The big players in Indian luxury retail want to get bigger. One solution is to invest in Indian brands and help them scale up to compete more effectively with international names, particularly in the sectors they know best: bridalwear and the festive category known in India as ethnicwear.
Over the last decade, Reliance Brands Limited (RBL) has dominated luxury retail in India. Also in the mix is Aditya Birla Fashion and Retail Limited (ABRFL), which bought a 51 per cent stake in India’s biggest luxury designer brand Sabyasachi in January, tapping the ethnicwear market.
The luxury goods sector in India is estimated to be worth $8 billion with a forecast compound annual growth rate of 7 per cent over the next three years. Expect a wave of consolidation within luxury brands, with positive reverberations.
Parallels have been drawn between Mukesh Ambani, chairman and managing director of Reliance Industries, and François Pinault, founder of French luxury group Kering and investment company Groupe Artémis. Both are billionaire businessmen with a growing portfolio of sports, entertainment and fashion brands. Since its launch in 2007, RBL, via joint ventures and strategic partnerships, has brought to India a mix of Western brands such as Kate Spade, Diesel, Superdry, Steve Madden and Tiffany & Co. Tory Burch is up next. RBL has also invested in Indian luxury brand Satya Paul and menswear ethnic label Raghavendra Rathore.
Meanwhile, Kumar Mangalam Birla’s ABFRL, after decades focused on the formalwear sector with brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England, is looking to diversify. That includes the introduction of Californian fast fashion brand Forever 21 to India, responding to the pivot to casualwear among young Indian consumers. And now ABFRL is tapping the bridal couture market with its addition of Sabyasachi for INR 398 crore ($54.53 million), which follows a partnership deal with bridal couture brand Shantanu & Nikhil in 2020.
Ethnicwear and bridal couture are hot product categories. Of the Sabyasachi deal, Ketki Paranjpe, partner at private equity firm L Catterton, says, “This move is a direct reflection of how Indians shop today. When Indians purchase luxury, they look at it as an investment piece — shopping here is very much driven by weddings.” Isha Dalal, vice president at Multiples Equity, agrees: “The womenswear space in India has been very fragmented, and, in Westernwear, it is largely fast fashion brands that have scaled up. Businesses anchored in ethnic wear from India will win when competing with larger global names.”
An Indian brand such as Sabyasachi is founded on the enduring appeal of tradition and Indian culture. Its product portfolio positions it as a balanced luxury brand including clothing, jewellery and bags and accessories. The brand sold 7,000 belts alone during one of the world’s strictest Covid-19 lockdowns.
But Sabyasachi and other Indian brands are still small players compared to global luxury brands. “I think at times the resonance of a brand is larger than its size and economics,” explains one analyst, who preferred not to be named. “If you peel back everything, a brand like Sabyasachi, after 20 years in business, reported only INR 274 crore [$37.6 million] in revenue last year.”
Shantanu & Nikhil, which received backing from ABFRL in 2020, is marking one year since the launch of its affordable luxury brand S&N. The new investment has enabled the company to open three new stores in the pandemic, alongside an e-commerce site launch. Growth in India is the priority before it can set its sights on an international market. “To be a global player, you have to also be a leader in your own terrain. India is a huge market with more than 350 million people under the age of 35, with the value chain being moved up by the middle class,” CEO and co-founder Shantanu Mehra explains. “India becomes the first frontier, where [consumers in] tier-two cities like Raipur, Indore and Aurangabad have deep pockets.”
Still, the luxury market remains relatively small in India, considering the size of the population, says Paranjpe. “When Indians purchase luxury, they look at it as an occasion driven purchase — luxury sales are highly correlated to weddings. The Indian luxury market is defined by roughly 25 million households that earn over 10 lakh rupees [$13,500]. This means only a very small number can consider buying luxury items, often as once-in-a-lifetime purchases. Brands need to go wherever the consumer is.”
Sabyasachi Mukherjee, who launched a second pop-up in New York’s Bergdorf Goodman this month, believes that Indian designers should chase the huge potential of Indians living abroad. “I would like to see more Indian designers going to the West and selling their clothing to the big Indian diaspora, which is everywhere. It’s a testament to the power of the Indian consumer,” he told Vogue India in a recent interview.
The Indian fashion house Anita Dongre was one of the first to receive outside investment back in 2009 from Kishore Biyani’s Future Group, and again in 2013, from General Atlantic. In 2014, Ritu Kumar received investment from private equity firm Everstone. And in 2017 Satya Paul partnered with Genesis Colors, now part of RBL.
Investment in Indian high-end brands from conglomerates such as RBL and ABFRL is likely to intensify, but don’t expect much action from private equity. “At the luxury end of the spectrum, there hasn’t been much private equity activity,” says one analyst. “The simple reason is that private equity comes with a very finite horizon of five to seven years. Unless firms are able to see proof points of scalability in a five to seven year duration, they will find it difficult to participate or underwrite those kinds of investments. Conglomerates, on the other hand, have a much more long-term view.”
Shantanu Mehra applauds this approach — creating strategic partnerships for long-term growth, less obsessed with fast profits. “ROI then stands for Return on Intention,” he says.
Other designers agree. “Finally, fashion houses and designers are realising that both commerce and creativity have to go hand-in-hand,” says Yash Dongre, inheritor of his mother Anita Dongre’s fashion house, which taps both bridal and affordable fashion categories. “They are getting their act together, creating more organised structures to scale and expand. Investors are now taking us seriously.”
To receive the Vogue Business newsletter, sign up here.
Comments, questions or feedback? Email us at feedback@voguebusiness.com.
India’s hypebeasts arrive: Can Nike, Adidas and locals respond?
The rise of the Indian influencer
India embraced e-commerce in lockdown. As stores reopen, what’s next?