Indian Economy News

India to be among top three markets for Benetton: Michel Lhoste

New Delhi: India will be one of the top three markets in five years for the Benetton Group, the Italian fashion clothing company, international business director Michel Lhoste said Thursday.

India is now one of the top five revenue markets outside Italy for the retailer that owns the United Colors of Benetton and Sisley brands.

“We expect volume to double in five years from about 10.7 million pieces a year at present. The average selling price is lower than most markets, essentially where winter clothing is a dominant category. But, the growth rate is high,” said Lhoste, who took over as interim chief executive for Benetton India after Sanjeev Mohanty left in November to join online fashion retailer Jabong as chief executive.

Lhoste is working on a three-year action plan for India. “India is growing incredibly fast, faster than most of the European markets. Internet penetration and e-commerce are growing probably the fastest in the world. We need to leverage on the India growth story,” he said. “To me, India holds much better opportunity than Germany (the largest market outside Italy) for Benetton.”

Starting this year, Benetton will transform all its 791 stores in India into its On Canvas concept store. The first such shop was opened in Piazza del Duomo, Milan’s main city square, in April 2014. Milan is considered the fashion capital of Italy.

India is the first Asian country where Benetton is bringing these concept stores. Its first such store in New Delhi, the only one in India so far, has seen a 20% surge in sales, Lhoste said.

On opening new stores, Lhoste said the company will go slower than the previous years. “Earlier, we opened about 100 stores a year. It was 85 in 2015. Going forward, it’ll be around 50 a year. Some of our existing stores need to be bigger,” he said. “We’ll invest more on transforming the existing stores, along with our franchisee partners, in communications. We need to understand how Indian cities are getting involved fast, and expand accordingly. It’s complicated, but we need to stay relevant for the future.”

Lhoste is also hunting for an India chief. “You may hear from us next month. We’ll look for a manager who better understands Italy (and not just India), can increase cross-border engagements. We see India as a centre for designs and innovations that are relevant for the global markets,” the interim CEO said.

During Mohanty’s tenure, sales at Benetton India jumped 64% to Rs.596.49 crore in the year ended March 2014 from Rs. 363.48 crore in 2010, according to its filings with the Registrar of Companies (RoC). This was at a time when many apparel brands struggled because of an economic slowdown and high inflation.

Besides fast retail expansion, Benetton’s growth in India was also backed up by the e-commerce boom. It was an early adaptor, and about a third of its volume came from online sales in the past year, unlike its global average of 10-15%, according to industry estimates.

“We were being trapped. The discounting business is not healthy. We need to be present online, but can’t compromise with quality, or anything else,” Lhoste said.

Benetton is taking a “cautious approach” and will be selective in product offering and presence. “We are integrating a multi-channel approach,” he said. “E-commerce players can’t dictate the rule of the game. We’ll be there, but won’t dilute anything.”

Although Benetton sources from India, these supplies are “minuscule” when compared to the company’s global requirements. “We source almost all kinds of product lines from India, except the winter clothes. In the coming years, we would substantially increase sourcing from India for the global markets,” Lhoste said, without quantifying.

The apparel market in India is estimated at $45 billion, and is projected to touch $200 billion by 2025, according to a study by consulting firm Wazir Advisors.

“Benetton had its advantage as an early entrant. But the way competition increased in the past few years, it is time for them to revisit the India strategy, keeping in mind the opportunity that this market offers,” said Saloni Nangina, president, Technopak, a retail consulting firm.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.