BIDDING ADIEU!!!

Esprit, the American brand has walked out of the Indian retail market. BHPC too made an India exit last year. Both Esprit and Beverly Hills Polo Club were well received brands in the county. Why didn’t things pan out for them?

Esprit Story

The brand made its India entry through a deal with Madura Fashion seven years ago. With the launch of its flagship store in Mumbai then, Esprit brought the retailing standards of Milan, Paris, and London to India. The brand offers 12 product lines encompassing women’s wear, men’s wear, kid’s wear, as well as shoes and accessories through over 640 directly managed retail stores and over 12,000 wholesale points-of-sale worldwide, occupying over 817,000 square metres directly managed retail space in more than 40 countries. In India, the brand had 14 stores in nine cities in about 10 states. They also ran a sub brand, edc in the country. The brand is said to have been bearing annual losses up to the tune of `20-25 crore which has led the brand to call off their innings in India. Esprit had shut down its flagships in Bangalore, Mumbai and Delhi in 2011 itself. The brand is now clearing off its inventory and waiting for a complete shut down.

Raison d’etre

The first reason that any one would point out is that the companies were generating losses. Business viability and profit making are the key outcome that every businessman writes for his business. Esprit was said to be bearing losses up to the tune of `20-25 crore. Entering and sustaining the Indian marketplace calls for investments and patience as returns are not very quick. The opportunities and avenues for growth are many just that the pace is a little slow. To be successful, a brands needs to be patient as it is an investing market with slower returns but a lot of acceptance.

The other possible reason for the fallout can be a conflict with the Indian partner. Anurag Rajpal, Director and Chief Executive Officer, The American Swan Lifestyle Company who previously headed operations for Beverly Hills Polo club said, “India is a very difficult market. Lack of quality shopping destinations like malls and well trained staff are the issues they face. Moreover, these brands were in a partnership with their respective Indian partners. The brands have their own expectations and Indian partners have their own. There often comes a situation where they have an expectation mismatch. The ROI is not as per their plans. And most of the companies lacked long term plans. The conflict arises when the expected break-even time is not fulfilled. It can happen because of numerous reasons but since they did not have a vision for the country for a longer run, they decided to leave. The Indian retail story is all about biting into the reality of the Indian marketplace. Today’s reality is all about very high retail rentals, very scant walk-ins and small bill sizes that don’t excite big brands anymore.”

Planning is an imperative part of crating a blueprint for entering a market and sustaining it. Harish Bijoor Brand-expert & CEO, Harish Bijoor Consults Inc. rightly says, “Brands come and brands go. Brands that do not do their homework will face hurdles in the Indian market. Many brands in the fashion market today find being online a better option than being in the rough and ruddy Indian marketplace as well. The online marketplace is a great place to be, as it offers a level playing ground for most retail brands. This I do believe is just the beginning of the churn. Expect a lot more retail brands that are niche in terms of offerings to crumble at the altar of online retail.”

Ajay Sharma, Senior Director, ASSOCHAM says, “It mainly can be because of business strategy going wrong. You need to understand the market and stregise accordingly. Zara is a successful case in itself. They understand the market well, the sensitivities of the consumer and are offering merchandise at the apt pricing points. They are catering to the middle and upper middle class where they feel business can happen and is happening so that is working for them. Pricing is also one big concern. So strategising is very important and understanding the segment they want to target.”

Popularity vs Business sense

Brands like Esprit had a huge fan base and a long list of loyal customers. The brand liking grew as the brand’s journey progressed in the country. Does business sense overtake growing popularity of a brand when it comes to making the decision of exiting a country? Bijoor tells, “Yes it does. At the end of the day, retail is not merely about visibility. It needs to be about volume and profit delivery as well. The moment your brand does not deliver that continuously for two years or more, it is time to question the entry itself.”

Re- entry: possibility?

We have seen brands exit the Indian marketplace but can there be a possibility to see them come back to Indian shores? Well it’s a mixed bag of thoughts. They may or may not come back. According to Bijoor, they will return for a second innings. “Yes they will, but second time round, they are going to be that much more careful. Once bitten thrice shy!”

The opening of FDI will bring in new brands rather than the comeback of the brands which already have a taste of the Indian market.  Agreeing with this Rajpal adds, “After FDI getting a nod, if they had any plans to stay, they would not have left at this point of time. If they had plans to resurrect their brand after FDI, they would have taken over the running stores from their Indian partners and continued from there on. Shutting down the stores does not show signs of coming back any sooner even after FDI approval in the country.” 

As far as speculations go, it is being said that DLF is going to revive BHPC in India looking at 74:26 joint venture and launching it with a new look. For now, we can only wait and watch who all make exits and entry into the multi faceted Indian retail market.