PROBLEM: International brands entering the Indian market do not revise their marketing/positioning/pricing strategies in order to fit the Indian context.

Case in Point : Esprit

How can brands like Esprit be profitable and survive in a market like India?

History of the Brand

Founded in 1968 in San Francisco, USA, ESPRIT is a leading international lifestyle brand. Various product lines offer women's, men's and kids' apparel, bodywear, sportswear, shoes, accessories and other licensed products, including timewear, jewel, fragrance, bed & bath etc

under the Esprit label. The companyis headquartered in Hong Kong. About 80 percent of Esprit's revenue is from Europe.

The Group operates more than 835 directly managed retail stores worldwide and distributes its products via more than 15,000 wholesale locations around the globe. In September 27, 2011 Esprit Holdings Ltd. was valued at just $1.4 billion, a loss of more than 90 percent from a $20 billion valuation four years ago. According to Credit Suisse, Esprit's brand is valued at $3.4 billion. In February 2012 Esprit announced that it will close all retail stores in North America because they haven't been competitive in this market and have been losing money.

Entry in the Indian Market

Esprit had entered India in 2005 through a distribution deal with Madura Fashion and retail, Aditya Birla Group's lifestyle retailer. Madura Garments,

aiming to tap into the rapidly growing segment of premium retailing in India,

launches for the first time in India the international brand - ESPRIT. Madura

Garments, home to brands like Van Heusen, Allen Solly, Peter England, Louis

Philippe and SF Jeans has entered into a strategic tie up with the fast

growing brand ESPRIT with an objective of strengthening its brand portfolio

in key segments (women's segment / premium relaxed clothes segment /

accessories) and to capture the buoyancy in premium retail business in India.

Flaws: Poor Planning & Execution

The global retail giant exited India by the end of 2012. Company sources ad media speculation reveal that Esprit in India was suffering losses of about Rs 20-25 crore per annum, which made it unviable for the brand to remain in India.

Over-scaling of stores was the first flaw in their strategy. They opened at the most expensive malls and opened huge stores of 8000 to 10,000 sq ft. “You can’t build a huge business until you have deep pockets. Whenever you have partnership between an Indian company and a foreign brand, the Indian partner would not put money beyond a point,” says says Jaydeep Shetty, chief executive of fashion brand Mineral . Esprit had opened stores on Linking Road, a premium Mumbai high Street and in Select City Walk, a celebrated mall in Delhi among

Over emphasis on imports and high pricing also played a role in Esprit’s challenges in India. If you maintain global pricing, products will be out of reach of buyers given the high dollar prices. Pricing should suit the market the brand wants to operate in.

Consultants also point out the flaws in Esprit’s positioning. Though it was a

mid-market brand globally, in India it was at the premium end of the market

partly because of import duty. They didn’t position their brand very well in

India and banked on the fact that the name Esprit had internationally would

help them in India. “Esprit’s basic positioning is that of updated classic while

that of Zara and H&M are positioned as fast-fashion which is gaining

ground,” Shetty says.

ALTERNATIVES

Esprit had planned to revive its India business but backed off in view of the

increased competition from the new arrivals in the Indian markets such as

Zara, Forever21 and Vero Moda.

Shortly before the management’s decision to close operatons in India,

Madura, along with Esprit's German management, was looking to jointly

announce an ambitious 10 year business plan. The plan was to take the

brand into tier II towns, broaden its portfolio and operate multiple formats at

a time when a slew of international fast fashion brands like Zara, Forever 21

and Vero Moda entered the burgeoning Indian consumer market.

THE SOLUTION

The probable solution: “When you bring in a brand, you should source from

India itself. That will make a major difference,” adds Prashant Agarwal,

deputy managing director of Wazir Advisors, a retail consultant.

Pricing should suit the needs of the market the brands wants to cater to.

The AB group company said the reason for shuttering some stores in Bangalore, Mumbai, Delhi and Ludhiana was primarily due to these outlets being unprofitable. "The rentals of these stores did not justify the kind of business they were generating. That's why it made sense to migrate the business to malls as they are relatively more financially viable,"