In India, sell as the locals buy. Marks & Spencer is an example of yet another international player tailoring its offerings for the local market
The sheer size of the Indian market and to an extent its inflexibility is driving multinational companies to adapt, adjust and customise products for desi tastes, sensibilities and size. The latest to fall in line is Marks & Spencer (M&S) - the global clothing chain. After several years of near-empty stores and pricing products beyond the reach of the average middle-class buyer, the 126-year-old M&S has now reworked its local strategy to garner more business.
The launch of M&S was a page turner for India's retail industry. The exclusivity and the brand name made the elite a happy lot. But in a price-conscious nation like ours, did the clothing chain imagine that India would lap up its high-end products? The brand was not being perceived as a mid-market retailer as it is in the UK.
Over the past 2.5 years, the £9.5 billion shopping chain has been putting in tremendous effort to shake off its "exclusive and expensive" image to make itself more accessible to Indian shoppers. It was also determined to overcome the biggest hurdle to its growth in the country - the perception that its merchandise was highly expensive for its target audience.
The story changed when the former head of M&S India operations, Mark Ashman, realised that exclusivity and rich appeal is not going to get in the revenues. M&S' franchisee imported clothes from the UK, paid a high import duty (at over 50%) and housed the merchandise in the stores here, pushing up landed costs of its goods in India.
Mr Ashman tried to make M&S more accessible to Indians; he started with sourcing from India which cut costs of final products. The international fashion leader not only cut costs but also changed its trademark style of clothes to suit the Indian body type and mentality. M&S shirts donned a pocket for the first time ever in their design history and ladies' shirts became longer. The men's trouser too went in for minor merchandising changes to suit Indian men. The success of these design experiments has started a new trend.
M&S is now implementing similar changes in parts of Europe and China. "The tricky part was to prove that customers liked what we did and that this did not prove to be a risk to the brand," said an M&S executive, preferring anonymity.
Martin Jones, head of M&S India operations told Moneylife, "When we took over the business we took a call to source more products from the South Asian region. At the time just about a single-digit percentage of products were locally sourced. Now it is 42%. We intend to take it to 70% eventually."
The newly formed joint venture with Reliance Retail is a change in M&S entry strategy from the franchise model of the past. The 51:49 partnership between M&S and Reliance is likely to result in 50 new stores over the next five years in India, covering Tier-II and Tier-III cities as well.
While apparel will be its mainstay, it will continue with the existing categories such as toiletries, food and home-ware as new categories.
Retail expert Harminder Sahni, MD, Technopak said, "By forming a joint venture, M&S has shown its confidence in the Indian market. The fact that it has invested serious money goes to show that it wants to create value in this market. In any case, for a company of its size, it is not a good idea to exist as a franchise and it has taken the right step for itself in the long term."
With international retail giants tweaking their way to feed Indian tastes, it can be said that the Indian retail industry is looking up, finally.
M&S is not the first to adapt to India. It began with Indian MNCs from Nestle to Pepsi switching to 'hinglish'.
Sportswear major Reebok also realised the importance of coming up with affordable products for the Indian market. Earlier targeted at the high-spenders, Reebok started manufacturing shoes in the range of Rs300-Rs400 to make itself more accessible to Indian masses.
Can food be far behind? McDonald's is another successful example - of a brand which adjusted its products to Indian taste-buds. Even TV channel MTV had to go desi!
It does not boil down to just dropping the price on the tags. Indians prefer value-for-money - and even the biggest global conglomerates are finally learning the game.
New Delhi: Contrary to UK-based Cairn Energy Plc's claim that it does not need government approval for the sale of a stake in its India unit to Vedanta Resources, the country's top law officer has ruled that specific approvals are required for all 10 oil and gas properties changing hands, reports PTI.
The law ministry, as well as the Solicitor General of India (SGI) have opined that government approval is contractually required before a controlling stake in Cairn India, a company that operates the country's largest oilfield in Rajasthan, are sold off to Vedanta, highly placed sources said.
Cairn Energy, which is selling up to a 51% stake in Cairn India to Vedanta for up to $8.48 billion, has been selective in seeking government approval and had last month applied for formal approval for only seven non-producing exploration blocks.
It maintains that such consent was not required in the case of producing properties like the RJ-ON-90/1 block in Rajasthan, the Ravva oil and gas field in the eastern offshore and the CB/OS-2 gas field in the Cambay Basin, off the Gujarat coast, as they were awarded prior to the advent of the New Exploration Licensing Policy (NELP) in 1999.
Sources said the second highest law officer of the country, the SGI has also opined that the deal will trigger Oil and Natural Gas Corporation's (ONGC) pre-emption or right of first refusal (RoFR) to acquire its partner's stake in blocks where the state-owned oil and gas firm is a participant.
The state-owned firm is a 30%-50% partner in each of Cairn India's three producing properties, as well as some NELP blocks like KG-DWN-98/2 in the Krishna-Godavari Basin, where gas has been discovered.
As such, besides government approval, Cairn Energy would also need a no-objection certificate from partner ONGC for the sale of a majority stake in Cairn India to Vedanta.
Cairn Energy chief executive Bill Gammell had told PTI that ONGC's pre-emption rights would not be triggered as the Vedanta Resources deal was a corporate transaction involving the transfer of shares at the corporate level. Such rights, he said, would only have been triggered if it Cairn India was selling its assets to Vedanta.
ONGC has the remaining 30% in the Rajasthan block, which is at the centre of the Vedanta deal. The block, holding 6.5 billion barrels of reserves, currently produces 125,000 barrels per day of oil and is estimated to have the potential to produce 240,000 barrels of oil per day (12 million tonnes a year).
Sources said the SGI - whose opinion ONGC had sought after Cairn Energy flatly turned down the existence of any pre-emption rights in the way of its deal with Vedanta - cited the recent Supreme Court ruling in the Ambani gas dispute to state that all oil and gas fields in the country belong to the government and any change in their ownership have to be vetted by the government.