India, the second most attractive market for global retail brands to expand

Arvind Retail Ltd, largest textile maker in India that sells foreign labels, after seeing sales growth topping its own expectations, now plans to accelerate expansion for the global brands in the Indian market. Arvind sells global brand such as Tommy Hilfiger, Nautica and Ed Hardy. In the year ended 31 March it added four more brands to its portfolio – GAP, Aeropostale, Sephora and The Children’s Place (TCP).

J. Suresh, chief executive officer of Arvind’s retail and brands business said that the four brands added to their portfolio from which they earlier expected revenues of Rs.2,000 crore in the next five years are now giving good response, as a result they have stepped up on their expansion plans and will achieve this (Rs.2,000 crore revenues) in four years.

The plan initially was to open 12 GAP stores in two years. The company has already opened 10 and will now have 14 Gap stores in the first two years of operations. The company has already opened seven TCP stores and will beat its target of 12 stores with a total of 15 outlets by the end of fiscal 2017 and an additional 15 shop-in-shops as well.

Likewise, for Areopostale, the initial plan was to open 40 stores in 4-5 years. This will now be achieved in 2-3 years, said Sumit Dhingra, who oversees the Nautica, Gant and Aeropostle brands.

When the retailer opened its first store at Select CityWalk, a month after H&M, it did sales per square feet per day of Rs.293 in the first 30 days. Brands like Benetton, Louis Phillippe and Levis do about Rs.50 per sq ft per day, which is considered good, said Dhingra.

According to The 2016 Global Retail Development Index report by consultancy AT Kearney, India is the second most attractive market for global retailers to expand in after China. But infrastructure bottlenecks, high attrition rates and limited high-quality retail space remain concerns for retailers.

India has in the past couple of years improved the ease of doing business. Greater clarity on foreign direct investment (FDI) regulations has helped.

According to Kenneth Ohashi, senior vice president, international and global licensing, Aeropostale, who expects India to contribute 20% of its international sales in five years said that India is one of the corner stone’s of BRIC (Brazil, Russia, India and China) and it is the first country in BRIC that they went into.

Swedish fashion retailer Hennes and Mauritz (H&M), which opened its first store in October, is expanding rapidly. H&M will have 12 stores by end of the year-end, the company said on 20 June.

However, challenges remain as India continues to be a complex market for foreign retailers, where understanding dynamics at the state level is important as the country’s 29 states have the power to opt in or out of foreign direct investment reforms.