India took a while in establishing itself as a retail destination and a business friendly country and it has very recently leapfrogged 79 places from 142 to 63 in the World Bank’s ease of doing business rankings and while the ongoing pandemic definitely has had its effect on the country, India has continued to remain one of the favourite markets for many countries. If we go by the data from before Covid times, according to GlobalData, the Indian retail sector is expected to grow at a compound annual growth rate (CAGR) of 10.4 percent between 2018 and 2022. Furthermore, the country is constantly pushing itself to become one of the favourable markets for foreign brands. In that effect, the Ministry of Commerce of India has announced a slew of relaxation on FDI investment in single-brand retail, in order to encourage investments and to ultimately create employment opportunities and the measures being taken by the government sure is yielding results. India received US $ 2.73 billion of foreign investment in the month of August 2019 as compared to US $ 2.54 billion in the previous year.
Even as India is constantly putting in efforts to become a global economy, strengthening its trade ties with different countries, Japan has been truly fascinated by the growth potential of the fashion and lifestyle industry here and is rapidly cosying up to India. And while the Japanese brands are eyeing the Indian market, Indians too have caught the fancy of Japanese brands, Japanese inspired designs, lifestyle and even Japanese technology. So much so that contemporary clothing brand Superdry too has gained traction due to its vintage American and Japanese inspired graphics. A number of Japanese brands in the likes of Onitsuka Tiger, Miniso, Uniqlo, Wacoal, Muji, Usupso, Owndays, Kai Group, among others already have presence in India while many others are planning to enter this market in the coming months. And not only in the retail segment, but also automobiles, electrnics or other equipments, Japanese companies have been entering the country in herds. Sanjay Malhotra, Business Head - India, Owndays, says, “We are thrilled to be opening yet another outlet in India and our product has been loved by Indian youth and matured alike. The fact that we are even opening during the Covid environment shows that we are bullish about Indian market as we have been received exceptionally well in the country.”
With advancements in technology and digital space, licensing and merchandising has dynamically changed in India and now with a favourable policy for foreign companies, international brands are strategizing on India via licensing and this has further helped the industry evolve. According to a report, the size of the domestic licensing industry is about Rs. 4,000 crore, of which 80 per cent is ruled by characters and entertainment segment. According to a recent LIMA report, in terms of market size, entertainment licensing is valued at US $ 406 million, fashion licensing at US $ 594 million, and sports licensing at US $ 30 million. India has also managed to create great Indian IPs while also bringing global IPs within the country. Japanese characters like Hello Kitty by Sanrio Inc, Pokémon, Super Mario, Doraemon, among others have a huge fan base in India already.
Japan also introduced Indian audiences to anime, which is the Japanese form of ary produced keeping in mind the audience consisting of all age groups. While India grew a fascination towards the anime series like Beyblade, Doraemon, Pokemon, Dragon Ball, etc., the audience were unaware of the fact that these infact were anime and not cartoons. It took quite some time for most of India to distinguish anime from the regular cartoons but it still has a long way to go in the country. Interestingly, Variety reported that the viewership for the anime category on Netflix doubled across many regions in Asia and the world for the year 2020. Pokémon: Mewtwo Strikes Back – Evolution was the most beloved title in Malaysia, Singapore and India, while Thailand watched Howl’s Moving Castle, the Philippines preferred Weathering with You, Hong Kong and Indonesia turned to A Whisker Away, and Taiwan’s favorite was Demon Slayer: Kimetsu no Yaiba.
Furthermore, Japan based Nintendo’s Pokémon GO (developed and published by Niantic) broke all records after it was launched in 2016. It was the most downloaded, topped the most international charts, and grossed $100 million in a mere 20 days.
So, we see how India has and is continuously attracting Japanese companies to enter and explore the domestic market, but what really is facilitating the overall process? According to McKinsey FashionScope, India is expected to welcome more than 300 international brands in the next two years and a number of these brands are Japan- based. India is definitely taking the centre stage among the other Asian countries in terms of economic expansion. For one, Uniqlo which entered the Indian market in October 2019 expects India to outpace China and its home country in about a decade to become its largest market. Shantanu, Head of Marketing, Uniqlo India, asserts, “There are three components which fall in place right now. The first component is the consumer taste and evolution for accessibility of our philosophy; we are a very simple brand but offer high quality. Secondly, I think the Government policies have been a great enabler for us, so much so that we applied for entering India in January 2018, and within only 20 months, we are here with our first store. I don’t think there is a better example of ‘ease of doing business’ than this mammoth scale of operation. Also, the Government’s move to relax the FDI norms and to liberalise its single-brand retail policy will enable the company to accelerate its growth in India. All these components – our readiness, consumers’ readiness and the micro-macro economics – facilitated our entry to India. For Uniqlo, India is kind of No.1 in terms of strategic priority across the globe. India has a huge middle- class, growing consumption, economy which is growing fast and will continue to grow, extremely high quality talent and the kind of opportunity that India provides makes it a preferable location to have a presence in. In fact, in our endeavour to be No.1 apparel brand in the world, India is the key building block to achieve that goal.”
Furthermore, India and Japan have had close civilizational ties for over 1400 years and the collaboration between the two countries is spread over a wide range of areas. The influx of Japanese companies in India is only strengthening various sectors across the home country.
What will it take to sustain?
The economic relationship between Japan and India have steadily expanded and deepened over the recent years. The volume of trade has increased and direct investment from Japan to India has also increased drastically. Japan was the 4th largest investor for India in FY2019 and the Japanese private sector too is showing enormous interest in India and an impressive 1,454 Japanese companies have branches in India today. While there had been a boost in the relationship between the two countries under Japanese PM Shinzo Abe, his successor Prime Minister Suga Yoshihide is likely to continue with Abe’s policies, particularly in the international arena, which has come as a relief for companies in both these countries. With the current situation due to the ongoing pandemic, Suga is likely to focus on domestic issues and the region and retain Abe’s foreign policy.
It is worth noting here that Japan has been allowed to invest in the Andaman & Nicobar Islands and northeastern region of India which is a no-go area for other countries. This and many other factors have been a major push for the Japanese brands to enter India’s retail landscape and invest in the country.
Even as the advantages are as many and relationship is as cordial, there are disadvantages and challenges as well. India is an established market with a number of homegrown as well as international brands having already established their presence in the country. Therefore the Japanese brands, in order to sustain, need to invest in brand awareness, customer engagement and loyalty and offer what makes them different from what is already being offered in the domestic market. Muji’s spokesperson for India maintains, “Muji products vividly embody both our design methods and overall philosophy. Our products are a result of careful elimination and subtraction of gratuitous features and designs unrelated to function. Muji aspires modesty and plainness, with a deliberate pursuit of the pure and the ordinary to achieve the extraordinary.” Furthermore, India is a land of diverse population and this necessitates any international brand to curate their offering for this market and Uniqlo India has done just that with its India- specific collection of ‘Uniqlo Kurtas’ which better associate with its consumer group in the country.
Reducing demographic dividend of Japan has led to a lot of new companies in the country look out for new markets outside of Japan and India happens to be a land of opportunities for these firms. Indian government’s pragmatic thinking on FDI policies, etc., is also encouraging stakeholders to source their global procurement requirements from India, thereby giving boost to manufacturing within India as well along with retailing.