Though Germany has witnessed takeovers of major German corporations by big Indian conglomerates - India's Reliance Industries' acquisition of German polyester fiber manufacturing group Trevira five years back comes to mind - Germany's apparel industry is now witnessing takeover bids by even smaller and lesser-known Indian companies.
In one recent case, a small Indian apparel importing company, Techno Lifestyle GmbH, based in Willich, near Duesseldorf, has taken over 28 stores from the financially troubled 43-store chain Wehmeyer, an associate company of the large German chain store Karstadt.
The man behind the Wehmeyer takeover is Rajive Ranjan, Techno Lifestyle's managing director, who said his company was impressed by Wehmeyer's concept, which offers mid-priced fashion apparel for the middle class, including private labels as well as popular brands such as Esprit, Lerros and s.Oliver.
Because of the terms of the takeover agreement, Ranjan declined to disclose the purchase price or the source of financing, but said he would be investing between 15 million and 20 million euros in the business within the next two years.
Citing "positive synergies" between Wehmeyer and Techno Lifestyle, Ranjan noted that the latter's extensive apparel sourcing experience in Asia would extend Wehmeyer's sourcing capabilities, while in turn accelerating the ability for both companies to source directly with apparel vendors. Techno Lifestyle supplies private-label product to leading retailers including Wal-Mart and Germany's Metro and Kaufhof.
However, skeptics within the German clothing industry wonder if such a large buyout was a prudent move, particularly at a time when German consumers are tightening their belts as a result of the country's rising unemployment and a generally rough economy. The country's apparel sector has been particularly hard hit.
Acknowledging the severe economic crisis in Germany, Ranjan said that those companies that have strong "core competencies" will survive and grow after the recession is over.
He points out that the company has taken over "only the profitable stores," and that, as part of its strategy to turn around the sagging fortunes of Wehmeyer, it has converted to an incentive-driven salary structure for 500 of its employees - a "revolutionary" move for a German company, he says. The company has retained 500 of the 982 employees that were part of the buyout, and is in the process of bringing in a new group of Indian managers.
Additionally, Ranjan says, the company plans to redouble its focus on its customers, particularly those in the lower-middle and middle-class brackets, while focusing production on its most profitable segments, and further improving profit margin through direct sourcing.
Ranjan expects to double the $3 million in products it currently sources from India. He predicts that India-made blouses, men's shirts and other garments will be popular with Wehmeyer's customer base.
Asked whether a small entrepreneur could surmount the huge challenges that lie before him, Ranjan responded that he is "100 percent convinced" that he is on the right track.
He is also toying with the idea of setting up Wehmeyer clothing stores in India, where, despite the economic slowdown, fashion retailing is thought to have a "bright future," with its increasingly prosperous middle class. Moving into the India market is extremely difficult, however, because of the many strict government restrictions surrounding the retail sector in that country.
Still, citing a study by global management consulting firm A.T. Kearney, Ranjan notes that India is the third most attractive market destination for apparel retailers after Brazil and China.
Manik Mehta is a free-lance business writer specializing in textiles and apparel, fashion, globalization and emerging markets.