BackSingle-brand retailers await clarity on sub-brands, e-commerce
The current single-brand retail policy allows for brands to retail goods under one brand name only
Premium(Victor J. Blue/Bloomberg)
New Delhi: Even as Inter Ikea Systems BV and Hennes and Mauritz AB prepare to invest in the Indian market to set up single-brand retail operations, some companies already in the country are still looking for clarifications on clauses related to e-commerce and sub-brands.
According to the foreign direct investment (FDI) policy circular issued last month by the Department of Industrial Policy and Promotion (DIPP), the DIPP reiterated that retail companies can only engage in e-commerce that’s business-to-business.
“Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of single-brand retail trading," the circular said.
The restriction on e-commerce was inexplicable, said the president and CEO of a company that has formed several joint ventures to introduce foreign apparel and accessories brands in India.
“Although we understand that the policy is still evolving...it is a bit odd that we can sell to another portal, say, a Myntra, but not through our own e-commerce website," said the person, who didn’t want to be identified as the matter is sensitive.
German apparel retailer s.Oliver, which is keen to start e-commerce operations, said the policy lacked clarity on the issue.
“We are waiting and watching," said Rajive Ranjan, managing director, s.Oliver India. The company is present in India through a joint venture with Design Pod, a special purpose vehicle.
Foreign retail chain companies invested in India are also worried about confusion over the definition of a “sub-brand".
The current single-brand retail policy allows for brands to retail goods under one brand name only.
The relevant conditions in the policy state:
“(a) Products to be sold should be of a single brand only.
(b) Products should be sold under the same brand internationally, i.e., products should be sold under the same brand in one or more countries other than India."
However, several single-brand retailers often sell products under various sub-brands.
Two weeks ago, the Economic Times reported that the finance ministry asked DIPP about British apparel retailer Marks and Spencer selling sub-brands such as Indigo, Autograph and Limited Collection in its stores. Marks and Spencer is present in India through a joint venture with Reliance Retail.
A Marks and Spencer spokesperson denied receiving any communication on the subject from the ministry.
But other retailers want clarity on the issue.
The confusion may delay the entry of an Asian apparel brand exploring the India market, said a company executive on condition of anonymity.
“We will wait and watch till all these aspects—such as what defines a sub-brand—are clear," he said.
Several brands will come under the scanner if the issue of sub-brands is not resolved, said a senior executive at a European apparel brand.
“Many brands in the market have sub-brands or different categories that they retail in India," he said on condition of anonymity. “It could potentially impact them if the issue is not resolved."
Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations, said, “The ground reality is that brands will have sub-brands or categories they retail globally and they will bring them (to) India. So, the DIPP will continue to get plenty of queries till the policy is" clarified.
Lalit Kumar, partner at law firm J. Sagar Associates, said the clarification on what qualifies as a sub-brand should not be stringent. “There is lack of clarification on the issue of sub-brand which remains a concern for foreign retailers at large."
Utsav Seth, chief executive officer and managing director at footwear retailer Pavers England Ltd, the first brand to receive the nod for investment under the revised single brand policy, said, however, that the policy has so far been clear. A company needs to take approval for establishing sub-brands and adding more product categories. He added that Pavers was not looking to launch an e-commerce venture.
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