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What we have been witnessing since the pandemic began is the inevitable and impending manifestation of the LVMH, Kering & Estée Lauder’s of the Indian luxury fashion industry. The glass ceiling has been irrevocably broken now and though a few decades later from the west, the joyride of centupling their business has begun.
Before we dig into the how, why and why now of this puzzle, here’s a haute couture question. The top three luxury corporations in the world are LVMH ($37.5 Bn), Kering ($17.8 Bn) and Estee Lauder ($14.9 Bn). Which one of the brands below is not owned today by one of these three multinationals?
Gucci, Cartier, Balenciaga, Prada, Louis Vuitton, Bottega Veneta, Christian Dior, Givenchy, Marc Jacobs, Stella McCartney and Bobbi Brown.
Prada is the right answer whereas all the other luxury icons were bought over the years. And with Gucci at $15.6B, LV at $14.8B and Dior at $6.5B valuations, no one is complaining. Of course there are family-run legacy names like Chanel and Burberry but in a world of hundred global brands, a handful exceptions only prove the rule. India before now didn’t have a single luxury fashion label owned by a billion dollar firm.
India’s luxury market though, according to McKinsey, is estimated to grow from its current market value of $30B annually to more than $200B by 2030. The mammoth $50B billion Indian wedding market, often referred to as a ‘recession proof’ industry in a country where a wedding is still culturally the most prestigious event of a family. It didn’t change in 2008 recession or 2020 pandemic and it won't change now.
What has changed though is younger audiences desire to find and celebrate their individuality through homegrown fashion and food this decade.
The definition of luxury on the other hand has also evolved. Modern high end fashion has warmed itself to hoodies and sneakers; the antithesis of orthodox luxury. And fashion for the young rich isn’t legacy, you have to earn it season after season, deed after deed, making it easier for new talents around the world to be spotted and celebrated.
As of early 2022, Aditya Birla Fashion owns major stake in star independent labels like Sabyasachi, Tarun Tahiliani, Masaba and Shantanu & Nikhil while Ambani’s Reliance now has comfortable footing in Manish Malhotra, Ritu Kumar, Satya Paul and Raghavendra Rathore. These independent fashion houses have been dominantly present in the Bollywood film industry and were offered between $10M-60M for stakes between 30-60%.
Another half a dozen of such closures are to follow as early as next year. A great deal for these billion dollar Indian conglomerates planning to make a standalone empire globally of Indian designs in the next ten years. Half of them will survive to thrive the next fifty as the West unravels the serenity of another Indian gift beyond Yoga. The decade of slow Indian fashion acquired by conglomerates was long coming. Here's why:
Death of Elite Media Hub
Luxury marketing was strictly a top pyramid club with one on one relationships with magazines and news channel heads. Now no matter who you are, you have to consider more creative ways to reach your core audience in the digital space. Sabyasachi, Tahiliani and Malhotra can spend upward of $100K just on buying magazine covers and exhibition spaces during the wedding seasons. When was the last time you saw the beautiful Indian handiwork of these designers in Paris Fashion Week? Not a single label is a regular even after having such a big rich Indian diaspora across Europe. It’s not a creativity issue, it’s a return-on-investment issue for bootstrapped labels. Now add another million dollars to constantly create great digestible content and then run ads via every channel to reach, engage and convert in real time. Unfortunately, not even a possibility for independent Indian designers without big corporate backing. Especially when in a bidding war with their American and European counterparts for the same keywords and banner space, you need to be as rich as you’re creative. Celebrity collaborations, campaigns and media partnerships earlier used to be a barter deal for Indian designers, however the modern media landscape hardly allows it even for the very best. To endure economic, financial and cancel culture storms now and then while still elevating profits by the year end is no mean feat. From this vantage point, it’s more about survival than strategy in 2022.
Dilemma Of Distribution Channel
The pandemic made clear that to sustain and thrive, every company from FMCG to Luxury fashion, has to deliver far, wide and fast. Online luxury purchases are worth $58B in 2020 according to Bain & Co. and the new hot category everyone is jumping into but yet to tame. And contrary to popular belief, according to the Indian luxury ecommerce brand, Tata Cliq, 60% of their revenues are from smaller non-metro markets. Imagine Napa not San Francisco. Amazon hence is of course trying their best to keep their competitive advantage here too while globally players like Richemont and Alibaba are aggressively increasing their stakes on portals like FarFetch. That brings us to another question: Who gets the advantage, free banners and round the clock marketing of their products: Independent luxury designers or the corporate houses which have an alluring stake in them? Precisely what Reliance and Aditya Birla will do in India with Sabyasachi and Ritu Kumar. With a strong franchise in India, USA, UK and the Middle East, ABF has a network of over 2,700 stores across 750 cities in the country. Reliance Retail across categories has 12,000 retail stores in India and is the only player Amazon is afraid of in the online war. All of their prime real estate and the encompassing supply chain will be generously used to make these designers break boundaries they never imagined. The only challenge waiting for them all is to become Giorgio Armani, Emporio Armani and Armani Exchange at the same time without hurting either of their audiences.
In a nutshell with this scale of corporate investments also comes access to the best talent in the world, a big pool of capital to experiment as an artist and the ability to diversify extensively in both product line and market type at tenfold speed.
India’s slow fashion just got very fast.
