India has a booming garment and shoe market. In various cities there, new shopping malls have sprung up one after another and sellers compete to exhibit latest products while consumers exhibit eager demand for brand products.

Many brands expand their businesses through franchised operation, particularly garment and shoe brands. By 2010, franchised operation is expected to hit 6% in growth rate, amounting to USD 17 billion in total value. This means that this market will create substantial opportunities related to franchised operation.

India is witnessing a rapid growth in its retail, attracting many international brands, most of which come from Europe and USA. After Tommy Hilfiger opened up store in India recently, it is reported that Esprit is to enter this market in summer 2005.

According to CY Pal, president of India Franchise Association, half of the retail activities in USA is conducted in the form of franchised operation while only 2% of the retail activities in India is associated with franchised operation. However, franchised operation has been rapidly growing in India at the annual growth rate of 30-40%, especially 4 or 5 years ago. According to Pal, research indicates that the success rate for franchised operation is as high as 90% while that for non-franchised operation is as low as 10%.

From Brand Store to Franchised Store

When entering Indian market, most international garment and shoe brands first invest in opening up stores and then hand over these stores for their Indian partners to operate. As Pal indicated, this is a typical solution for brand owners and international brand owners in particular. The reason is that they have their established image and they have to ensure their stores everywhere share the same style. These stores are owned, managed and operated by brand owners and become the model for other franchised stores. This solution also helps brand owners to have a clear idea about market response and preference, and provides useful information for them to identify the direction of establishing franchised operation agreement in the future.

According to KrisIyer, executive president of Crossroads (the first shopping mall in India), brand companies often open stores for their brands in major regions in their country, and then open franchised stores elsewhere after successful operation. Other international garment brands that have opened franchised stores in India include Marks & Spencer, Ermenegildo Zegna, Mango, DAKS and Hugo Boss but most of them have less than 5 stores in India.

According to insiders, almost all international garment and shoe brands are gloating over the Indian market or negotiating with large textile and garment companies there concerning franchising agreement. According to retail consultant Bela Gupta, India is expected to have another 65-70 stores in the next years, believing more international brands will enter Indian market in 2006.

With the entry of many large international brands into Indian market, India is beginning to formulate specific laws and regulations concerning franchised operation. To engage in franchised operation in India, franchised operators should pay a sum of entry fee to franchisers, the amount of which may vary depending on different brands. In addition, franchised operators should pay royalties to franchisers on regular basis at the rate of 5-8% of their stores' turnover, depending on their mutual agreements.

Franchisers often appoint general franchised operators in regions which their brands intend to cover and general franchised operators may solicit franchised operators in such regions and coordinate with franchised operators. Franchisers only contact general franchised operators. With constant expansion in this market, according to Pal, the organization of the entire sector will gain further improvements.

Rapid growth in high and medium-end shoe market

Organized retail scale in India only occurs recently. According to Pal, Bata is one of the first brands to implement franchised operation and currently, almost all sports shoe brands, including Reebok, Adidas and Nike, are operated in this mode. Indian high-end sports shoe and garment market is expected to achieve 20% growth rate this year.

As indicated by Sushil Dungarwal, executive president of The Loft (forerunner in brand shoe stores), current market is shifting from low-price shoes to medium and high-end products, thus attracting a lot of foreign shoe brands to open stores in India. Recently, Clarks opened its exclusive shoe store in India and other brands such as Lotto, MarcoRicci, Valis and Tommy Hilfiger have achieved outstanding performance. Loft is operating more than 130 Indian and international prestigious shoe brands, becoming a platform for most international brands to enter Indian market.

Most international shoe brands enter Indian market through different retail channels, including exclusive stores and stores dealing in multiple brands. According to Dungarwal, Clarks has its exclusive store and has formulated its marketing strategy; Tommy Hilfiger also launches series shoes through its exclusive store. Other brands such as Ecko may also market their products through two types of stores. As indicated by Dungarwal, Indian high quality shoe market promises great potential. India has a population of one billion. If every Indian buys a pair of USD 15.5 shoes, this makes a huge market. He believes thousands of shoe stores will be opened in India in the next 5-10 years.

Sports shoe market is also experiencing a booming growth. Many international brands such as Reebok, Adidas and Nike are planning to expand market in India. Holding 47% market share in Indian high-end sports shoe market, Reebok already has about 130 stores there and is planning to open a new store every week to fully cover large and small cities in India. These new stores are mostly franchised stores. According to a Reebok employee, India is one of their largest and fastest-growing markets, and it is no problem soliciting franchised operators there. The only problem is that there are too many candidates for them to select.

India is also the largest market for Adidas in Southeast Asia. This brand has opened 80 franchised stores in various regions in India. Italian brand United Coloursof Benetton that has maintained a low-key attitude in past years is planning to expand its market in India and will update and expand their existing stores.