U.S. Fashion's Passage to India
The opening of U.S. designer Tracy Reese's first store in Manhattan's oh-so-trendy meatpacking district drew dozens of luminaries from across the fashion world. Anna Wintour of Vogue rubbed shoulders with designers Nicole Miller and Rachel Roy, style guru Andre Leon Talley, actress Elizabeth Rohm, and Om Bathija. Om, um, who?
He's the Indian-born financier who, with Bombay-based partner Vijay Aggarwal, owns 70% of Reese's company, TR Designs. "Our strengths were complementary," says Bathija. "She had design skills, a great product, and presence but no infrastructure. We didn't have design or marketing sensibility but had the infrastructure, administrative skills, and financial means to support her." Expect to see people like Bathija at a lot more fashion shindigs.
Reese's is one of a growing number of high-end U.S. apparel and textile brands backed or owned outright by Indian entrepreneurs. Bombay's Texport Garments holds a majority share in men's shirtmaker Robert Graham. Haresh Tharani, an Indian-born financier now living in New York City, bought the Bill Blass brand in 1999. And in January, Indian textile maker GHCL paid $18.5 million for Virginia-based linens producer Dan River.
The reason for the acquisitions is simple: Indian textile entrepreneurs already do much of the manufacturing for such companies, so acquiring the brands themselves is a natural next step. It works for both sides, helping U.S. companies survive the onslaught of Chinese-made goods and enabling the Indians to obtain established brand names, experienced creative teams, and strong marketing and distribution in the U.S. and Europe.
"We thought, why not focus on the top end and build brands in the West?" says Naren Goenka, chief executive of Texport. His company had been making shirts for Robert Graham for years, so when Graham's owner, Robert Stock, decided to go solo, he turned to Goenka as a partner. The shirts now sell for up to $250 apiece at 400 specialty retailers in the U.S. as well as such department stores as Bergdorf-Goodman, Nieman Marcus, and Bloomingdale's.
Such acquisitions also help Indian textile and apparel companies better compete with Chinese rivals. China today controls 30% of the world apparel trade. Mexico has 9.5%, and India is a distant third, with 4%.
India's poor infrastructure has made it difficult for apparel makers to meet the tough delivery schedules required by mass-market retailers. By actually owning upscale brands, Indian companies guarantee work for their factories that specialize in smaller lots and in detail work such as intricate embroidery—perfect for startups and niche designers who want fewer, more exclusive pieces.
BED, BATH, & BOMBAY.
Reese's new line, Plenty, is made entirely in India, as is some of the Bill Blass couture, especially items with beading. Dan River will now outsource a chunk of its manufacturing to GHCL's India operations. "The Indians are trying to position themselves in a way the Chinese aren't, at the upper end of the business," says Peter Shay of New York private equity firm MMG Asia, which focuses on the global textile industry.
Ditto with the home furnishings business. India has grown into a big manufacturer of linens, especially for smaller lots. Bombay's Welspun India, which for the past five years has made higher-priced towels and sheets for brands such as Nautica, Fieldcrest Cannon, and Tommy Hilfiger, last year offered $70 million for the bankrupt Pillowtex, the largest U.S. home-furnishings manufacturer. Although Welspun fell short of the winning bid, the company is on the prowl for other U.S. deals.
"Retailers in the U.S. want to see an integrated offering," says Welspun chief executive Rajesh Mandawewala, "with the back end in Asia and the front end in the U.S." And that means more deals, says Venkat Ramaswamy, executive director of Bombay bank Edelweiss Capital. "Indian entrepreneurs are getting comfortable managing businesses overseas," he says. "Fashion is just following the trend the Indian tech industry set."