The Hindu Business Line : Design equity

Brand extensions, licensing arrangements, endorsements... call it what you will. Indian designers want to leverage their brand equity, a la international fashion houses.

Rohit Bal

He's Indian fashion's poster boy, and the man whom Time magazine had rated as one of 50 young Indians to watch, but Rohit Bal wishes he could be cloned five times over, for he has so much on his plate. Bal has just designed a restaurant in Connaught Place, the heart of Delhi's Central Business District, where the menu is by Suvir Saran, the chef behind Devi, which is rated New York's trendiest Indian eatery.

He's working on a second line of luxury watches for Titan (price: Rs 50,000 to Rs 2 lakh), a Rohit Bal range of fragrances, a chain of boutique hotels (inspired, naturally, by the Versace and Dolce & Gabbana hotels) christened Bal Casa, and his home furnishings line, Bal Style.

"Fashion encompasses everything," says the designer. "It is a lifestyle, an attitude, an entire mental framework. The food you eat is as much a fashion statement as the place where you eat it in and the clothes you wear."

Bal is venturing into areas that other designers shy away from. The farthest that others have gone is uniform design (it is a low cost, high returns revenue stream for even the most chichi designer) and endorsements for products, from Swarovski crystals to mobile phones. But Bal is no lone ranger.

Back in 1994, JJ Valaya opened an Italian fine-dining restaurant at his store Life, in a quieter, greener part of Delhi that has become very happening today. But it was clearly ahead of its times — Delhi still hadn't got over its fixation for butter chicken and there wasn't even a proper road leading up to the restaurant.

Raghavendra Rathore, the first cousin of Gaj Singh of Jodhpur who has worked with leading New York designers like Donna Karan and Oscar de la Renta, launched chocolates with a French name that most people found difficult to pronounce, under a licensing arrangement with Mount Shivalik Industries, makers of the strong beer, Thunderbolt. The venture just didn't work because a designer name isn't enough to sell chocolates that are below standards for people with evolved palates. Even Bal's association with the Delhi-based Metro Shoes didn't yield the desired results.

Valaya, meanwhile, has entered into an arrangement with the shoe brand, Skin Sin, to lend his name and sketches to their upper-end footwear line (Rs 3,000 to Rs 6,000) for women. He has tied up with Ferns N Petals, a chain of flower shops with online booking service, to design flower arrangements both for private use and for social occasions like weddings. "In this business, it's constantly a race against yourself," says Valaya.

Manish Arora

Manish Arora, who became the first Indian designer to present his collection at the London Fashion Week, left immediately after his show to start working on a line of shoes for Reebok. "It is a natural extension of my fashion business," he says.

The dream that drives them is to make enough money out of licensing arrangements — Tommy Hilfiger, for instance, has raked in $74 million in royalties alone in fiscal 2005 — and drive corporate investments into their kitty.

"I am not getting into brand extensions out of any necessity," says Bal, adding in his typical style that he wishes to work for another five years because he doesn't wish to start enjoying life after 50.

"I'm going about it in a fairly methodical way because mine is the first Indian fashion house where a foreign company is going to make a substantial investment," he says.

Bal refuses to disclose the company's name. All that he's prepared to say is that it owns 400 fashion stores in Europe and Asia. Foreign investors, though, aren't interested in a fashion house that doesn't offer the complete range of products that a designer is now expected to deliver.

`Pretend globalisation'

Industry observers, however, feel it is too early for designers to venture into new areas. "There's a natural pull for designers to get into other products. They have names other people want to use," says Vinod Kaul, an apparel industry veteran, who gave the Fashion Design Council of India (FDCI) a business focus during his stint as executive director. "Their businesses are still not being run on sound commercial lines, so designers only manage to create one-off accessory lines or endorse other people's products," he explains. Insiders call this phenomenon "pretend globalisation" — adoption of imported practices hinting at the globalisation of Indian fashion before it actually happens. At this year's Lakme India Fashion Week, the urge to be like international fashion houses was evident everywhere off the ramp, but, as the International Herald Tribune pointed out, "Internationalisation only caters to vanity: what pays the rent is being part of the two-tier consumer revolution in India — the acquiring of disposable income by hundreds of millions of Indians and the efforts by those in the new elite to announce their arrival with couture."

Says Arora, "Right now, the money is in India." But designers seem to be in a big hurry to take the next step forward before tapping the full potential of this market.

Experts advising caution say that the high fashion industry is still too small for designers to focus elsewhere. According to a report released by the management consultancy KPMG and FDCI, the turnover of the Indian designer-wear industry is Rs 180 crore, which is a mere tenth of the salwar-kameez market in eight metros, pegged at a value of Rs 1,700 crore. The country's apparel market does business worth Rs 20,000 crore, of which Rs 5,000 crore are contributed by branded apparel.

The high street is 0.2 per cent of the branded apparel segment and an equally insignificant fraction of the country's textile exports, from raw fabrics to manufactured apparel for foreign labels, worth $13 billion. More importantly, it is 0.2 per cent of the international designer-wear market, which is currently valued at $35 billion.

Too much, too soon?

KPMG estimates that the high fashion industry will touch Rs 1,000 crore in another five to ten years, but the key players are likely to register a compounded annual growth rate of 40 per cent. But there's a roadblock. Designers don't have the kind of resources needed to grow in size and achieve economies of scale.

Says Joseph Sam, Bal's former CEO who now heads Saks India: "International design houses have invested many years in becoming brands. Our designers want to crash time and replicate the business models of these brands without getting their basics in place.

They venture into other businesses for quick, short-term gains, so you'll find it hard to name a designer offshoot that has done consistently well as a brand."

Ashish Soni, back after a successful debut at the New York Fashion Week, appears to be thinking along the same lines.

"I would eventually like to diversify into accessories and fragrances, which contribute the bulk of the earnings of design houses internationally," he says.

"For that, though, I still have a couple of years to go. I don't wish to make any premature moves. Once I believe that the market is ready, I'll be the first to go for it. I'm so serious about it that I have already completed the initial research."

Sam points to the costs related to diversification and urges designers to move in stages. The easiest and least expensive first move is to sell fashion styling and design services.

The next big step is to get corporate investment and marketing muscle, but it's a Catch 22 situation out there — designers don't want to sell their labels for love or for money and then be answerable to their new master.

Corporate honchos don't have much faith in the valuation figures that designers tout, and big guns like Madura Garments are happier to invest in Tommy Hilfiger, and more recently, Armani, than in building an Indian designer brand from scratch.

Kaul says the alternative business model would be for corporate houses to invest first in cosmetics and fragrances, or other fashion accessories rolled out by designers and then let these products enhance the brand recall of leading Indian fashion houses.

The next major step would be to invest in the designers themselves. The industry has only been able to scratch the surface of the market potential for fashion accessories.

"The retail boom is changing the face of Indian consumers," says Bal. "They not only have the money, but also the propensity to spend it."

What's missing, though, is the kind of designer products that will fire their urge to splurge.

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