In the recent few months, the piqued interest of conglomerates taking significant stakes in the luxury and retail industry especially in luxury and retail is something unlikely. Here is how the conglomerates have been going with the stakes.
Reliance Retail has acquired a 52 percent stake in the luxury fashion brand Ritu Kumar which was its second investment within a week after acquiring a 40 percent minority stake in Manish Malhotra.
Equally wanting to firm its claws in the luxury and retail segment, Aditya Birla Fashion Retail Limited (ABFRL) in January 2021 took a 51 percent stake in bridal couture brand Sabyasachi followed by a 33 percent ownership in Tarun Tahiliani’s men’s ethnic wear range. Back in 2019, the retail conglomerate had acquired Finesse – an apparel brand from Shantanu and Nikhil.

This puts forward a question what is luring the conglomerates to own stakes in the luxury and retail industry?

Ethnic wear market: no more a blindspot for retail biggies

The total Indian ethnic wear market has a size of Rs 70,000 crore, according to Technopak in which almost 80-90 percent of the market is unorganised. Given its unorganised nature, several conglomerates found the ethnic wear market a tough nut to crack. But, in the past decade ethnic wear brands like W, Aurelia, Fab India, and Biba have changed the narrative by introducing an organised format. Today, the above mentioned have carved a niche for themselves by becoming Rs 1000 crore brands and have revealed the potential of the organised ethnic market to catch the eye of these majors.

Moreover, what makes it deliver profits, in the long run, is its strong resilience to apparel cycle fluctuations. As compared to western wear Indian traditional outfits such as sarees, kurtas, lehenga cholis, sherwanis, Kurtis, etc are hard to go obsolete in styles and are least impacted by global brands.

Aspiration for better lifestyles and high purchase power is also driving the migration of buyers from the unorganised to organised retail in tier II and tier IV market and the increased shopping from the e-commerce only brands.