India - Garment cos shift focus to domestic retail market
Dated- 04 Aug , 2010 - India
Call it a stitch in time. Several apparel and fashion accessory manufacturers catering to global brands are increasingly shifting their focus to the domestic retail market due to slowing overseas demand and rising consumption at home.
More than half a dozen companies including Orient Craft, Mandhana Industries, Royal Classic Group, SP Apparels and Crew Republica plan to expand retail network with single-brand stores of either their own labels or partnering foreign brands, company insiders said.
“The move by the garment exporters comes as overseas markets, particularly Europe, is uncertain,” says Rahul Mehta, president of Clothing Manufacturers Association of India (CMAI). This is because of prevailing recessionary trends as well as increasing competition from cheaper products from neighboring countries, he adds.
The domestic market, on the contrary, is on a song.
As per industry estimates, organised branded apparel market is around $7 billion (approximately `32,000 crore) and is expected to grow to $19 billion by 2015.
The opportunity is big indeed.
Most of these companies hope to pull in overseas money and more brands as up to 51% foreign investment is allowed in single-brand retail.
Delhi-based Orient Crafts, which is marketing German brand s.Oliver, plans to open around 80 stores by the end of 2012 for around `125 crore.
“The single-brand retail market is going through an evolution at both ends of the yardstick. At one end, while the growth in sales and market size is keeping up its pace, at the other end the market is maturing in terms of retailing practices and consumer preferences,” says Sudhir Dhingra, MD of Orient Craft.
Mandhana Industries, which makes apparel for international brands such as Tommy Hilfiger, French Connection and FCUK, plans to float a retail subsidiary to launch its own casual-wear brands.
“With increased spending power, India is very lucrative destination for business,” says Manish Mandhana, MD of Mandhana Industries. He said the company will initially open 10 exclusive flagship stores in metros and then it will take it to tire II towns.
Tirupur-based Royal Classic Group, which targets students and young professional with affordable brands such as Classic Polo and Smash, plans to open around 100 exclusive outlets by the end of 2011.
The country’s largest textile exporter, Gokaldas Exports, meanwhile, plans to increase its revenue from domestic market to 30% from current 10%. It is in talk with big retailers to supply its garment to cash-and-carry format.
Alok Industries and Arvind Mills have announced plans to increase domestic presence.
However, it is not an easy market to enter. After all, many well recognized national and international brands are already there.
“Establishing the connect to its target audience with the brand, being focused and sticking to its brand ethos and finding acceptance would be challenge for all these companies,” says Sangeeta Tripathi, senior analyst at Sharekhan.
The companies are aware of the challenge ahead.
“To create space for new brands would not be as easy as it has been in the past,” says Tarun Joshi, director, Crew BOS, a prominent leather goods supplier to luxury brands such as Esprit, Zara, GAP and Fossil.