Global brands’ clock in growth, while local retailers suffer

Friday, 29 November 2013
While the brands and retail have got the much needed boost during the festive season, some have even seen single-digit revenue growth for the first time since last year, popular global fashion brands are in celebratory mood. In fact many global brands like Zara, Marks & Spencer, Benetton and Tommy Hilfiger have reported a year on year rise in revenues anywhere between 21 percent to 56 percent last fiscal. Seems they have realized that the key to attract consumers is offering quality collection at affordable prices. And working on their retail expansion plans carefully has also worked in their favour.

Positive growth last fiscal boosts business

As per their annual reports, when their sales are calculated, it equals apparel section of department store chains Shoppers Stop and Lifestyle International that sell around a hundred brands, and is more than half of Aditya Birla’s Madura Fashion & Lifestyle that owns brands such as Louis Philippe, Van Heusen and Allen Solly.
The list of women’s fashion brands that are strong globally and have already made it big in India includes Zara and Vero Moda to name a few. Zara in particular clocked in sales worth Rs 405 crores (64.8 million dollars) during the financial year ending March 2013, within four years of its India launch.

This has attracted many foreign labels to try their luck in the country. Over a dozen brands are in queue, which include Swedish fast-fashion retailer Hennes and Mauritz (H&M), GAP, the largest casual wear retailer in the United States and Japanese brand Uniqlo. India relaxed FDI norms in single brand retail in January last year, however, many brands expressed their displeasure over the 30 percent local sourcing norm, which has been diluted by the government last September.

Success mantra of global brands

One factor that has surely helped these brands in registering growth is careful retail expansion. Most of them saw growth in same-store sales. For example, Inditex Trent, which runs Zara in India, grew its sales more than 56 per cent without adding a single store and M&S Reliance opened just six outlets during the year, witnessing its 28 per cent like-to-like sales growth.

Keeping the dilemma of foreign retailers like H&M, M&S, Zara and others in mind, the DIPP has also reworked the definition of 'single brand' to enable them to continue selling their sub-brands and stay within the ambit of foreign direct investment regulations in single-brand retailing. According to a 2012 report by Boston Consulting Group, consumption expenditure on apparel in the country is expected to increase 3.8 times to 225 billion dollars (aroud Rs 14 lakh crores), over the next seven-eight years.

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