Tommy Hilfiger also posted between 21% and 56% year-on-year jump in their revenues last fiscal, according to their annual filings.
According to a study by rating agency Crisil, the branded apparel market in India is expected to witness a positive growth over the next few years.
“Branded apparels would grow at a much stronger pace, driven by increased presence of organised retail, rising disposable incomes, changing demographics and increasing brand consciousness,” it said.
The research estimates the domestic apparels market to be around Rs 1,25,000 crore in 2012, of which branded apparels (defined as brands having a strong national or regional presence) contribute about 40 percent. A decade ago, the corresponding percentage would probably have been closer to 25 percent.
CRISIL research also said that the growing demand for branded apparels has also encouraged many of the domestic players to enter into marketing tie-ups with well-known foreign apparel brands and many established foreign apparel brands are also present in India on their own.
It projects domestic branded apparel sales to grow at a CAGR of 10-15 percent over the next five years, much faster than the 6-7 percent annual growth in the overall market.
Little wonder that Zara now plans to bring its higher-end label Massimo Dutti to the country through a joint venture whileUS-based clothing giant Gap and Children’s Place are all set to enter India next year through a joint venture with Arvind Brands.
Just last weakGap’s global rival Hennes & Mauritz AB ( H&M) got the approval from the Foreign Investment Promotion Board to set up a wholly owned subsidiary in the country that will run its H&M stores.Topshop too is finalising plans to enter the country in the next couple of months.