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Business News/ Industry / Retail/  Inside the battle for the moneyed shopper: Reliance Retail vs Aditya Birla Fashion and Retail
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Inside the battle for the moneyed shopper: Reliance Retail vs Aditya Birla Fashion and Retail

How Reliance Retail and Aditya Birla Fashion and Retail are increasing their brand width to woo the premium customer.

Shoppers are aspirational, luxury brands want a wider reach, and retailers are happy to serve as a bridge. Photo: MintPremium
Shoppers are aspirational, luxury brands want a wider reach, and retailers are happy to serve as a bridge. Photo: Mint

NEW DELHI : Retail therapy is back. And it isn’t just consumers who are out revenge shopping after two pandemic-struck years, but retailers too.

In the battle to woo India’s shoppers are the country’s two top retail groups, Reliance Retail Ventures Ltd (RRVL) and Aditya Birla Fashion and Retail Ltd (ABFRL). Both have been actively snapping up rights for brands, from mass-market clothing to innerwear, luxury couture to more high-end labels. While others like Walmart-backed Myntra, homegrown Arvind Fashion Ltd, Tata-owned Trent and new disruptor-on-the-block Nykaa, too, have been onboarding international and high-end domestic labels from time to time, none can match the range and repertoire of ABFRL and RRVL.

In over two years, both groups along with their subsidiaries have partnered with or invested in close to 20 brands. The reason for the frenzied shopping may well have to do with the changing dynamics of shopping and the fashion business, where shoppers are aspirational, luxury brands want a wider reach and retailers are happy to serve as a bridge.

The brand width

Since 2019-2020, ABFRL, the retail arm of the $60 billion conglomerate Aditya Birla Group, has been quickly adding new allies. It first acquired omni-channel retailer Jaypore for 110 crore and then picked up a 51% stake in homegrown designer duo Shantanu & Nikhil’s apparel company. In early 2021, it partnered with luxury designer Tarun Tahiliani to create affordable men’s clothing brand Tasva, acquired a 51% stake in couturier Sabyasachi, and swung a 51% stake in designer Masaba Gupta’s House of Masaba Lifestyle earlier this year, to leverage its Gen Z connect.

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Reliance, too, has been scooping up brands, through RRVL and its premium arm, Reliance Brands Ltd (RBL). Its raft of investments in 2021 included homegrown brands such as Ritu Kumar, a 950 crore majority stake buy in Purple Panda Fashions that owns innerwear brand Clovia, and a 60:40 venture with Anamika Khanna’s AK-OK brand. In March this year, it picked up a majority stake in legacy designers Abraham & Thakore; in April, it picked up a majority stake in Abu Jani Sandeep Khosla.

Among foreign names, in a joint venture with American Iconix Brand Group, Reliance grabbed the IP rights of British brand Lee Cooper. It is in advanced stages to gain beauty retailer Sephora’s rights for India from Arvind Ltd, after a similar takeover of American brand Gap’s rights.

Accessible luxury

So what’s driving this buy and tie-up spree for the retail giants? Analysts and industry insiders believe it is an attempt to attract shoppers who are trying to move up the value chain, across both western and ethnic labels.

“They are building an ecosystem which spans price-points right from regular retail, with brands such as Louis Philippe to now working with Indian designers and making that more accessible," says Pankaj Renjhen, chief operating officer and joint managing director, Anarock Retail.

And therein lies the secret to winning Indian shoppers—providing them aspirational goods at the right price points.

“Reliance is aggressive and has deep pockets. ABFRL is moderate in comparison. RIL also wants to get everything on their Jio app—so they need to build a bigger bouquet of brands," says a retail consultant, adding that the overall strategy is clear for both retailers.

In their wooing of homegrown designers, the intent is to invest in high-end brands and eventually carve out more mid-to-premium sub-brands from these. “Designers want to launch lower-priced labels. While not all shoppers can afford a Tarun Tahiliani outfit, buying into a sub-brand (in this case Tasva) is a starting point for aspirational shoppers," he adds.

