India Luxury Retail Market A Long Term-Bet_Value Partners
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India Luxury Retail Market A Long Term-Bet_Value Partners

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"India Luxury Retail Market: A Long Term-Bet", Value Partners' speech at the 2008 Milan Fashion Global Summit

"India Luxury Retail Market: A Long Term-Bet", Value Partners' speech at the 2008 Milan Fashion Global Summit

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India Luxury Retail Market A Long Term-Bet_Value Partners India Luxury Retail Market A Long Term-Bet_Value Partners Presentation Transcript

  • IND-MFFne-081119-LuFerr-P1 The information contained in this document belongs to Value Partners S.p.A and to the recipient of the document. The information is strictly linked to the oral comments which were made at its presentation, and may only be used by attendees of that presentation. Unauthorized copying, disclosure or distribution of the material in this document is strictly forbidden and may be unlawful. Luca Ferro, Managing Partner, Value Partners India Milan, 25th November 2008
  • IND-MFFne-081119-LuFerr-P2 ! Luxury market in India Expected CAGR (2008-13) 2007 100% = Euro 3.5 bn Luxury Retail Growth Luxury Services (Spas, Luxury hotels,...) Billion Euro 30% 25% 21% 2.4 33% Luxury Retail 17% 25% 0.8 Luxury 0.6 Assets (Cars, 62% luxury homes, Yatchs) 18% 2007 2008E 2013E • The luxury market in India is dominated by assets with retail commanding a small chunk of the total market • However, Luxury retail is showing a strong growth momentum despite the financial crisis compared to the slowdown in developed markets Source: ALTAGAMMA, Market reports, Value Partners Analysis 2
  • IND-MFFne-081119-LuFerr-P3 quot; quot;quot; #quot; quot;quot; Population by Income class; Millions of people CAGR 2007-12 •Primary consumers of luxury goods 1,203 1.3% •Exposed and aware of the world-class 3.7 13% living 1,117 1,115 Luxuriented 2.0 ( > USD 100K) 1.8 21.5 15% •Current focus on 9.3 10.7 luxury assets and… Future Potential (USD > 50K) •…aspirational brands (Guess, Tommy Hilfiger) Others 1,178 1% 1,104 1,104 •Moving towards (< USD 50K) ‘Bridge Segment’ in luxury retail 2007 2008E 2013E Source: EIU, NCAER, Market reports, News clippings, Value Partners Estimates 3
  • IND-MFFne-081119-LuFerr-P4 quot; quot;quot; NOT EXHAUSTIVE Apparel and accessories brands only 25 17** 8* Luxury brands New brands Luxury brands present in India entering in present in India (end 2005) 2006-08 (2008) Brands present ONLY Brands present MOSTLY through franchising through agreements joint ventures (NO FDI allowed) (51% FDI permitted) *Includes LV, Boss, Salvatore Ferragamo, Zegna,Moschino, … **Includes Giorgio Armani, Hermes, Brioni, Versace, Gucci, Armani Jeans, Bottega Veneta… 4
  • IND-MFFne-081119-LuFerr-P5 $ $ quot; quot;quot; Fashion Weeks • Two big fashionista gatherings - Wills Lifestyle India Fashion Week - Lakme India Fashion Week • Aim to make India a global fashion destination Indian Designers • Increasing visibility in the global fashion arena - Rina Dhaka’s creations appeared in Marie Claire and Vanity Fair - Anamika Khanna,Manish Arora showcase their work at the Paris Fashion Week Sabyasachi Manish Arora Tarun Tahiliani Rina Dhaka Mukherjee Fashion Magazines • Play an important role in generating awareness of luxury products from a global perspective • Face association: ‘Bollywood Celebrity endorsments’ to create hype 5
