The Hindu Business Line : Looking homewards, to retail

Some garment exporters are turning to domestic retail, spurred by dollar depreciation and growing competition spawned by the end of the quota regime.

Exporters who understand fashion as a product are the ones who are likely to be successful in the retail business. _ Harminder P. Sahni, Technopak

Looking for newer pastures, at home

Purvita Chatterjee Experience in handling the operations of international retailers has led to a surge in exporters focusing on domestic retail. Using their designing and sourcing strengths, a clutch of such exporters have turned to the burgeoning domestic retail industry to test their retailing skills. Cuts from Evinix Accessories, 109F from the Creative Group and s. Oliver from Orient Craft are some of the suppliers to international brands who are now turning to domestic retail with the ir own stores and formats. While the recession in the US market led by dollar depreciation may have triggered the entry of these players into the retail industry, the opening up of quotas and increasing competition are some of the other factors which have forced such exporters to move up the value chain. Take the case of the Rs 745-crore Delhi-based Orient Craft, a full service supplier of garments to international retailers such as Gap and Dillard in the US. Having established itself in the textile manufacturing and exports space, Orient Craft recently took a decision to move up the value chain and launch its own retail brand in the front end of fashion world.

The fashion retail foray of Orient Craft Ltd begins with the launch of a retail chain of fashion and lifestyle products by the name of s. Oliver. It would be exhibiting various product lines: s. Oliver (Casuals), Selection (Dressy Formals), QS (Young & Trendy fashion) and Anastacia (Celeb Fashion) - designed and endorsed by international pop star Anastacia). Orient Craft would establish a retail store network across all the metros and other major cities over a period of next five years.

Sudhir Dhingra, Managing Director of Orient Craft, says, “By forward integration we plan to capture the last mile of the global fashion industry. It is a conscious decision of the group to expand from the B2B segment and create a connect with the B2C segment of the value chain.”

Other exporters trying their luck in the domestic market after experiencing a slowdown in exports include the Faridabad-based Evinix Accessories. Claims Raujeev Taneja, Manging Director, Evinix Accessories Ltd, “There was no growth in volumes for our export business while there was growth in retailing, especially multi-brand retailing, where we saw an opportunity for ourselves.” Hedging its risks in its exports business, Evinix Accessories is turning to the domestic retail industry. With plans of launching 125 stores of its retail brand CUT (for Comfortable, Urban and Trendy), the textile company is targeting youth in tier-2 and -3 cities by bringing 32 global brands into its stores. Marking an investment of Rs 170 crore, the company intends raising the money through internal accruals, its last IPO and partly through debt and equity. With the concept of ‘rapid retail’, CUT would offer garments with limited editions and then go into discount mode if it does not go off the shelves. In the case of the Rs 400-crore Mumbai-based Creative Group, where exports still account for 80 per cent of the turnover, a foray into organised retail happened about a year ago under the brand 109 F.

“We realised that after the quotas were removed, there would be increased competition in the market. Besides, organised retail was opening up the market for exporters and today we are supplying to the likes of Pantaloons and Westside who are demanding more styles per cut in the garments. As we are already supplying to others, we have the urge to create our retail brand and wanted to expand our export business with our own retail brand,” states Rahul Mehta, Managing Director, Creative Lifestyle, who has eleven 109 F branded stores selling women’s Westernwear today.

But ramping up the number of stores will be the key to staying competitive in the crowded retail scenario. As Sanjeev Narula, Managing Director, Lilliput Kidswear, observes, “The biggest challenge for erstwhile exporters like ourselves is to quickly expand from the few stores that we have today.” Lilliput Kidswear comes from a background of owning an export business and today has its own brand of stores and clothing for kids in the Indian market. All this while its parent company was exporting to some of the world’s best retailers and the fastest growing and largest kidswear chains including Gap, Wrangler, Mothercare and The Children’s Place.

While exporters are busy taking a leap forward into the domestic market, not all are likely to succeed in the competitive retailing industry. Warns Harminder P. Sahni, Managing Director, Technopak, “While this trend of exporters turning into retailers has been there, of late, with competition coming in and just about anybody entering India, such companies have felt the need to serve the domestic market. Besides, the issue of dollar depreciation is also another trigger. With other economies slowing down, exporters have begun to seize opportunities in the Indian market. But it does not mean that all exporters who are manufacturers have the capability to make a success of this business. Those with only manufacturing facilities will fall flat in the retail business. Exporters who understand fashion as a product are the ones who are likely to be successful in the retail business.” There may be other impediments. Observes Pradeep Agarwal, Managing Director, Prateek Apparels, “Exporters must also realise that they are not going to get the excessive volumes that they are used to in the export market. The fact is, today they want to produce at any price as they do not want to keep their factories idle. With the recession in the US market, such exporters have realised that they have to keep feeding their factories and it is more of a survival strategy to turn to domestic retail.”

But experience in dealing with international brands will give an edge in the domestic retail business.

As Narula of Lilliput, who now has his own outlets under his own brand says, “After supplying all these years to players such as Gap we are familiar with the operations of international retail chains.” Being suppliers to international brands, such exporters would be bringing in their expertise to build their retail operations in the booming Indian economy.