Though the government has thrown open foreign direct investment (FDI) in single brand retail to 100% equity investment, big labels keen to tap the Indian market may prefer to seek local partners than go it alone, say industry experts and insiders.
Given the complexity of the Indian market with a diversity of consumer tastes, preferences and regulatory issues across dozens of states, partners may be critical in their setting up or expanding their ventures.
While various retail brands told Hindustan Times that it may still be too early to comment on the finer details of future partnerships and joint ventures with local players, they said links with local players would certainly add value to their brands and add to their understanding of market segments within cities."These are still early days and every brand would a make detailed analysis whether to go along with a local partner, form a joint venture or go solo," said Arvind Singhal, chairman of Technopak Advisors, a retail consulting firm. A retail brand’s partnership with a local player can result in a joint venture with equity investment from the local player or it can be a franchise arrangement under which the partner operates stores.
“A local player does understand the neighbourhood market that in turn adds value to the brand,” said Rajesh Jain, CEO, Lacoste India. Lacoste is a premium French apparel brand. He added single-brand retail was not as capital-intensive as multi-brand retail.
“We are still in the process of finalising the finer contours of relaxed FDI norms in single-brand retail,” said a senior Reebok executive.
However, in response to a question he said setting up Reebok stores through franchisees helps gauge the local preferences and tastes which in turn provides valuable insights for the company to introduce new product lines.