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India: A Wait-and-See Proposition

IndiaThe opportunity to sell volume goods to India's burgeoning middle-class market is vast in many product categories. Home textiles is not yet one of them, according to several export manufacturers who produce goods there.
     But that doesn't mean they aren't beginning to prepare for the possibility, which many see coming five to 10 years down the road.
     The first hurdle is the country's $590 billion retail landscape, which is dominated by small, independent shops. So far, India has barred entry to what it calls multi-brand retailers from outside the country such as Carrefour and Wal-Mart Inc. (which has a JV in a cash-and- carry operation, the only retail format in India currently permitted to accept 100% overseas investment).
     But government officials met last week to finalize a plan that will ease up on that regulation - albeit slowly. The restrictions are also likely to be steep, according to a July 21 report from The Hindu Business Line. Foreign ownership could be capped at 49% in joint ventures for multi-retail formats, with a minimum investment set at $100 million. Some portion of that minimum must be directed into building up the country's infrastructure.
     "Organized retail is growing at 20% to 30% but it's a very small base," said Anish Doshi, managing director, Textrade.

 

2007  

2008  

2009  

2010 

Floor coverings  

$15.6  

$15.8  

$12.5  

$13.8 

Curtains & Drapes

0.15  

0.30  

1.2  

1.0 

Bedroom furnishings  

0.30  

0.36  

0.40  

0.72 

Bathroom furnishings  

NA  

NA  

NA  

NA 

SOURCE: U.S. OFFICE OF APPAREL AND TEXTILES 

     He predicted the government will move carefully so that chains will not grow so rapidly that they swamp the mom-and-pops. "Also, they will worry about inflation so they will want more players to level the prices," he said.
     Still, Textrade began directing some of its business into the domestic market about 18 months ago and hopes it can launch its own brand there within the next two or three years.
     While India's consumer class is expanding, "people's standard of living is still low compared to the West," said Pradeep Mukherjee, president of global marketing, Himatsingka Linens.
      Himatsingka operates 12 high-end fabric stores in the country for the carriage trade, but its volume bedding business is export and will likely remain that way for several years.

Largest Indian Cities by GDP ($bil.) 

Mumbai  

$209 

New Delhi 

167 

Kolkata  

150 

Bangalore  

83 

Chennai  

67 

Hyderabad  

60 

Ahmedabad 

59 

Pune  

30 

Surat  

22 

Kanpur  

17 

SOURCE: MCKINSEY GLOBAL INSTITUTE 

     "Retailing is huge in India, but home retail is a low priority," said Mukherjee. "There's no home stores as such. Department stores, yes. Food stores, yes."
     Once there's a market for home stores, he said, the sector should expand fairly quickly.
     Middle class Indian consumers are not throwing their discretionary money into their homes yet - in part because housing remains very expensive and down payment requirements high.
     And there's no real brand profi le in home textiles. Consumers are interested in apparel, accessories, electronics and automobiles - things that can be seen by others.
     "As things change in personal usage, then we will catch up in home textiles," said PK Markandy, general manager of Trident.
     His company is doing its biggest domestic business with the rapidly growing hospitality sector, but it is also making inroads here and there in retail. Trident is also expanding its capacity for domestic business.
     "We plan to have a strong brand-building exercise in the country," said Markandy.

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