Denmark-based fashion house Bestseller, which owns Vero Moda, Jack & Jones and Only has ended its four-year-old franchisee ties with its Indian partner, Bombay Rayon's Prashant Agarwal.
But this is not the first experience of a relationship between Indians and their global retail partners going sour. First there was a break-up between Mumbai-based Alok Industries and UK's iconic suit maker Savile Row as the former wanted to exit the retail space. Then DLF Brands ended its franchise partnership with Italian brand Alcott. French fashion conglomerate LVMH group's Sephora also ended its partnership with Genesis Colors.
There are many reasons for these failed joint ventures, but it all boils down to a mismatch in ambitions, difficulties in scaling up and operational issues.
Due to the current economy and hence low consumer buying, Indians are unable to help their global partners in scaling up. Consumers across urban India have been postponing major purchases over the past twelve months, spending only on essential item due to prolonged inflation. A January report by India Ratings and Research, a Fitch group firm, said the outlook for urban consumer sentiment is likely to remain subdued in fiscal year 2015 amid reduced affordability.
Take for example; DLF Brands ended their partnership with Alcott because the stores were not doing well and Aditya Birla Group’s Madura-Esprit venture failed to pursue their ambitious targets.
Lack of planning and expanding too fast is also one of the reasons for this failure. Global partners need to understand that Indian customers are different and need to be treated accordingly. For example, the geographical differences, consumers based in South, West, North and East should be taken into consideration when planning.
Many also believe that the debt issues faced by textile companies such as Alok Industries, Bombay Rayon and S Kumar's Nationwide are also responsible for the break-ups between their overseas partners.
Now that India is allowed 100% FDI in single-brand retail, perhaps less companies will feel the need to find a local partner to build business in the country.
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