When Tahiliani met top executives at ABFRL, he recalls the intent was to build ethnic wear for Indian consumers. This, after ABFRL spent years developing western wear brands such as Louis Philippe, Allen Solly and Van Heusen in the country.

Tahiliani explains that fashion trends are percolating beyond the uber-wealthy to aspirational shoppers in India. While his bridal outfits are worn by India’s more upmarket shoppers, at Tasva, kurtas for men can be purchased starting 1,999. “My real excitement is to bring affordable, beautiful fashion to a bigger population," says Tahiliani.

Building a presence

ABFRL’s move chimes well with its strategy to build a strong presence across diverse segments of the apparel fashion market. Apart from its Pantaloons chain of stores, its foreign brand portfolio includes Forever21, American Eagle and The Collective—a multi-brand retailer of luxury brands such as Ralph Lauren, Michael Kors, Hackett London, Ted Baker, Fred Perry and others.

While announcing its 90 crore investment in House of Masaba Lifestyle, ABFRL had said it was eyeing annual revenues of 500 crore from the brand over the next five years, with plans to enter the cosmetics, personal care, athleisure & home decor to its portfolio. The company envisages similar returns from Tasva, while intending to turn brand Sabyasachi into a global luxury house out of India. Earlier this week, Sabyasachi opened a store in New York.

Group chairman Kumar Mangalam Birla was understandably bullish when he stated at the company’s recent annual general meeting that ABFRL could surpass its projected revenue of 21,000 crore in 2026.

High on premium

Experts believe that consumption at the premium end of the country’s shopper base is growing at a faster clip, even if it is a small pie, giving brands the opportunity to tap into the segment.

According to 2021 estimates by Boston Consulting Group (BCG), India’s apparel and fashion market is set to touch 5.7 trillion by 2024 driven by premiumization, greater e-commerce penetration and a higher focus on private labels as well as the entry of international brands.

“Across every category in apparel and fashion, the premium segment is growing roughly twice as fast as the regular segment. This is not just a one-two year phenomenon; the growth rate in the last few years has been high," says Abheek Singhi, MD and senior partner at BCG.

Singhi says profits are also bigger in this segment. “So, the sector is appealing both in India and globally," he adds.

This wasn’t the case a decade or two ago, when the wealthy could buy premium goods only overseas, due to lack of availability and purchasing power here. One also saw partnerships between foreign brands and their domestic partners falter as they failed to tap the Indian shopper’s wallet.

Markets like Dubai, US as well as the UK offered better prices and variety. They also offered discounted goods via outlet malls—drawing more shoppers from overseas.

Moving beyond logo

Things are changing now. A general uptick in disposable incomes, rising entrepreneurship and growth of social media are beginning to stoke domestic consumption. While it may not translate into significantly high volumes for ultra-luxury brands, it may enable purchases for more bridge-to-luxury labels.

In fact, 96 more individuals entered the 1,000 crore club in the country taking the total count to 1,103, according to the 2022 IIFL Wealth and Hurun India Rich List 2022. Hurun expects this list to grow to 3,000 individuals over the next five years.

The Indian luxury customer has matured, said Darshan Mehta, managing director, RBL, while announcing a long-term franchise agreement with global luxury brand Balenciaga in August this year.

Tahiliani, too, believes that Indian shoppers are ready to step up to better brands. “They are getting to understand quality and that is a game changer. Your body must tell you that luxury is not a logo," he says.

The ultra-wealthy aside, BCG’s Singhi says even individuals with an annual income of 20 lakh and more, make for a potential consumer base. Their share of consumption has been growing at a “disproportionate" pace, he says. While they may not drop big money on the priciest bags, they prefer to start with smaller indulgences such as luxury perfumes, cosmetics and ready-to-wear apparel.

