Indian retail giants on shopping spree for designer brands
Indian retail giants including Reliance Retail and Aditya Birla Fashion have acquired at least 10 fashion designer brands in recent months in a bid to attract high-end customers who have so far preferred to do their purchases at multinational luxury outlets.
Reliance Industries Ltd, backed by Mukesh Ambani, has acquired stakes in brands owned by designers such as Rahul Mishra, Ritu Kumar, AK-OK and Manish Malhotra. Aditya Birla Fashion and Retail (ABFRL), led by Kumar Mangalam Birla, has taken stakes in designer brands such as Shantanu and Nikhil, Tarun Tahiliani Sabyasachi and Masaba.
“Well, better late than never. It was time for Indian designers, like international designers, to catch the attention of venture capitalists, conglomerates and other retail giants,” said Sunil Sethi, President of the Fashion Designer Council of India.
According to Arvind Singhal, Chairman and Managing Director of Technopak, said, “There are only four designers in India with a thriving level of business. These include Riutu Kumar, Manish Malhotra, Sabyasachi Mukherjee and Anita Dongre.
He said that over the past four decades, each of these players has managed to carve out a place for themselves. For example, he explained, Malhotra was able to break into the niche segment of Bollywood films, while Mukherjee was able to cater to the large Indian bridal segment.
Impact of Covid-19
Another industry player said the reason these deals were happening was because “Indian designers have been deeply affected because of the Covid-19 pandemic. With the arrival of Covid in the Indian fashion and retail market, brands that had good value and brand recall were ready to be acquired at a lesser value.
Besides this, the conglomerates have understood the power of rich India. Singhal explained that in the next decade India will see a lot of wealthy young first generation Indians.
Emerging wealthy class
“These Indians may not belong to the Tata, Birla or Ambani family. These will be people who are the founders of young and successful start-ups, or who are making big money or who have ESOPs in their kitty. Their ability to spend is what is tapped by these players,” he said.
According to Ashish Dikshit, Managing Director of ABFRL, the acquisitions target a new generation of young, digital-native consumers who are actively seeking colorful, vibrant and digital brands.
Along with this, according to experts, Indian designer brands have not been able to make a name for themselves in the international market. As international consumers have the purchasing power and appetite, companies can earn by taking these brands internationally.
According to Sanchit Vir Gogia, Chief Analyst, Founder and CEO of Greyhound Research, these companies could also cross-sell, upsell and create a distinct line of products from these designers that are more accessible to other consumer segments. than the luxury segment.
What’s in it for Indian designers?
According to Sethi, Reliance and ABFRL Group both have supply chains, production, factory infrastructure and logistics capabilities that these designers could benefit from.
“While these segments may be supported by acquiring companies, designers can focus on what they do best – creating good quality designs.”
According to Gogia, Indian designers have been unable to tap into international markets due to lack of scale and opportunity for expansion. As brands are acquired by larger players, these designer brands could reach the international level of quality parity.
“In India too, it is difficult for Indian designers to grow unless there is strong investor support,” Singhal and Sethi said. Both gave an example of Manyavar linked to the IPO which became famous out of nowhere.
Is it a good investment?
According to one industry player, who distributes more than 25 fashion brands in India, it is not good for the economy to acquire designer brands in India due to its limited reach and fragile balance sheet.
Another industry expert also agreed and said it was just peer pressure from both sides and “presenting a bunch of brands to stakeholders. Today, shareholders might ignore the revenue generated by these brands, but 12 months from now there will be scrutiny.
February 05, 2022