The world’s largest premium beauty products retailer is entering the Indian retail market. Owned by the €20.3-billion (Rs 1.33-lakh-crore) Louis Vuitton Moet Hennessy (LVMH), the world’s leading luxury goods group, Sephora is a trailblazer, with 1250-plus retail stores in 25 countries. Although LVMH’s financial reports do not give stand-alone figures for Sephora, expert estimates suggest that the French firm has worldwide revenues of between €4.3 billion and €5 billion (Rs 28,260 crore and Rs32,860 crore). Sephora.com is also regarded as the world’s top beauty e-commerce platform.
The €12.3-billion (Rs 80,836 crore) AS Watson Group (part of the Hong Kong-based €32.5 billion - or Rs2.13-lakh-crore — Hutchinson Whampoa Group) is the world’s largest health-and-beauty (H&B) retailer with over 10,000 stores in 33 markets worldwide. It is among the top three in 25 of them. It is also the largest H&B retailer in Asia, with 2600-plus H&B stores and 900-plus pharmacies in ten Asian markets. (Well, H&B is a term for skincare, beauty, grooming, wellness and other personal care products but excluding prescription medicines)
Another global biggie, The Body Shop (TBS), addressed India's Health Care Franchise through a franchisee in 2006. With sales of about €800 million (Rs 5,258 crore) from 2660-plus stores in 60 countries, TBS is part of the €20-billion (Rs 1.3- lakh-crore) L’Oreal (the world’s largest beauty company). Today, TBS has 80 operating stores in 28 Indian cities and has a target of opening 150 stores by 2014.
So what has prompted Sephora to enter India even without foreign direct investment (FDI) being permitted in multi-brand retail? Undoubtedly, it has to be the size of the Indian H&B market and the pace at which it is growing.
The Indian H&B market (products and services combined) was estimated to be worth almost Rs1.73 trillion (€26.6 billion) in 2011. It represents 3.7% of India’s private consumption expenditure of Rs46.7 trillion. The US market was estimated to be €78 billion (Rs 5.12 lakh crore) last year. On a per capita basis, consumption of H&B products and services in India is 8.5% of that in the US, while our per capita income is 7.5% of the US.
With an annual growth rate of almost 16%, the Indian H&B market will be worth Rs3.57 trillion (€54.9 billion) in five years. The organised sector accounts for Rs134 billion or just below 8% of the business. This is the very reason that many global research agencies such as Euromonitor and Mintel have gone horribly wrong in estimating the size of the Indian market. They haven’t taken into account facts like slum-dwellers in Greater Mumbai consuming Rs7.9 billion worth of H&B products alone.
The rich contribute about Rs320 billion (18.5% of the market) and the upper middle class about Rs414 billion (23.9% of the market). The middle class constitutes the largest chunk of the market at almost 35%. Consumption by men accounts for about 32% of the total market, or about Rs554 billion (€28.5 billion).
So what exactly are Indians spending on? It’s not just kajal (kohl paste) anymore! About Rs259 billion (15% of the market) is spent on smelling good, making fragrances (including deodorants) the single largest sub-category. Globally, fragrances account for 15.5% of the total market, so the Indian market for fragrances has caught on.In this segment, the richest 24.3% of Indians consume 98.4% of the products. Around 35% of fragrances sold in India (by value) are either fake or smuggled. Quite a large percentage also comprises products bought while traveling abroad.
Beauty services like haircuts, pedicures, facials, waxing and other treatments delivered at salons alone (excluding treatments at spas) is the second largest sub category at Rs238 billion (13.8% of the total market). Another Rs222 billion (12.8% of the market) is spent on cleansing, including soaps, facial cleansers, shower gels, face scrubs, body scrubs. Colour cosmetics constitute about Rs208 billion, shaving (hardware and software) accounts for about Rs128 billion, shampoos about Rs116 billion, oral care about Rs113 billion, hair oils about Rs110 billion and hair colourants about Rs90 billion. No wonder you have salon beauty franchises opening across India.
Was the Indian H&B market always so big? It has grown 20-22% per annum in the last five years. So the market was only worth about Rs670 billion (€10.3 billion) in 2006, but it was still large enough to attract The Body Shop back then.
Source: DNA March 7, 2012, Amit Bagaria: Chairman of Asipac, India’s leading mall development managers and retail research consultants, and founder of Men & Boys, Asia’s largest chain of retail stores for men’s skincare and grooming products.
Tags: Sephora, Sephora Franchise, Watson Group, Beauty Franchise, The Body shop franchise,TBS franchise, L'oreal Franchise, salon franchise,
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