The company, which clocked ₹5,181.14 crore in sales in the year ended 31 March 2021, recently acquired a 51% stake in designer Masaba Gupta’s firm, besides investing in Sabyasachi and Tarun Tahiliani earlier. In an interview, Ashish Dikshit, managing director of ABFRL, said the company could invest in and build as many as 30 internet-first brands in the next 3-5 years. Edited excerpts:
Could you elaborate on the direct-to-consumer business you are entering?
Over the last 4-5 years, we have been expanding our portfolio in spaces where either we had low or no presence. Most of it was done through expansion initially into youth fashion, subsequently into inner-wear, followed by all the expansion in the ethnic wear market.
These are spaces we got to play because there’s a large, evolving market, and our original business had a limited presence. One of the things that we have been witnessing, and this is not just for fashion but across consumer categories, is the rapid growth of digitally native brands. On the demand side, clearly, there’s a whole bunch of digital-first consumers, they’re more comfortable shopping online, and they’re looking for products there. On the supply side, a large number of entrepreneurs have started to identify these particularly smaller niches, which big brands or big companies are slower to get to. As both demand and supply-side action are happening, brands are getting built that are new-age in terms of their go-to-market, business model, consumer strategy, and product proposition.
In that sense, it’s an extension of our strategy to be a very large player in the branded segments for fashion and related discretionary categories, whether it’s home accessories or other lifestyle products.
Our plan is over the next 12-15 months, perhaps look at 8-10 brands which we invest in, also launch a couple of brands organically. Because as we started studying the market, we also see spaces where we could launch digital-first brands. But the primary route will be to invest in smart entrepreneurs at their early stage as long as we see something distinctive around it. And over time, grow this portfolio, maybe in 3-5 years, into 25–30 brands and create a very new portfolio of brands.
How much do you plan to invest in building these D2C brands? What kind of equity will you buy?
We are evaluating and thinking of brands (that are) anything between ₹10 crore to ₹100 crore (in revenue)—we’ll have to evaluate a large number of brands to come to the ones we really like to invest in. Clearly, our initial investment will be a significant majority investment. We want to make sure that the entrepreneur has enough motivation to build this business because a lot of it is built around their entrepreneurship and their insights. So in the first stage, we’ll probably invest ourselves through our resources, and subsequently, as the scale grows, we will look out to raise capital on that.
Does that mean ABFRL will open a fashion marketplace?
No. We have thought about it. We don’t want to build our own marketplace. That’s not our strategy. We are deeply invested in making our own brands online. So even our existing brands are fairly large on e-commerce today. We are the single largest partner with most of the e-commerce platforms. These brands have their own e-commerce strategy. And that’s our primary play. This is not as much about e-commerce, but the ability to build new-age brands, as both consumers move online and therefore new business models come in.
How is this different from your investments in the large Indian designer labels?
It would help if you looked at this as a continuum of our strategy. Our strategy is to build very strong consumer brands in all the operating spaces we want to play in. Till three to four years back, those spaces were more offline. Now we are finding a whole set of digitally native brands with slightly different operating models, and maybe seven to eight years later, many of these brands will be interesting brands. So many of these brands could be ethnic wear; some could be casual wear, some could be activewear. The broad space of fashion, via apparel and beyond, is really what we’d look at. We look at home, beauty and, other lifestyle accessories.
How much will the D2C brands contribute to your business in the future?
If you look at the whole thing today with the lens of our brand portfolio, our ambition would be that five years from now, maybe 10-15% or at least double-digit share of our revenue should come from brands, which are digitally native, and online first. And that will be in line with how consumers are shopping.
Will ABFRL stitch more deals with home-grown designers or international brands?
I would say, never say never. But if you look at our portfolio, to my mind, we are largely covered. So the next big attention for us is really the direct-to-consumer brands.
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