Apparel Sourcing Intelligence - Worldwide

Businesses review Indian retail: Mothercare/Shoppers Stop split rumoured

UK childrenswear retailer Mothercare is reported to be reviewing the termination of its Indian joint venture with Shoppers Stop, and reviewing the possibility of switching to a partnership with the Trent division of Tata. The reports are that Mothercare is generally unhappy with sales performance in India, but particularly concerned about Shoppers Stop’s preference for Mothercare having a shop-in-shop format, rather than individual outlets).

Te reports come as a number of businesses have given different reasons for the apparently growing number of struggling Western apparel retail brands in India.

Mark Ashman, CEO of Marks & Spencer Reliance India, or MSRI, blamed difficulty in finding the right locations for its slow growth, culminating in M&S terminating its relationship with Planet Retail and setting up a venture with India’s Reliance. "New mall openings are at least six months behind schedule. India is over-hyped. People thought they could quickly open stores, but it takes time" he said. But under its Planet Retail partnership, M&S also had product problems, with most garments being shipped from the UK, even though often made in Asia, and having to cut prices 40% with Indian import duty often adding up to 40% to landed prices. MSRI now sources 39% of its requirement from South Asia and plans to take it to 70%

But Reliance did not open a single store for Italy’s Diesel or Dama’s Paul & Shark, though it planned to open them by April this year. "When we signed the JVs last October, rentals were very high. One needs to enter into nine-year leases, which was not rational at that point in time. We waited and signed for properties which are 30 per cent lower than when we initiated these ventures," says Darshan Mehta, CEO of Reliance’s Brands division.

Cost problems hit GAS, a joint venture between India’s Raymond and Italy’s Grotto, which recently closed. "Although the brand was well received among its target youth audience, the company has been incurring steep losses due to brand building expenses, high cost of imported merchandise and very high rentals and other operating costs for its stores," said Raymond, explaining that losses in the venture had grown to around $10 mn in 2008/9 – nearly three times the previous year’s level.