The pace at which the retailers and designers have been collaborating is no less than extraordinary, but what’s noteworthy and welcoming is the realisation that their marriage is integral to the growth of both. After all, wasn’t it long overdue!
The fashion designers are no longer anxious and uncertain of losing the brand values and neither are the retailers anymore apprehensive of designers’ unpredictability in delivering the right design, managing the brand value and maintaining the quality of the product. The scenario has now changed – and changed for better.
As this piece gets written, one gets to hear about Reliance Brand’s definitive agreement to invest either by itself and/or through its affiliates, in couturiers Abu Jani Sandeep Khosla for a 51 per cent majority stake.
And just few months back, one had seen Aditya Birla Fashion and Retail Ltd. (ABFRL) receive an approval from its board to pick a 51 per cent stake in House of Masaba for Rs. 90 crore. These are just some of the many retailer-designer collaborations Indian industry has been witnessing lately. It’s all about acquisitions and collaborations now!
Fashion landscape changes as retailers buy stake in designers
Few years back, when Reliance Brands picked up a stake in fashion label Raghavendra Rathore, acquisitions in the Indian designer space were not even heard of. However, things have changed rapidly in last 5 years.
Thereafter we saw the same firm pick up 40 per cent stake in celebrated designer label Manish Malhotra – not to mention Reliance Retail Ventures Ltd. (RRVL)’s move to make a 52 per cent stake in veteran couturier Ritu Kumar’s firm Ritika Pvt. Ltd. for an undisclosed amount.
This is just the beginning! In fact, Indian retail giants, including Reliance Retail and ABFRL, have acquired at least 10 fashion designers over the last few months so as to woo high-end customers who until now preferred to shop at multinational luxury retail outlets.
In January, Reliance Brands formed 60:40 joint venture with designer Rahul Mishra for a fashion and lifestyle business, while in December 2021, one saw Reliance Brands forming a similar alliance (60:40) with designer Anamika Khanna to develop her AK-OK label.
Following a Rs. 67 crore deal of Tarun Tahiliani with ABFRL, the partners expect to build a business worth Rs. 500 crore in the next four years with 250 stores.
It’s all about collaboration in Indian fashion world today. Corroborating further, Sunil Sethi, President, Fashion Designer Council of India, said that there wasn’t a better time than now for Indian fashion designers, like international designers, to grab the attention of the venture capitalists, business conglomerates and other retail giants.
Partnerships with companies/investors help designers
Indian designer brands haven’t so far been able to leave a mark for themselves in the world fashion market. As the international consumers have the buying capability, the retailers can gain significantly by taking these brands on an international scale.
Lately, business houses have taken fashion designers under their wings, which is a positive sign of industry getting institutionalised. Moving forward, this will enhance the growth in the Indian designer segment over the next 5-10 years.
In its mission to take Indian designer brands global – thereby giving international customers easy access to Indian fashion – Purple Style Labs has set itself up, so as to acquire fashion designers and then help them grow.
Purple Style Labs, founded in 2015 by Abhishek Agarwal, has a base of 150 investors including finance industry executives and IIT/IIM alumni network. On the acquisition front, Purple Style Lab’s preference is more towards legacy brands.
Having acquired Wendell Rodricks and Hemant Trevedi labels, Abhishek says that the recall value is spread over decades, and they have a richer design library so that it becomes easier to change them to mainstream luxury fashion labels.
Even the smaller designers can leverage Purple Style Labs’ online digital platform, which can give them more visibility, as well as marketing support, thereby increasing profitability.
In fact in the West, it’s been a common business strategy, wherein one has eventually seen companies growing into colossal corporations. Whether it was the acquisition of German fashion designer Jim Sandler for US $ 244 million few years back by Onwards Holding Company or the investment firm Warburg Pincus’ buying of David Reiss, the designers have not only gained momentum, but also seen the legacy continue, much after their times have gone by.
Similarly, after Américo Amorim Group, the Portuguese cork producer, bought a 25 per cent stake in Tom Ford, it took no time for the fashion label to get commercial success and industry recognition. The last decade also saw OpenGate Capital, a global private equity firm, buy the renowned fashion brand Nicole Farhi from the French Connection Group PLC – taking over all inventory and retail locations under the label.
In India too, like Purple Style Labs, investment firm HLD has said that it is in talks with L Catterton – the private equity firm backed by LVMH boss and French billionaire Bernard Arnault – over buying a majority stake in the fashion design company ba&sh. Notably, LVMH’s wide repertoire of designers includes the likes of legends like late Virgil Abloh and Marc Jacobs, amongst others.
What’s in for designers!
It’s a win-win for both retailers and designers if they collaborate. Sanchit Vir Gogia, Chief Analyst, Founder & CEO, Greyhound Research, said that with the brands being acquired by bigger players, these designer brands can match the international level of parity in quality.
In India too, it is tough for the Indian fashion designers to scale unless there is a solid investor backing,” believe experts. Notably, Manyavar, endorsed by Virat Kohli, rose to fame out of nowhere.
