Single brand, total control
So the good news from India for all the luxury brands is that 100% Foreign Direct Investment (FDI) in single brand retail is now allowed by the government. Now, isn’t this all these brands always branded?
I know for sure that the chairman and CEO of Louis Vuitton, whom I have known personally for many years, had been a crusader for this for many years. In fact, on many forums, including the Hindustan Times Luxury Conference 2008, he had mentioned the need for 100 FDI in single brand retail quite strongly for brands to invest heavily in such new markets as India. I am sure, barring the heavy tariffs that prevail in India, Yves has all the reasons to smile with this new, no-so-soon-expected turn of things in the retail scenario in India.
Now such brands as his can have total and direct control in India. So far, some of the brands, barring the ones who have entered into joint ventures, who have had the mandatory Indian partners have had ‘dummy or namesake’ partners tucked somewhere away in a corner. No one knew who they were and brands never really bothered to talk too much of them. They merely remained as the brands’ partners and brands that have had such partners did whatever they could to have maximum control in the market.
Now, with the new turn of events, they are in a position to remove these dummies from their way and take over direct control in the soonest moment. Some who have active, operational partners, may take some time off to think whether or not they should immediately come on their own. But dummies are bound to be washed away really soon.
I suspect the same will be with some of the franchisees who are presumably active, but aren’t giving any results to their principals. There are brands that have entered the Indian market through individuals who really aren’t running these brands the way they should. Unprofessional approach to sales (I have seen old season’s merchandise being mixed with new arrivals for clearing dead stocks; I have also seen damaged merchandise of well-known luxury brands being on the shelves so as so get rid of them and make the money), bad marketing plans, uneducated employees and untastefully done multi-brand stores have all added up on the failure of these brands in the Indian market. Such franchisees may also see their exits as the brands now can use its brain to develop their image and sales in this market.
There are some brands who have entered the Indian market and done their business carefully, thus with some element of success. But there are many who made their entry quite callously and are heaving hard breaths without being able to sell (not to forget the heavy per sq/ft rentals being shelled out). Some of them have started pulling down their shutters in some cities or started moving on to areas that are more economical, but way below standards.
I think, with the government allowing total control for single brands, perhaps it’s about time that they woke up and smelled the coffee. The first step has already been made… who knows soon tariff reduction will also follow… till then atleast the brands should out their houses in India in order… for their own happiness.