India and the Middle East are emerging markets yet India is “close to the inflexion point to where China was 15 years ago,” said Sanjay Kapoor, managing director of Genesis Luxury Fashion Pvt. Ltd., which owns Indian fashion labels, operates stores and partners with foreign brands entering the country.
And the Middle East is “quite volatile,” observed Said G. Daher, chief executive officer of Azadea Group, which is based in Lebanon and manages over 35 brands in the region. “We live in a market where we are not sure what’s going to happen in the next week, especially after the Arab Spring, which is actually boosting the retail market.”
At the Global Sourcing Forum’s roundtable discussion, Kapoor said India retailing is undergoing “a second revolution.…The first time, when lots of brands came, rents were terribly high and productivity was terribly low. People were selling as much as they were paying rent. They tried to control businesses from Milan, Paris, Singapore or Hong Kong. But we are now seeing some real growth rates. In the last three, four years, same-store sales are going up 30 percent,” with urban areas growing more rapidly than rural areas.
The Middle East “enjoys great demographics,” noted Daher. “More than 50 percent of our population is actually below the age of 30. We are also blessed with countries that are extremely wealthy. We control the majority of production of oil. And the revenues from the oil are being invested into the region.”
Much of the female population doesn’t work. Instead, women shop often. “The Dubai Mall is magnificent. It’s actually a leisure center, not just a place to shop,” though sales per square foot are probably three times as much as major malls in America, Kapoor noted.
Also on the panel were Stanley Silverstein, executive vice president of international strategy and business development for Warnaco Inc., and Mortimer Singer, president of Marvin Traub Associates, who moderated.
Underscoring the potential of global growth, Silverstein said eight years ago Warnaco generated 20 percent of its revenues abroad. However, the business model changed and now 60 percent of revenues are generated overseas, and the company expects it to reach 70 percent in the next several years.
For Warnaco, China is red hot. The company does $170 million in revenues in China and sees the business growing to $400 million to $450 million in a “handful” of years. Brazil is also strong, accounting for $140 million in revenues which are seen doubling over the next several years.
India is a different story. Brands need to adopt “a longer-term horizon” for growth, Kapoor said. “Many brands may not be very well known. To create brand awareness you need to spend money. The brand building exercise is slightly longer. We do expect to break even in three to five years,” with brand partnerships. “I don’t think we are signing any contracts below ten years. Eight to ten years is really the bare minimum.”
“There’s a good deal of first-mover advantage in each of these markets. If I had a power brand I wouldn’t wait. I would figure out a way to put my flag down,” said Silverstein.