When retail conglomerates like Reliance and ABFRL Group join hands, it works big for designers. These retail biggies have supply chain, production, factory infrastructure and logistics capabilities that the designers could benefit from. Sunil Sethi added, “While these segments can be taken care of by the acquiring companies, designers can focus on what they do best, and that is to create good quality designs.”
Good capital, for founder-designers, helps enhance distribution as well as the scope of fashion business. If industry experts are to be believed, the pre-pandemic period saw ‘Big 10’ Indian couture houses generate turnovers between Rs. 200 crore and Rs. 800 crore.
Shantanu and Nikhil (S&N) had five stores before acquisition, followed by three more in 2020. They are now preparing to launch few more stores. Reportedly, S&N’s turnover pre-buyout was around Rs. 30-35 crore annually, with around Rs. 5-7 crore as net revenue – and now sales are estimated to touch Rs. 100-150 crore in 2024, when they have the option to sell their remaining stake at a valuation of Rs. 300-400 crore.
Similarly, General Atlantic took a 38 per cent stake in the House of Anita Dongre in 2013 for around US $ 50 million and it’s been a success story since last 9 years. It has over 1,100 stores today, with sales going up by more than three times. That says it all!
Here it is worth stating that with a focus on affordable ready-to-wear and westernwear made for young Indian women, Anita Dongre is today known as ‘the queen of pret’. Notably, her approach was different from other Indian fashion designers, who focused on the more attractive Indian bridal market and the ready-to-wear market at designer multi-brand boutiques.
Substantiating further, Shantanu Rastogi, MD, General Atlantic, averred, “When we invested, we saw that there were more and more working women in India with disposable incomes who wanted to wear Western clothing, yet loved their Indian sensibilities.”
Retailers too reap rich reward!
Business firms are keen on acquiring 100 per cent control of a designer’s company and this formula of the valuation has an exact date and time that is agreed upon at the initial stages of the agreement.
Besides reaching new audiences or creating a new niche, the retailers more often than not build a bigger impression than they would on their own. Along with the visibility, it also helps retailers create a certain amount of desirability. There’s an inexplicable kind of craziness amongst customers to know and see the latest from the collaboration.
Additionally, it helps fashion retailers measure outcomes in a better way and make informed decisions for any of their next product launches. It is all about thinking big picture and down the road.
Sometimes the retailers share their successful designer collaborations with other potential partners as well – adding to more exposure and sometimes more collaborations.
But analytical study is necessary
At times, retailer-designer collaboration fails due to their inability to ascertain the consumer’s views about the blend of a particular combination of the designer and retailer. An analytical study is integral to the success of any joint venture, but not many realise it.
Globally one recalls how H&M’s alliance with Maison Martin Margiela had turned out to be a disaster as both retailer and the designer ended giving deep discounts to clear the inventories.
The first order might be a small order for a designer, with deep discount, but if the collection becomes a hit, the later orders could be even bigger and better. So, it is actually a designer’s prerogative to weigh both the good and not-so-good aspects of collaborating with a retailer. Similarly, in India also, famous fashion designer Sabyasachi Mukherjee’s association with H&M was not as successful as one had anticipated.
Also, the designer needs to have a business sense of working with the right stores, getting the merchandise pricing correct and, importantly, negotiating the terms of the agreement.
A new designer generally gains awareness for their brand and builds reputation on local and global level by selling to retail stores that are well-known to potential customers.
Fortunately, for new designers and consumers, it has become important for stores to carry new designers to keep the product mix fresh and interesting. Analysing and understanding the intricacies of the collaboration is no less than a challenge for a new designer.
While globally designers like Alexander McQueen have evolved from strength to strength even after its founders’ death, business firms led by fashion designers generally grow only to some point. That’s because collaborations with investors or corporate entities, many times, secure the creative talent of the designer who don’t have much knowhow in supply chain-logistics or finance.
Disagreement between stakeholders had led to the closure of Manish Arora’s Indian line, which was a joint venture with BIBA Apparels. Similarly, Schulen Fernandes, who was the creative heir of the late designer Wendell Rodricks, had also quit Purple Style Labs, due to creative differences with the company.
Abhishek Agrawal, Founder, Purple Style Labs, in an interview with Economic Times, said that investors are wary of fashion businesses that are too dependent on a designer’s personal presence, adding “I think you should have the ability to run it without their existence.”
One dilemma that business houses, however, face is how long a fashion designer should be retained. The general time frame is 10 to 20 years, wherein the first 10 years are locked, while the next 5 is optional. Following this, on mutual agreement, most designers sign a 100 per cent buyout.
Amidst all challenges and struggles, the retailer-designer collaborations are here to stay in India. Selecting the right products by channel at the right time – along with the right involvement of the consumer – will surely go a long way in making these retailer-designer partnerships a big success in the years to come.
Trust the magic of new beginnings!
