Luxury Retail in India

Luxury is no stranger to India, the land of the erstwhile maharajas known for their opulence and grandeur. The lavish lifestyle of hunting and polo was their birthright, and the only way you could be a part of the elite was to be born in to it; new money and the nouveau riche couldn’t get you the ticket to this exclusive circuit.  But there has been a paradigm shift with the IT revolution and the demands of the brain drain giving birth to a new class of wealthy global Indians; and luxury is no more a preserve of the elite.  Visit a shopping mall or a five star hotel, and you would notice guys wearing an Armani and Prada suit and flaunting a Rolex or Tag Heuer watches, or ladies with Gucci bags dangling from their shoulders carrying a whiff of the latest Chanel perfume. Luxury retail companies like Chanel, Gucci, LMVH, Emporio Armani, Valentino etc have their eyes on India as a potential luxury retail destination.  The Indian luxury market is growing at a rate of 24% per annum and is estimated to leap-frog from a 3.5 billion to 30 billion Dollar industry by 2015, making it the 12^th biggest in the world. Indian luxury retail constitutes about 20% of the total luxury market.

The Indian Luxury Consumer

Earlier a domain of the few with old money, Indian luxury is slowly opening its doors to the new age so-called rich and the famous, comprising of celebrities(actors, socialites, designers etc), CEOs, senior professionals in their thirties and forties, newbie entrepreneurs, prodigal sons returning home and the likes. This new breed of Indian luxury consumer is quickly on the rise, with the luxury space increasing from 1.6 million to 3 million household by 2010. On an average, affluent consumers spend around 4% (9 lakhs) of their total earning of 45 lakhs per annum on top luxury purchases like jewellery, clothing, digital accessories, timewear, cosmetics and skincare products.   Broadly, the Indian luxury consumers consists of the primary consumers who have experienced world class living and buy exclusive and select products and secondary consumers who buy  aspirational brands and are slowly moving towards the bridge segment in luxury retail.

Features of Indian Luxury Retail

The luxury retail market in India is showing great growth momentum in spite of the present global financial crisis. Though the market is small, it is growing at a rapid pace fuelled by a small but increasing number of consumers. Some of the positive features of luxury retail in India would be:

» Growing number of international brands entering the market (mostly through joint ventures) and100 percent FDI in single brand

» Growing exposure to world class luxury and fashion through fashion magazines, and Bollywood celebrities endorsing them to create hype

» Fashion designers putting India in the world fashion map, making it a fashion destination

» Fashion weeks generating awareness of luxury products with a global perspective

» Increase in brand awareness with favorable attitude towards luxury brands

» Consumers with old money with an European attitude, aficionados of prêt-e-porter looking for exclusive brands with low visibility

» An increasing bridge segment, progressing from aspirational brands to luxury products.

» Product choices for men consist of apparel while women prefer accessories and lard luxury items like watches.

Challenges of Luxury Retail in India

There is no denying the fact that India is heading towards a retail boom, however unlike the high end fashion capitals of the world like New York, Milan, Paris or London, this land of the Maharajas sadly has no high street worth mentioning. Availability of appropriate space is a priority for luxury retail, and the lack of such quality retail environment in India is the reason behind the top international brands choosing the exclusive ambience of deluxe five-star hotels than camping it out on the streets. Some of the challenges inhibiting the growth of luxury retail in India would be:

» Lack of high quality luxury retail environment, with its presence restricted to select hotels leading to low footfalls

» No modernized and dedicated luxury retail areas in protected areas like airports

» The high streets are unsuitable due to the absence of exclusive ambience demanded for luxury retail

» Prominent high streets like Connaught Place (Delhi) are cluttered and crowded, with a hot and humid climate

» High import duty that is absorbed by some retailers

» Increase in revenue sharing though rent is coming down

» High cost of setting up luxury stores

» Luxury stores finding it difficult to break even at the current sales density and rent

» Building scale is still a challenge as there are a few select cities with potentials for luxury retail

Indian Luxury Retail – Getting It Right

Luxury retail is growing at a frantic pace in India, but still there are a sizeable number of rich Indians not known to luxury, leaving lots of room for those trying to walk in the fray and join the rat race. However luxury retailer players should keep in mind certain considerations before they make their foray into the Indian Luxury retail sector such as;

» Long-term investment, not just as a flavor of the month, and continue investing in spite of short term losses

» Strong organization comprising of a committed local team

» Finding the right partner for joint ventures with a clean track record and competence in retail, consumer understanding and real estate (as space is a premium)

» Customization of the merchandise according to local flavor and body structure like more accessories for women and apparel for men

» Getting the merchandising right according to climate and consumer behavior like more brighter colour for women’s apparel

» Focusing on single season collections in most cities

As luxury sales weaken in the US and other developed nations, most of the top end luxury brands are looking out for new markets like India and China. Going by the latest drift in the luxury retail sector, India is chic and is one of the fastest growing markets after the Gulf. With the relentless pursuit for luxury, the affluent class with tremendous purchasing power are on the fast lane sapping up leading luxury brands like Christian Dior, Hermes, Cartier, Louis Vuitton, Armani, Versace and Dolce & Gabbana, which have all chosen India as the ‘happening luxury retail destination’.