Global entities bring pricing pressure on Indian brands

19 Jul '10

3 min read

International apparel and fashion brands have now started marking their presence in the Indian markets as well as the consumers mind. Big time global brands like, Diesel, Zara, Yishion and Vero Moda have opened outlets in India in the last few months. In May this year, Spanish fashion brand Zara opened its first Indian store. A month later, it was the turn of Chinese clothing giant Yishion to follow suit. They were preceded by at least three more – Diesel, Vero Moda and 7 For All Mankind – all of them set up shop in India this year.

According to estimates of Technopak, a retail consulting firm, the premium fashion retail segment is expected to grow at between 25-30 percent annually from the current 20 billion to 60 billion over the next five years. After the Indian markets were opened to foreign brands in the 90s, many apparel and fashion retailers opened outlets in India, but priced their products beyond the reach of a majority of the consuming segment in order to retain the premium of their brands, which led many to close down their operation.

However, this time around, the fashion retailers are positioning their brands and pricing them competitively to catch the eye of the discerning Indian consumer as well as carve out a bigger slice of the Indian fashion and apparel market. Fibre2fashion spoke to Mr Shobhit Tyagi Head of HR at the vertically integrated textile major, Arvind Ltd who spoke forth on reasons of the deluge of global brands in India and their reasons for adapting competitive pricing.

He said, “Products flows to the place of highest sales and Indian economy being the fastest growing economy in terms of Purchase Power Parity (PPP), entry of foreign brands was inevitable. Foreign Brands have been lobbying hard for policy changes on FDI in Indian Multi-Brand Retail segment with assurance of employment to Indians. Currently 51% foreign equity is allowed in single brand retail and 100% is allowed in cash and carry (B2B) wholesale (indirect retail) in India.

“The world's top multi-brand American and European retailers like Carrefour SA, Metro AG, Walmart Inc. and Tesco plc are ambitious about growth in India. With the rise in middle-class incomes, value retail customers are moving to premium brands which are likely to further fuel and facilitate the growth of foreign brands in India.

“Besides continued pressure on cost and quality, Indian brands have to equip themselves in terms of right positioning for the right segment before foreign brands adapt to Indian taste. With Spanish fashion brand Zara and Chinese Yishion coming in cost pressures will be more intense on Indian brands and undoubtedly these brands will eat a bite of the Indian market, which otherwise would have gone to Indian brands.

He concluded by saying, “However, cost can still be an advantage with India. With cost levels on which foreign brands operate, it's tough for them to compete with Indian current cost structures. However, we are likely to loose on account of low productivity and continuously increasing labor cost”.

Fibre2fashion News Desk - India

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