If India’s Foreign Investment Board approves Sweden’s H & M’s plan to open 50 stores in the populous country, then the world’s second biggest apparel retailer will grow larger –and if all goes well, even more profitable.
A major incentive for approval is the $130 million H & M intends to spend in India to open their planned 50 wholly-owned stores.
“We view foreign investments as a source of technology, finance and means of creating gainful employment in the country,” said India’s Anand Sharma, Minister of Commerce, Industry and Textiles.
New more liberal government policies regarding foreign ventures are expected to attract global retailers which were previously reluctant to enter the Indian market.
Nevertheless, many major retailers have put a hold on their global expansion plans. H & M, however, is among the handful of firms still seeking to open new markets and expand foreign operations.
As of early May, H & M has not announced plans to backup its proposed Indian brick and mortar operations with an online presence, although that could change as H & M establishes its brand.
H & M’s chief competition in India will be Inditex’s Zara, tops in worldwide sales, with profitable stores in Delhi and Mumbai.
As international retailers contend with a lackluster global economy, consumer spending continues flat or is on the decline, prompting a pull-back in foreign activity, notably in Asia.
Retailers are also aware that not every major company in India has been successful. Even an iconic giant like U.S. firm Levi Strauss has yet to post a profit after operating after more than ten years in India.
So rather than pursue a strategy of global expansion, unlike H & M, retailers are now reportedly concentrating on integrating operations and beefing up sales channels.
One potential challenge for H & M in India is the climate. In some areas, including Mumbai, the temperature seldom if ever falls below 60. Consumers, therefore, will not be buying fashionable seasonal apparel such as woolen topcoats and faux furs, H & M items that sell briskly in colder climates.