Increased sourcing from India is helping foreign apparel brands lower costs and compete with local retailers, with prices of many of these brands on a par with those of local brands. The size of the women?s apparel market in India has been estimated at $15 billion by consultants Technopak, and analysts say the market is growing at a compounded annual rate of 30%. Large companies like Benetton and Marks & Spencer (M&S) have seen more than a 20% rise in revenues in FY13, according to data from the Registrar of Companies (RoC).
Benetton, the largest global fashion apparel chain in India, sources 92% of its products locally, helping the Italian company price its products in line with those at Shoppers? Stop. ?Local sourcing definitely helps us keep costs low and, in turn, helps us offer discounts as local retailers do,? explains Abhik Saha, director supply chain, Benetton India. The retailer?s sales for FY13 rose 21% to R523 crore, a bigger jump than the 13% for FY12. Benetton India uses the franchisee model and also run its own stores ?the chain now has 668 stores.
Britain?s largest apparel retailer M&S is focusing on increased sourcing from India from the current levels of 64%. Says Venu Nair, managing director of M&S India,?As our business expands, local sourcing plays an even more important role, helping us study fashion trends and cater accordingly to customers.? M&S reported a 33% increase in India revenues at R375 crore in FY13; in FY12, revenues had risen 42% to R282 crore.
Lacoste India?s director and chief executive officer Rajesh Jain believes business can be tough without local sourcing. ?It could burn irreparable holes in your pocket. Lacoste in India has the advantage of domestic manufacturing with a plant in NCR that helps us maintain our margins,? Jain points out. Lacoste, which originated in France, sources almost 90% of its apparel locally for the Indian operations.
Hoping to get a bigger market share, foreign players have of late begun to tune into the discount season cycle of Indian companies. While this initially increases walk-ins, the strategy has also resulted in an uptick in sales. Moreover, these brands have been able to re-position themselves if required. M&S entered India in 2001 with local franchise partner Planet Retail, and marketed itself as an exclusive, expensive brand. In 2008, the company tied up with Reliance Retail and, in 2011, started repositioning itself as a mid-market player. The new pricing and repositioning was possible thanks to higher local sourcing, says M&S? chief executive officer Marc Bolland.
?International brands are now changing sourcing strategies and opting for local procurement channels to gain competitive advantage. Brands like Marks & Spencer and Benetton have increased sourcing from India to overcome the high import duties challenge and offer competitive pricing,? a recent report by retail consultant Technopak states.
With the Indian retail market pegged at $490 billion, more foreign single-brand retailers are looking to enter the Indian market soon. The Foreign Investment Promotion Board (FIPB) has cleared Swedish clothing brand H&M R720-crore investment to open stores in India. The FIPB has also cleared proposals from other companies like British footwear retailer Pavers England, American luxury clothing retailer Brooks Brothers and Italian jewellery maker Damiani.
