NEW DELHI — Moving fast in the Indian market, Spanish retailer Zara opened three stores in the country within five weeks. The brand made its debut on the Indian market through a joint venture with Trent Ltd., the listed retail arm of the $70.8 billion Tata Group.
Trent already has a presence in the retail industry with Westside stores and Star Bazaar hypermarkets.
Inditex controls 51 percent of the joint venture, while Trent Ltd. owns 49 percent. Current regulations on foreign direct investment in India stipulate that foreign single-brand retailers must pass a 49 percent stake on to a local partner. With this entry, Inditex, one of Europe’s largest clothing retailers, now has stores in 77 countries.
The flagship in New Delhi is a 19,375-square-foot unit in a shopping mall. “The country has a dozen cities whose populations each exceed three million people and the Indian market promises substantial growth potential for Zara’s fashion offering,” said Jesús Echevarría Hernández, Inditex’ chief communications officer, at the launch.
The stores have opened in relatively new malls — at the Select Citywalk mall in New Delhi and at Mumbai’s Palladium mall. The newest offering is in New Delhi’s DLF Promenade mall.
“The brand’s expansion would depend on the feedback we get from customers. We also want to open stores in Bangalore, Hyderabad and Chennai very soon. The average size for a Zara store would remain 1,200 to 1,500 square meters [12,900 to 16,140 square feet],” said Hernandez.
According to a June report by McKinsey & Company, Indian apparel sales are forecast to reach $25 billion this year, having grown in excess of 10 percent over the past five years — a growth rate faster than that of the overall India retail market — and the trajectory is expected to continue over the next five years, doubling within that time period.
Zara is the latest fast-fashion chain to enter the Indian market. Rival Spanish retailer Mango launched in India in 2001 following a franchise model, with Indian company Major Brands as franchisee. Mango’s growth has been relatively slow, however. “At 500 million rupees [$10.76 million], India contributes only 0.47 percent of our global business,” said Isak Halfon, executive vice president, international franchise and expansion at Mango.
The reasons for the slow growth remain the same as those faced by other international brands: the high cost of retail real estate and the lack of a focused fashion retail arena. “Business is scattered to malls and high streets unlike in West Asia, where most of the business for big brands comes from malls. Moreover, India also has to improve its infrastructure a lot,” Halfon said.
Mango plans to open additional stores this year, plus look at new formats within department stores. The retailer also has reduced some prices and renegotiated the terms of agreement with the franchisee partner. Mango has five units in India — three stores in Mumbai, one in New Delhi and one in Bengaluru — and has seen sales growth of 20 to 25 percent since lowering prices.
While Zara has entered the Indian market ahead of several other brands such as H&M and Gap, this is in line with the firm’s international expansion experience in the last two years. Asia has been an area of focus, with store openings in South Korea, China and Japan, where it opened a combined 63 stores in 2009.
India is another step in that direction, a challenge and a growing market, which many international brands are increasingly looking at as a serious growth area. The acceptability and desire for Western wear among Indian women has never been higher — Western style has become the new alternative and is fast becoming the norm to make a trendy fashion statement in metro areas.
A recent report by The Associated Chambers of Commerce and Industry in India observed, “The frequency of purchase is the highest amongst youngsters. However, women in the 41 to 50 years age group are also big shoppers. The northern and western regions of India account for the highest shopping of designer apparel.”