Jacob , The Economic Times
March 28, 2012
International fashion brands Versace, Corneliani and Guess are
all set to break away from their Indian partners, joining a growing
list of international fashion brands struggling to settle down
Italian luxe brands Versace and Corneliani are expected to part
ways with little-known Delhi-based firm Blues Clothing Company
, three industry executives with knowledge of the development
"It is the case of a small firm going beyond its means,"
a retail executive said. "This business needs deep pockets."
He said a team from Versace would be travelling to New Delhi this
week and could scout for new partners. Email queries sent to Versace
and Corneliani remained unanswered.
Dinesh Sehgal, MD of the family-controlled Blues Clothing, denied
a split. But he admitted that a Corneliani store and one or two
Versace stores are being shut.
Sehgal said his company, formed in 1996 with the aim of becoming
the largest retailer of suits in the country, plans to pump in
funds into the business but would not dilute equity. Other international
brands Blues Clothing retails in India include Cadini and John
PLANET RETAIL'S WRONG GUESS
Meanwhile, Guess is changing hands after its long-time partner
Planet Retail decided to restructure its business. The American
clothing maker will now tie up with Major Brands, the marketer
of Mango and Aldo in India.
Ramesh Tainwala, co-owner and chairman of Planet Retail, says
letting go of Guess is part of the firm's restructuring plan.
Planet Retail had expected increasing buying power in India to
help it break even by 2012-13. But it will take twice the time
now, says Tainwala.
That is mainly because most Indians prefer to buy luxury products
from abroad because high import duty makes these products costlier
here than elsewhere. Also, while rentals in a metro like Mumbai
is comparable to global cities, the average sales per sq ft per
day in a shop in Mumbai is one-tenth of Hong Kong and one-fourth
"Controlling the bleed is the name of the game," says
Tainwala. "I have no doubt that retail will be profitable.
But I doubt if that is two, five or seven years from now,"
Despite such issues, the luxury garment business is thriving
in India with foreign brands rushing in to make the most of a
fast-growing economy, thriving middle class and Indian consumers'
rising aspirations and growing exposure to western products.
Madura Fashion & Lifestyle, in fact, is in talks to convert
its licensing and distribution deal with Esprit into a joint venture.
While India recently allowed 100% foreign investment in single
brand retail, most international brands prefer to have a local
partner for the complex Indian market. But often, the partner
does not invest enough to scale up the brand.
About one-third of the more than 150 international fashion
brands launched in India over the past seven years have either
changed partners or exited the market. Around 26 brands have changed
partners, while 23-26 exited the market with at least half of
those later returning either as a wholly-owned subsidiary or with
a new partner, says consumer goods and retail consultancy Third
Reliance Brands President and CEO Darshan Mehta says, "The
single-biggest reason for conflict between foreign brands and
their partners is when the interests of both parties are not aligned."
Differences also crop up over brand positioning , choice of store
location and partners' inability to offer services at global standards,
industry players say.
"There has been an explosion in the number of brands
entering India but there have not been as many stores," Devangshu
Dutta, chief executive of Third Eyseight, says. "This suggests
either that brands have to wait it out or their proposition is
not as relevant to the market," he adds.