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» » » » » » » » Japanese apparel companies explore Indian launch

New Delhi: Japanese fashion apparel company Fast Retailing Co. Ltd, which owns the Uniqlo brand, may be looking to enter India and is talking with several possible joint venture partners, say several people familiar with the development.

Another Japanese fashion apparel firm World Co. Ltd has been test marketing its products here and is also looking for potential partners, said a company executive.

The move by the two companies to enter India is prompted by the growing market for fashion apparel in the country. The apparel market accounts for 6% of India’s consumption expenditure and is expected to grow fourfold over the next decade, with an estimated consumption expenditure of $225 billion (around Rs.12.4 trillion today) in 2020, according to a 2012 report by Boston Consulting Group (BCG). India’s overall retail sector is currently valued at about $500 billion and is estimated to reach $1.3 trillion by 2020, according to a 2012 report by PricewaterhouseCoopers

Harminder Sahni, founder and managing director of Wazir Advisors, said that Uniqlo “has been talking to multiple partners, but they could also be looking at a stand-alone entry into India”.

A retailer who did not want to be identified said: “Uniqlo was in very serious talks with Arvind Brands.” A spokesperson for Arvind Brands said the company wouldn’t comment on speculation. An Uniqlo spokesperson in Japan said in an email that the company cannot comment regarding new store openings as nothing is determined yet.

Uniqlo’s entry into India was first reported by Reuters in September last year.

Fast Retailing is Japan’s largest apparel retailer with annual sales of 928.6 billion yen (around Rs.61,288 crore today) in the year ended August. With 845 stores in Japan and 292 shops elsewhere, including Singapore, the UK and the US, Uniqlo is the company’s mainstay.

Research firm Euromonitor defines it as a brand that “offers economic and sensibly priced brands, which resonate well with Japanese consumers that value affordable and high value clothing options”. Globally, Uniqlo competes with Sweden’s H&M (Hennes and Mauritz), Spain’s Inditex that owns brands such as Zara and Bershka, and American casual wear retailer Gap Inc.

According to Euromonitor, India is the next logical step for the Japanese retailer. “Due to geographical and cultural similarities, Uniqlo has successfully expanded into other Asian markets, primarily China and South Korea. India is a logical next step, given the country’s apparel market is expected to register a strong value CAGR (compounded annual growth rate) of 5.9% over 2011-16,” said Ashma Kunde, international apparel analyst at Euromonitor International.

Meanwhile, World Co. is considering launching five of its brands in India by next year. Rajkumar Sambandam, senior adviser to World Co. in India, said: “We’ve been test marketing the Indian market since February this year. We want to identify the right brand for the country. The company works with a one brand, one store concept and also operates multi-brand departmental stores in Japan.”
World Co. has more than 100 brands and 3,000 shops in Japan and 200 stores in other parts of Asia.

Currently, the company is in talks with joint venture partners and “might be looking at either retailers or manufacturers for our India entry”, said Sambandam. He said that it would look to source from India once it launches its retail operations. The company is test marketing the five brands, women’s apparel and accessories brands such as Couture Brooch, Opaque.clip, Ozoc, Tk Mixpice and Hot Beat. It even test marketed mini-stores in New Delhi’s Select City Walk mall for a duration of 11 days to gauge consumer response earlier this month.

The interest shown by the two companies is because of the “India growth story”, said Amitabh Mall, partner and director at BCG. “Since Japanese tend to be a bit conservative, it is a positive sign that these companies are showing interest in the Indian market.”

Still, the brands may suffer recognition issues, based on what Euromonitor has to say on Uniqlo. “Whilst international brands are valued in India, the Japanese subculture is not as popular as American or European styles. It remains to be seen whether it will have the same cachet as the Zara brand,” says Kunde.

Sambandam admitted that the company is facing challenges because of “low brand awareness”, but BCG’s Mall said this wasn’t such a big issue for any company seeking to enter India.

“Most brands which come to India will not be known here per se, but this will be more about building the brand and adapting to the Indian market,” Mall added.

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