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Sniffy foreign retailers are bowing down to the demands of the Indian market. Three years after its entry in 2006, the British personal care brand, The Body Shop, had to align its prices with the Indian market to attract more consumers and increase profits, despite the brand's initial reluctance to reduce prices and shed its premium tag.
Several hard-nosed retailers are now following this model in India and laughing all the way to the bank.
“There was immense brand recall but prices were a deterrent. Two years ago, we aligned our prices with the Indian market. Since then the Indian business has accelerated in its growth, registering a 60 per cent growth annually. Going forward, we will introduce a range to cater to the domestic audience,” Mr David Smith, Asia-Pacific Managing Director, The Body Shop, said.
The Body Shop, which had slashed its prices by up to 35 per cent in the domestic market, has been reaping rich dividends by growing not just in its store size but also cornering more customers. The subsidiary of French cosmetics brand L'Oreal is now considering introducing India-centric products, such as a hair oil, to find a firm footing in the Indian market and target a customer base of 15-20 million in next two-three years.
Baby car brand Chicco owned by Italian Group Artsana noted that making products affordable for the Indian market remained its biggest challenge.
Mr Vineeth Nair, Chief Executive Officer, Chicco, said, “The rising income level in India is a long-term prospect for us. There was a need to tailor our pricing according to the market needs. Therefore, we reduced prices for India,” he said, adding that Chicco products in the domestic markets are 30-40 per cent cheaper than anywhere on the globe.
Analysts noted that companies which come to India with a perception about purchasing power are overwhelmed by the growing middle class and their ability to try out new things. Companies which realign their prices according to the Indian market make profits.
Mr Manishi Sanwal, General Manager – Indian sub-continent, LVHM Watch and Jewellery India, which retails brands like Tag Heuer, said, “We let go of certain margins initially and gained larger brand presence and customer traffic.”
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