Creating global labels

With 16 lakh homes spending at least Rs 4 lakh on premium and luxury products and services, 400 million upper middle class, with rising disposable incomes and big aspirations… luxury retail in India is undoubtedly the next big opportunity.

Brandhouse Retail Limited, a part of the S Kumar’s (SKNL) group has introduced global labels in India as part of its long term Rs 400-crore expansion plan. Brandhouse, which was recently hived off from S Kumar’s, currently has brands like Reid & Taylor, Belmonte, Carmichael, Stephen’s Brother, Dunhill and Escada, and has plans to open 1,200 mono-brand stores by 2010-11.

Retailer: What is the scope for brand luxury & premium lifestyle apparel in India?

Tarun Joshi (TJ): There is tremendous scope for branded apparels in India. As the economy grows, the need to dress better is among the first issues addressed. The consumer will always understand what he/she needs. The degree may vary depending on the evolution of the individual market. Wider exposure to international environment (thanks to media & travel) has ensured a sharp increase in the fashion consciousness of the Indian consumer- the reason why you see a sudden surge in the number of brands.

Retailer: It is said that 2009 will be the defining moment for Indian retailing industry. What transition can be expected in the retail industry? What are the key areas where notable improvements are likely to come forth?

TJ: By 2009, we would have two main areas of change. Firstly, the growth of organised retail which will further influence a behavioral shift in shopping patterns backed by superior technology and improved manpower availability. And secondly, the emergence of a more realistic scenario in terms of both costs and prices. The speculation era would be over, giving rise to a realistic phase, where sales projections, costs (especially real estate), etc. would be based on workable market experience rather than mere speculative market dynamics.

Retailer: What has been the reason behind the building of Brandhouse Retail in India? What other developments and retail formats can we see coming from your end?

TJ: Brandhouse Retail was formed as a 100 per cent subsidiary of SKNL to enhance the retail reach of SKNL Brands through exclusive brand outlets (EBOs). Subsequently, as Brandhouse gained expertise, it attracted the attention of international brands coming to India. Luxury brands like Dunhill & Escada signed Brandhouse Retail Limited (BHRL) as their exclusive India franchisee for retail and distribution. Subsequently, a host of international brands have approached us, across various price points and market segments, and we are in the final stages of signing with a few. Since retail requires different market dynamics, we decided to de-merge BHRL into a separate company.

In the EBO format, where we operate over 600 outlets (for various brands) we see tremendous potential and intend to reach over 1,200 outlets by March 2010. Additionally, we will introduce a private label by March 2009.

Retailer: Could you tell us more about what all you retail in Brandhouse Retail and how you see your margins improving?

TJ: Currently, we are an EBO (Exclusive Brand Outlet) format company, which means we do mono-brand stores for many brands - for example, a Reid & Taylor store will be a Reid & Taylor store. We also have international brands directly into Brandhouse where we have Indian franchise for the entire region- like Dunhill and Escada, brands for which we set up mono-brand stores.

Coming to how we see the improvement of EBITDA (Earnings before interest, taxes, depreciation and amortization) - primarily what happens is that our economy kicks in; you see the stores roll out during that part of the year. And all these 398 stores that were set up during the course of the past two years will reach maturity into the next year, and once they are mature the full year sales, the EBITDA kicks in very well.

Retailer: What sort of new brands will you be launching, both yourself as well as those brought into India?

TJ: SKNL will be introducing two new brands shortly. Additionally, we will be introducing 4-5 international brands next year.

Retailer: How many stores Brandhouse Retail stores do you have across the country at present and what are the expansion and investment plans for the next five years?

TJ: For the EBO format we are planning 859 stores by March 2009 & over 1,200 by March 2010. For the private label (unlike EBOs, these will be larger say 8,000-10,000 sq.ft) we have planned around 180 stores over 5 years.

Retailer: For all these expansion plans, what kind of fund raising plans do you have in place- will it be debt or some other form?

TJ: We are currently reasonably funded with our existing funds and now going ahead, we are raising some more funds for the EBO format and some of the newer formats that we are looking at during the course of this year.

Retailer: Do you think consumers in emerging markets value brand attributes any differently from those in the developed markets?

TJ: Like I have mentioned earlier, the difference lies in the level of detailing.

Retailer: Brandhouse Retail has quite a diverse range. In your view, is there a trade-off between brand premiums and low prices? Can you have both?

TJ: We have different stores for each brand. No two brands are sold from the same store. Different teams manage different brands so there is no trade-off at all. They are different brands catering to different audiences, across different socio-economic segments.

Retailer: Do you feel retail technology has been well accepted both by retailers and consumers in present day organised retailing in India? Do you feel there is room for improvement?

TJ: The key element to successfully manage organised retail is technology. It is not about acceptance- it is a necessity today. In India, technology is a little outdated but it is fast catching up. Technology is ever changing. So there’s always scope for improvement.