Celebrity fashion brands in tie-ups with online platforms face uncertain future

By

Isabelle Crossley

Published
Jan 17, 2019

A number of celebrity fashion brands including HRX, All About You and Alia Bhatt for Jabong may have to change their business models due to the new foreign direct investment (FDI) policy due to take effect on February 1.

The future looks uncertain for some of India’s Bollywood celebrity backed brands as the Department of Industrial Policy and Promotion’s (DIPP’s) FDI policy clarification does not allow e-commerce platforms with FDI to sell brands in which they have a stake on that platform. A number of celebrity fashion brands have been created in collaboration with Myntra, Jabong, and Flipkart and, as Flipkart is now owned by the US-based business Walmart, it appears that the brands will no longer be eligible for sale on those platforms, according to a report from ET Bureau.

Alia Bhatt for Jabong is a collaboration between actress Alia Bhatt and Jabong, a subsidiary of Myntra and therefore Flipkart. As Jabong holds a stake in Bhatt’s clothing brand, according to ET Bureau sources, and is now foreign-owned, it appears to contravene FDI policy. A swift change of business plan is therefore expected before the policy deadline on February 1. Although there have been reports that Jabong had discontinued Bhatt’s line, ET Bureau found an ensemble by the brand for sale on the platform on January 16.

Bhatt is not the only celebrity with a clothing range on the line. Hrithik Roshan’s clothing brand HRX was created in collaboration with Myntra and has been expanding rapidly since its inception, recently branching out into new product categories but would also be in opposition to FDI norms come February 1. ET Bureau reported that Myntra has a controlling stake in HRX.

Saif Ali Khan launched the ethnic wear brand House of Pataudi on Myntra just a few months ago but may also have to rethink the brand as Myntra and Khan co-own the brand. Myntra, according to the sources, also has a stake in Deepika Padukone’s label All About You. However, there is an array of celebrity fashion brands that will be unaffected by the changes as they are not tied to a particular e-commerce platform. These include  Virat Kohli’s One8, Salman Khan’s Being Human, and Sonam Kapoor’s Rheson. The new FDI policy may indeed influence the way celebrities think about starting brands in future.

One way that Flipkart could circumvent the new policy would be to sell its stakes in its range of celebrity brands and private labels, ET Bureau reported, citing analysts. However, the close time frame could make this challenging and this would take away the benefits of private labels- their higher profit margins and reduced logistics’ costs. As private label fashion brands were a large part of both Flipkart and Amazon India’s growth strategies, the policy means an entire rethink of business strategy, especially in the fashion sector.