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Marks & Spencer is upping the stakes for innerwear in India.
Over the last two months, the U.K.-based retailer has unveiled its first in-store concept featuring a separate lingerie and beauty section. It opened the concept in its two revamped flagships in Mumbai and New Delhi.
The retailer is well known in India because of the strong British heritage connection in the country. The U.K. is also a big travel destination for Indians, but M&S has found a strong resonance in its innerwear segment with Indian customers in India as well. With a decision to kick this growth up, the retailer plans to open seven more stores in India by the end of March, adding to the existing 36 across the country.
M&S, which generated about $16 billion in the year ended March 2013, entered India with a franchise model in 2001 and changed to a joint venture with Reliance Retail in 2008. The company counts India, along with Russia, the Middle East and the Shanghai region of China, among its “priority markets.” International sales were about $1.8 billion in fiscal 2013.
“We’re so proud of these stores,” said Venu Nair, chief executive officer of Marks & Spencer Reliance India Ltd. “These two are the only such concept stores anywhere in the world. It has almost doubled our earlier offering [in the innerwear department] in each store.”
The New Delhi store, which was opened at the end of December, has an additional new concept: a freestanding building only for women’s wear, adjacent to a separate building for men.
Having two buildings allows for a broader assortment. “We’re offering a range of sizes and styles that have not been available in the market before,” Nair observed.
This follows a similar store in Mumbai that was opened in November, all in one building but a similar size — 5,000 square feet — of innerwear shared with a corner on beauty.
The Indian innerwear market is estimated to have generated about 158.7 billion rupees, or $2.9 billion, in 2012, according to Technopak Advisors, with the women’s segment contributing a 60 percent share. It is expected to keep growing at 14 percent for the next five years.
“The high growth of the innerwear category is driven by the transition of innerwear from a utility-based product to an aspirational one,” according to Technopak, which predicts that the category will be worth 279 billion rupees ($5.1 billion) by 2017.
This is the second-fastest-growing category in women’s wear, with the fastest growing being ethnic apparel, which is Indian-specific clothing that varies for each state or region, based on design, fabric and/or style.
The growing lingerie concept is just the start for M&S, which has planned substantial growth over the next two years; it expects to open a total of about 44 stores by 2016.
“We see India becoming our largest market outside England by 2016,” said Marc Bolland, ceo of M&S, in Mumbai for the inauguration of the store there. “We have set a clear plan to build a leadership position here. We are targeting around 80 stores here by 2016.”
These would open in smaller cities as well, from Kanpur to Kochi, he said, as well as substantial growth in metro cities. Nair explained that the innerwear mix in each city would vary by area. M&S has been adapting and changing its business model in India, decreasing prices, increasing local production in some segments and experimenting with different size formats of the store, and Nair feels they have the positioning worked out despite the fact that the pricing and exchange rate bring the M&S innerwear into a premium category. Overall, innerwear accounts for almost 20 percent of M&S sales in India.
Analysts estimate that 14 percent of sales comes from premium and superpremium segments. The premium and midprice segments are expected to witness a higher growth rate within this market.
“In the last six months, we’ve seen our lingerie sales increase by a third as customers continue to look for more choice, whether everyday underwear, clever lingerie solutions such as innovative shapewear or glamorous silk and lace pieces,” said Nair, explaining that this growing demand made the Indian market the launch pad for the new lingerie and beauty department concept.
“M&S is also focusing on building a leadership position in India, including in cities such as New Delhi and Mumbai, by opening a cluster of supporting stores around its flagship store locations such as its new stores in South Extension and Bandra, Mumbai,” he said.
Although Nair did not share specific numbers, analysts have estimated that M&S sales in India went up by almost 30 percent from May through December 2013, as sales in India and China continue to contribute to growth in global revenues.
“Women’s wear is already our biggest category,” Nair observed, “and lingerie adds strength to that.”