Designer Wear: Affordability, corporatisation success mantraWednesday, 28 March 2012
A 2010 McKinsey report notes that Indian apparel sales are expected to reach an estimated $25 billion (Rs 1,25,000 crores) this year, having grown in excess of 10 per cent over the past five years - faster than the overall Indian retail market. Apparel is the second largest retail category (behind food and groceries), representing approximately 10 per cent of the total market. The report says: “By 2005, nearly 21 million of India’s 210 million households earned more than $4,000 (Rs 2,00,000) a year, qualifying them for membership in what we call ‘the consuming-class’.” Based on the McKinsey report, by 2015, the number of “consuming class households are likely to triple to 64 million”. But in the Rs 720 crores domestic designer market, not one Indian designer brand is worth Rs 100 crores. So why are designers lagging behind in making most of the positive atmosphere?
Analysts feel designers are ready to play the bigger game. Indeed the prêt retail model is not new in India. Raymond, Wills Lifestyle, Van Heusen, Reebok, and Adidas have all tried to float labels at some time but none were successful. Now with Pradeep Hirani’s recent brand launch Karmik in the affordable designer wear segment, the industry is optimistic that such affordable brands would hit the right cord. Since, it would cater to both the consumer segments - those who want to purchase designer clothing but find them out of reach and those who can afford; can purchase several pieces.
The KPMG research commissioned by Kimaya found that a huge vacuum exists in the branded Indian women’s wear category. At one end are a few mass brands averaging price points of $30 (Rs 1500) and at the other, designer labels with $400 (Rs 20,000) tags. Aiming to fill the gap that exists between the two consumer segments, Karmik will launch 11 stores in nine cities in April 2012. Will other designers take the clue from Kimaya’s research study…only the time will tell.
Meanwhile Kimaya also managed investment from Franklin Templeton’s Indian PE arm Franklin Templeton, which reportedly bought a 20 per cent stake for Rs 60 crores, valuing the company at Rs 300 crores. Recently LVMH’s L Capital bought stake in Genesis Colors, which manages Satya Paul brand. But according to the analysts, these are just a handful of examples, because PE investors don’t find investing in designer wear labels fruitful due to their size. There are very few fashion brands beyond the Rs 100 crores mark, which does not meet the minimum size for PE.
The bottom-line is if Indian designers wish to take advantage of the impending opportunity, they have to think big and take a risk of jumping into the big league by corporatizing their designer wear line.