Eastern Opportunities

Fashionista notes with interest the growing trend for retailers to turn to emerging markets whilst trading conditions in the UK continue to be troublesome. As reported in Retail Week, Inditex has signed a deal to open stores in India in 2010. Local law prevents foreign holdings of more than 51 per cent in single brand retail, so Inditex has formed a joint venture partnership with Tata Group to open Zara stores in cities including New Delhi and Mumbai. Inditex will control 51 per cent of the venture, while Trent, a Tata Group company, will control the remaining 49 per cent.

Whilst this means that Inditex will have to share the upside, it also clearly provides an opportunity to mitigate any risk. Fashionista notes that whilst her man on the ground in Mumbai has greeted the news of Zara's impending arrival with polite interest, his wife is positively delighted!

Is online the way to succeed in 2009?

The BRC today reported that UK retail sales for January 2009 were up compared with January 2008 despite the economic crisis. While these figures were buoyed by food sales, with clothing and footwear in the poorer performing categories, online sales remained strong, up 19.2% from last year.

Fashionista suggests that online should be the focus of attention for fashion retailers this year.

While it is possible to build online business quickly with low barriers to entry, the story of Holly Tucker, founder of notonthehighstreet.com, as reported in the Times at the weekend, shows that sometimes the success can come too quickly.

Holly explains that despite large sales in the first year, the business nearly ran out of money after leaving it too late to get further investment: "The enormity of what we were doing led us to not keep our eye on the bottom line". Fortunately for Holly, she managed to raise further investment from selling a minority stake to a private-equity firm and subsequently from a deal with a venture capitalist, while retaining (along with her partner Sophie Cornish) a majority stake in the business.

As the landlords struggle to fill the high street, Fashionista expects more and more businesses to launch online. While the set up costs are relatively low, if the business takes off, make sure you leave enough time to secure the right sort of investor.

India's Fashionistas

Despite the global downturn which is hampering India's ambition to reach double digit growth, consumers' appetite for shopping is still clearly visible in the shiny newly built shopping malls spreading across the country. While organised retail is a relatively new phenomenon in India, the FT reports some commentators predicting that the Indian retail sector to grow to £450 billion within 6 years, putting it on a par with Italy. McKinsey predict that 300m shoppers per year will visit shopping malls within a similar time frame.

Although India is not for the fainthearted and there are still a number of restrictions that hinder foreign investment in retail in India - not least the requirement for any foreign investment to be in single brand - if the shine has come off retail in the UK for the foreseeable future, Fashionista suggests that retailers with global ambitions could do worse than look to India as a new growth market.

The development of India's dynamic and consumer retail sector and export opportunites for UK companies are the subject of UK Trade & Investment's event held on 27th January 2009 at which their report "The Retail Opportnunities in India" 2009 will be launched. See here for more information.