Asia’s third largest economy growing at a rate of 7% and home to over 200.000 millionaires, India is one of the toughest luxury markets in the world. In my view, the lack of suitable luxury retail spaces and the restrictions on direct foreign investment are the two most important factors which are hindering the development of India’s luxury market. India’s largest cities lack suitable street retail locations and creating shopping streets with an appropriate environment, in terms of neighbourhood, cleanliness and security is a fantasy which will never become reality, at least not in the next decade.
Recently, French luxury house HERMES opened a 3.000 sqf stand alone store in Mumbai, being thus the first international brand to open a street level store. With the occasion of the openiing, the company’s regional executive stressed that luxury stores should come out of malls and hotel galleries and open in the street. I beg to difer with this approach! Hermes is a brand in a league of its own, which has always had a different approach to international expansion, both in the selection criteria and the type of real estate, always standing out among other international luxury brands. I would say, Hermes is probably the only major international luxury brand which can afford to open a ”destination location” such as the recent opening in Mumbai.
How would luxury retail improve if, let’s say Vuitton would open a street location in one side of Mumbai, Chanel and Prada in different areas? Customers would have to hassle through Mumbai’s traffic jams and spend hours from one location to the other one. Presently luxury stores are scattered around at different locations, yet within shrt distances, i.e. the shopping galleries at TAJ and OBEROI are quite close. If the executive from Hermes meant suggesting that other brands should open in the area where they opened, that seems almost impossible, given the area is rife with banks. I wonder how many of the international brands would afford to buy or lease a location in this area and still make a profit ?
The second most important challenge in India’s luxury market is the legislation which limits direct foreign investment, international companies being obliged to form a joint venture company with a local partner to be able to operate in India. That is why, most of the international luxury brands had no other choice but to accept to operate through a local partner. Following disappointing performance, some of the major international luxury brands, such as Gucci, Armani or Burberry have terminated joint venture with major retail companies and have instead formed a company, still with a local enity, as a formality, and operating directly. However, the majority of the brands such as Zegna, Canali, Salvatore Ferragamo, Jimmy Choo, Brioni etc continue to operate through franchising with one of the local major luxury retailers: Genesis, Reliance, Blue Clothing and DLF.
Joggling with several brands, most of the local luxury retails have been unable to ensure a high quality of customer service, similar to the international locations of the respective brands. Their lack of expertize and experience in buying also resulted in an unsuitable representation of the collections of the respective brands, wealthy Indian consumers finding a limited range of products as well as a lack of selection in sizes. The fact that taxation leads to prices of luxury goods in India to be at least 20 or 25% higher is an important aspect, however not as crucial as customer service and buying expertise.
That is why, to compare India to China is irrelevant ! Why not look at Russia where still prices of luxury goods are at least 30% higher than in Western Europe, yet Russians buy locally? Russia transitioned in the past 5 years from multi-brand and franchised distribution to directly operated distribution, most major internationa brand setting up representative offices in the country’s capital. This has translated into luxury brands being able to provide a similar customer experience and product selection similar to Western markets. Given the increasing travel costs, many Russians, who used to make shopping trips, now prefer to buy locally. An important segment of Russians still buy abroad, but mostly during holidays and theyr buying patterns and preferences are different.
When analyzing the Indian luxury market, one must also be aware that luxury brands in India will not necessarily attract the top Indian billionaires, the least those who are also well known. The fact that business media highlights cases of high profile billionaires shopping abroad does not mean that the Indian luxury market is failing. The top billionaires will most likely continue to shop abroad, looking for tailor made or limited edition exceptional pieces, most of their piers enjoying most of their lifestyle in the major capitals of the world.
International luxury brands must understand that, despite its size, India cannot be treated similarly with other large markets such as China. India has a huge cultural heritage in clothing, jewellery and accessories dating back centuries, with very high quality manufacturing and raw materials as well as original design. More and more luxury brands have recognized the importance of creating Indian inspired items, such as limited collections to show connectivity with the taste and lifestyle of the locals. It is, in a way, showing respect towards India’s cultural hertage and traditions.
Hermes announced the creation of a saris made in France which will be exclusively available in India. A matching blouse could be made to measure at the Mumbai stire at an additional cost.
Luxury house Bottega Veneta recently launched its limited-edition “Knot India” clutch, which blends conventional embroidery with a signature Bottega weave and has “India” embossed on a sterling plate inside, just below “Made in Italy.” Italian luxury men’s fashion brand Canali has designed a “bandhgala” (closed neck) jacket specifically for the Indian market, inspired by jackets worn by India’s first prime minister, Jawaharlal Nehru.
Showing respect and understanding of the local culture is the only way international luxury jewellery brands will succeed in India, a country known for its high end jewellery, especially gold and diamonds. Emphasizing the use of local precious metals and stones could also be an additional factor to break through on the Indian market. One of the sectors which India has never had any tradition is watches, hence the huge success of luxury watches in India.
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