Feedback
A pioneer B2B media and publication platform connecting with Fashion Brands & Retail in India

Brands take the franchise route to counter sourcing norms

Brands take the franchise route to counter sourcing norms 001Before January 2018, India allowed 49 per cent FDI in single brand retail trading (SBRT) under the automatic route. Funds beyond this limit, up to 100 per cent, required government approval. However, the government, with effect from January 2018, has allowed 100 per cent FDI in SBRT through the automatic route that does not require any approval. The FDI policy has laid down certain conditions that state that the sold products need to be of a single brand and they need to be sold under the same brand internationally.

SBRT covers products of non-resident entities only, be the owner of the brand or otherwise, either directly or through a legally tenable agreement executed between the Indian company adopting SBRT and the brand owner. For proposals involving foreign investment beyond 51 per cent, 30 per cent of the value of the goods needs to be sourced in India. Such an Indian entity is also allowed to sell through an e-commerce platform.

Brands prefer local franchise, distributors over SBRT

Although foreign investment in SBRT is permitted in India forBrands take the franchise route to counter sourcing norms 002 the last few years, most overseas brands are still sold through local franchises and distributors. For instance, Genesis Luxury Fashion, a marketing and distribution company of Reliance Group, has brought several global iconic brands, such as Bottega Veneta, Giorgio Armani, Hugo Boss, Emporio Armani, Jimmy Choo, Paul Smith, Tumi, Burberry and others, in India.

The restrictions and conditions for retail trading under the FDI policy are forcing foreign companies to opt for the franchise route to enter India. Under this route, a global retailer partners with an Indian company which pays a fee to the brand owner besides marketing and launching it in India. In the recent past, Gap, Aeropostale and Ipanema are few of the brands that have entered India through franchise agreements.

Dealing with challenge of local sourcing

Post-January 2018, Indian subsidiaries of global retailers such as Apple, that have an FDI of more than 51 per cent, do not require a history of local sourcing for upto three years if it is undertaking SBRT of products. This requirement of local sourcing was challenging for entities trading in high-technology products as few brand-owners manufacture and trade in products made with materials not sourced in India due to various factors and constraints. The government has formed a committee to determine if this product qualifies as having ‘state-of-the-art’ and ‘cutting-edge’ technology.

Another way of dealing with this standard requirement for mandatory sourcing is to permit up to 51 per cent and find a local partner for the remaining 49 per cent. This structure relieves the Indian brands from the burden of local sourcing as the majority investment comes from a foreign brand-owner. Overall, there are certain key areas such as sourcing norms in cases of high-tech products retailers, as well as the question of sub-brands, that need to be addressed. Until then, foreign brand owners prefer to sell their products through the franchise or distribution route.

LATEST TOP NEWS
  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10

Quality products, retail expansion helps Mufti balance fashion and comfort

Quality products, retail expansion helps Mufti balance fashion and comfort

Among the popular casualwear brands in India, Mufti thrives on the basic principle of novelty in menswear fashion. The brand, catering to Indian men strikes the right balance between fashion... Read more

Neva to reclaim its position through new collections, retail expansion

Neva to reclaim its position through new collections, retail expansion

“Our new Spring/Summer Collection 2018-19 is not only high on style but also a treat for quality conscious customer,” says Anuj Jain, AVP-Advertising, Neva. “The collection provides clothes for all... Read more

Kids brand Kittens plans to go global

Kids brand Kittens plans to go global

“The sky is the limit for us,” says Rachna Shah, Partner, JS Clothing Company, owner of the kids wear brand Kittens. The brand, after 25 years of fruitful journey in... Read more

Woodland foresees positive growth ahead, plans to continue retail expansion

Woodland foresees positive growth ahead, plans to continue retail expansion

As the weather warms up, Woodland is ready with its Spring/Summer 2019 collections that will hit stores soon. “The fabrics that will rule this season include: suede, canvas, blends, etc.... Read more

Transforming Retail Awards: Showcases the potential of Indian retail industry

Transforming Retail Awards: Showcases the potential of Indian retail industry

“There are many who are yet to understand the potential of the Indian retail industry that we seek to unleash,” said Smriti Zubin Irani, Union Minister of Textiles speaking at... Read more

CMAI’s India Size Project to benefit manufacturers and consumers alike

CMAI’s India Size Project to benefit manufacturers and consumers alike

CMAI recently launched the India Size Project that aims to study Indian body types to create an Indian size chart. “The project is not only an emblem but a resolve... Read more

Raisin aims for a holistic experience with retail expansion on the cards

Raisin aims for a holistic experience with retail expansion on the cards

Staying close to its core strength of providing exceptionally comfortable fashion, Raisin, in the upcoming summer season, plans to introduce a new collection ‘You Are Hue’ Spring/Summer ’19. “True to... Read more

Not yet ready for summer, Tom Tailor launches an in-between range

Not yet ready for summer, Tom Tailor launches an in-between range

All collections of Tom Tailor exude individuality and a sense of style, and skillfully combine classic pieces with seasonal fashion trends. The brand for the upcoming season is launching two... Read more

Duke’s launches S/S ’19 collection, to foray into new segments

Duke’s launches S/S ’19 collection, to foray into new segments

Kuntal Raj Jain, Director, Duke believes “innovation is most important in the fashion industry.” With a style statement that says, ‘clean, chic and vibrant attitude’ for the not so patient... Read more

Numero Uno celebrates individuality with new collection

Numero Uno celebrates individuality with new collection

The S/S’19 collection of Numero Uno offers an interesting mix of natural and sustainable fabrics alongwith technology-driven sustainable wash. The collection comprises ‘One Glass Water Jeans’, and a new collection... Read more

MOST POPULAR NEWS
Go to top