New Delhi: India’s north-east is known for its tropical rain forests, tribal cultures and handicrafts, Assam tea, flaming hot peppers and outbreaks of ethnic unrest.

Now, the region is emerging as a magnet for upscale apparel and accessories labels that are seeking to tap the growing demand in states such as Assam, Tripura and Manipur. From the makers of sports and fashionwear to branded jewellery chains, retailers are heading to the north-east either to open their first stores or expand their presence.

S. Oliver Fashion India Pvt. Ltd, which runs S. Oliver stores in India, has been receiving queries from potential franchisees in cities such as Shillong, Guwahati and Siliguri.

“Currently, we are not present there but we are looking at a mid-2013 entry into that market," said Rajive Ranjan, managing director at S. Oliver. The premium German apparel brand entered India in 2007.

The north-east, home to a combined 45 million people as of 2011, comprises the states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Sikkim and Tripura.

Rapid economic growth in recent years has increased the purchasing power of consumers in the region.

While the average rate of growth in gross state domestic product (GSDP), a measure of state-wise economic output, was 6.88% in 2011-12, some north-eastern states grew faster. Assam’s economy grew 8.42%, Tripura’s by 8.87% and Meghalaya’s by 9.54%, according to Planning Commission figures.

Louis Philippe, the men’s brand from Madura Garments that sells apparel, shoes and accessories, started test-marketing its range in the north-east one-and-a-half years ago with a store in Guwahati. Pleased with the results, it is looking at expanding.

“We will look at more stores in Guwahati as well as at places that are further away," said Bangalore-based Jacob John, brand director of Louis Philippe at Madura Garments, which has brands including Van Huesen and Peter England in its portfolio.

Tanishq, the jewellery retail chain from the Tata-owned Titan Industries Ltd, has two stores in the region, in Guwahati and Agartala. It is planning to open three more within this year in the region.

“The north-east is one of the fashion capitals of the country," said Dwaipyan Sen, brand manager (east) at Tanishq. “It is turning out to be a very important market for us in terms of demand for diamonds." He calls it a future growth market.

Titan Industries, which also sells watches and eyewear under the Titan and Fastrack brands, clocked sales of 100 crore in the region last year, up from 12-13 crore five years ago.

V. Ganesh, associate vice-president and business head (eastern zone) Titan Industries, is confident Tanishq, Titan and Fastrack will collectively log 300 crore in sales by next year. “These consumers like to flaunt brands," said Ganesh in a phone interview from Bangalore.

Fashion retailers making inroads into the region to tap consumers is a relatively recent phenomenon. Retailers are seeking to tap the demand in relatively unsaturated markets, eyeing new sources of revenue, after establishing themselves in the big cities.

“It’s a brand-conscious and fashion-forward market. So it’s a natural progression for fashion brands to get there," said Rachna Nath, leader of retail and consumer practice at PricewaterhouseCoopers.

Growing incomes and rising purchasing power in urban areas of the north-east are pulling “consumers towards premium and branded products", explained Pankaj Gupta, head of the consumer and retail practice at Tata Strategic Management Group consultancy.

That’s not all. The north-eastern consumer “is willing to trade up" as well, said Manish Agarwal, east-zone head at Future Value Retail Ltd that operates Big Bazaar supermarkets.

The company entered Guwahati three years ago through a 75,000 sq. ft Big Bazaar store. “They have the capacity to upgrade and are experimental, so they are looking for more variety and quality rather than value, per se," said Agarwal. The company is opening another store in Agartala, in Tripura, in the next two-three months.

Personal care products, especially color cosmetics, are also seeing sales spurt. According to data provided by research agency Nielsen, the north-east accounts for 3.8% of India’s personal care market, in terms of value, but is growing at a yearly pace of 22% —3 percentage points higher than the national average.

“It is a big make-up market," said Satyaki Ghosh, director of consumer products division at L’Oreal India Pvt. Ltd. He said pockets of the north-east mirror the consumer behaviour of high-income pockets of suburban Delhi and Mumbai. “Consumer behaviour in these states and the level of awareness is similar to that of in the big cities."

Consumer goods maker Dabur India Ltd has been deterred by the challenge of product distribution in the region in the past, but has included Assam among its focus states in Project Double, an initiative under which it is seeking to double direct distribution to ensure higher market penetration.

The firm, which markets Dabur Amla hair oil and Gulabari—a skin care product—believes “consumers in the northeast are highly evolved and their awareness levels on beauty care are particularly high," said George Angelo, executive director, sales, Dabur India.

New Delhi-based DLF Brands, which represents brands such as Forever 21, Mothercare and DKNY in India, will consider entering the north-east in the next one year, said Dipak Aggarwal, chief executive at the New Delhi-based firm.

To be sure, supply chain and logistics-related issues loom as potential challenges and scaling up may be a challenge given the limited density of population of cities in the region.

The limited critical mass restricts the potential for new store openings, said Gupta of the Tata Strategic Management Group.

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