Invite Investment

To cash in on global interest in the Indian market, we need to relax sourcing restrictions in single-brand retail for luxury goods in India.

- Kanika Premnarayen

In 2016, tech enthusiasts were in for a pleasant surprise as Apple applied to the Department of Industrial Policy and Promotion (DIPP), seeking permission to set-up single brand retail stores in India. The application was in accordance with the Government of India’s (GoI) relaxation of the Consolidated Foreign Direct Investment Policy (FDI Policy), which dictates single-brand retail norms in India.

Apple’s CEO Tim Cook recognised the country’s potential for tech goods, and said that India, one of the fastest growing economies, featured in Apple’s global business strategy. While the Republic of China continues to be Apple’s choice of destination for its production line, for its cheap labour and sourcing, Cook’s admission of India as a robust and recognised market for Apple products played right into the hands of the GoI, which has been pushing Make In India and trying to woo foreign investors.

While India has been a market that has welcomed foreign brands with open arms, more so since the liberalisation of the early 1990s, luxury product manufacturers have, arguably, had their apprehensions about the Indian market, choosing to enter the country with strategic local partners or distributors rather than by way of an all-out investment into the economy.

Despite repeated reassurances from the GoI, luxury brands have chosen the franchise, distributorship or joint venture routes to target India’s ever-growing appetite for luxury retail. Under the franchise/ distributorship model, the foreign brand enters into an arrangement with an Indian partner; the Indian partner pays a fee to the foreign brand and invests in marketing and launching it in India.

Media reports mention that Gap Inc, Aeropostale Inc, Desigual, Rider and Ipanema have entered India through the franchise model.