Demand vs supply

The choice is wider now, agrees Megha D but the New Delhi-based marketing executive feels India is still no match for what the west offers. “I prefer to buy high-end goods abroad as it helps save tax and I get more options," she says, while also revealing that she bought a Kate Spade and Tory Burch locally. Both brands are available in India through RBL, and also retail on luxury websites like Tata Cliq Luxury and Ajio Luxe.

Singhi says the appetite for consumption can be stoked if consumers have options to shop locally. “Earlier the price disparity in luxury brands across different markets was significantly high, say about 25-35%. Over time, there has been some equalization," he says, adding that while India may not mirror China, one can learn from it. “Rapid urbanization in China led to luxury stores opening beyond major cities. The China experience shows that supply creates its own demand. In India, there is demand but some supply-side issues prevent scale-up of that demand. Feeding that real estate is what one needs," Singhi says.

Renjhen begs to differ, arguing that demand is limited and opening multiple stores for more high-end luxury brands like Tiffany or Balenciaga could pose a challenge. While the jury is still out on this and the rich continue to jet abroad to shop, the two retailers are hoping to close the gap with multi-brand luxury concept stores. ABFRL’s The Collective and RBL’s White Crow are a step in that direction.

White Crow offers a variety of brands such as Superdry, Salvatore Ferragamo, Scotch & Soda, Adidas Originals, Brooks Brothers, Onitsuka Tiger, G-Star Raw, Steve Madden, Armani Exchange, Coach, Diesel and Replay. On the back of 821 stores and 1,263 shop-in-shops in India, RBL also announced the launch of premium fashion store chain Azorte.

Casting the net wide

RBL’s portfolio encompasses nearly 50 brands, including Armani Exchange, Bally, Burberry, Clarks, Coach, Diesel, Dune, EA7, Emporio Armani, Giorgio Armani, Hamleys, Hugo Boss, Hunkemoller, Iconix, Jimmy Choo, Kate Spade New York, Manish Malhotra, Michael Kors, Mothercare, Muji and Pottery Barn. “RBL has this hunting team or business development team, mandated to scout for new brands across global apparel and food services," says a senior retail executive, on condition of anonymity. But he, too, concurs with Renjhen that the demand at the upper end of the market is still limited.

When it comes to mid-to-premium brands where shoppers are happy to buy and experiment across price points, however, a bigger bouquet of brands helps. Reliance is building platforms such as Ajio, JioMart as well as malls including Jio World Drive in Mumbai. Reliance Retail operates value formats such as Reliance Trends and Reliance Centro (formerly Future Group’s Central). Also, through a joint venture with British retailer Marks and Spencer, it operates the latter’s stores in the country.

While ABFRL’s portfolio is more broad-based, RBL’s is larger as it partners with bridge-to-luxury and super premium international brands across categories such as fashion, accessories and kids. Reliance Retail’s acquisition spree over the years has been built on a three-pronged framework of entering white spaces, strengthening supply chain and logistics and deploying technology, analysts at Jefferies said in a 2021 report.

Aditya Birla Group, too, is upping the game. In June, it announced a new digital venture, TMRW, that will acquire as well as incubate over 30 brands in the fashion and lifestyle space and enable the next phase of direct to consumer business over the next three years.

Big gets bigger

What is clear is that a consolidation is emerging in the retail industry. In effect, the big are becoming bigger. Acquisitions became much easier in a post-pandemic scenario where the balance sheets of several small to mid-sized retailers were strained.

The bottom line, as Renjhen argues, is that consumption in India is fast increasing. Both companies’ investments are aligned with this growth story. “India is consuming better and the brand awareness is there. The infrastructure is slowly getting built. As the markets improve in terms of consumption, the customers want to buy bigger and better, increasing the market size," he says. And it’s just what the two retailers seem to be doing.

Elsewhere in Mint

In Opinion, Deepak Nayyar argues US Fed’s intended solution could be worse than the problem. Trivikraman Thampy says overtaxing online gaming industry will favour grey operators. Why did so many Big Tech CEOs grow up in India? Jaspreet Bindra answers. 

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Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Updated: 20 Mar 2023, 01:57 PM IST
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