  • IND-MFFne-081119-LuFerr-P6 ! Consumer • Increasingly becoming brand conscious attitude • Indian consumer is always a value seeker (discounts ! ) Attitude • “Old money” consumers with inherited wealth are already luxuriented and are increasingly showing a “European attitude” towards luxury towards - Subtle / ‘Brand Invisibility’ : luxury is about “knowing, not showing” luxury goods - Exclusive designs and brands; afficionados of Prêt-à-Porter brands • “Newly Affluent” consumers are quickly orienting to the world of luxe, and are looking to showcase their arrival - Flamboyant / ‘Brand Visibility’ : “Have it , flaunt it !” attitude - Progressing from aspirational to luxury brands but mostly in the bridge and diffusion segments • Indian luxury consumer is very demanding and likes to be pampered (house visits, personal calls, ...) Product • Menswear in India is already westernised and therefore apparel is the primary luxury product choice among them choice - Within apparel executive wear dominates casual wear • However in Womenswear, traditional outfits like ‘sarees’ still dominate and Accessories (shoes, handbags,perfumes) & Hard Luxury (watches, jewellery,pens) are in high demand 6
  • IND-MFFne-081119-LuFerr-P7 $ #$ % & ' quot; quot;quot; Protected areas Shopping areas New urban areas e s tor all ts gM en t ee pin rtm r ts -st op pa or s gh Sh tel rp De Hi Ho Ai Getting off Breaking of the walls architectural barriers • No FDI allowed acting as a deterrent • Currently non-existent but for foreign players could be a future potential • Domestic players are evaluating the with better infrastructure opportunity • New / modernised airports • Accessories (perfumes, watches..) have dedicated retail areas are retailed in mainstream dept stores • Primary luxury retail • Do not offer the ambience • Recent phenomenon with destination in India: 80-90% and exclusivity desired by malls opening in Delhi of luxury retail POS the luxury customer (Emporio) and Bangalore (UB • Restrictive environment • Some multi-brand stores City) with limited footfalls and (Thanks, Kimaya, …) present • New malls planned in visual impact in Mumbai and Delhi Mumbai and Delhi 7
  • IND-MFFne-081119-LuFerr-P8 EXAMPLES IN ! $ $ # ! MUMBAI Grand Hyatt Trident Taj Mahal Brands Brands Brands • 6 monobrand stores • 7 monobrand stores • 7 monobrand stores • 10,000 sq mt dedicated to retail • 2,000 sq mt dedicated to retail • 3,000 sq mt dedicated to retail • Rentals of € 50-80 per sq mt • Rentals of € 250-300 per sq mt • Rentals of € 200-300 per sq mt 8
  • IND-MFFne-081119-LuFerr-P9 ! ( $ ! Promiment “Luxury streets” globally Prominent High streets in India 5th Avenue, Colaba New York Causeway, Mumbai Monte Napoleone, Connaught Place, Milan New Delhi • Destination for luxury customers: modern • Uninviting for the luxury customer: cluttered, ambience and atmosphere, good climate, “mixing overcrowded, “mixing with commoners”, with elite” unsuitable climate conditions (hot and humid !) 9
  • IND-MFFne-081119-LuFerr-P10 ! $ $ $ $ & ) ' UB City, Bangalore DLF Emporio, Delhi ‘Collection Mall’ Boss store in Exterior DLF Emporio Louis Vuitton Tods store in store at UB City DLF Emporio • 23 luxury international monobrand stores • 80 international luxury monobrand stores • 12,500 sq mt dedicated to retail • 32,000 sq mt dedicated to retail • Rentals of € 80-100 per sq mt per month • Rentals of € 120-150 per sq mt per month 10
  • IND-MFFne-081119-LuFerr-P11 ( MONO BRAND STORES IN ! MUMBAI HOTELS Euros, % of revenues Europe India • Low footfalls (10-15 per day) but a high Revenue 15,000 – 54,000 5,000 – 14,000 conversion rate (50-70%) per sq mt • Strong growth : 25-40% annually • High import duty which is absorbed by some COGS 35 – 40% 45 – 60% retailers Rent 10 – 20% 20 – 35% • Comparable to Europe but coming down and (per sq mt) (1,500 – 4,000) (1,000 – 3,000) revenue share model increasing Personnel 15 – 25% 8 – 12% • Lower salaries of sales personnel Margin • High cost of setting up stores (~ € 3000/sq.m!) 25 – 40% (-20) – 12% at store level • Store margin much lower than in Europe 11
  • IND-MFFne-081119-LuFerr-P12 ! $ $ $ & ' Delhi Cities Luxury ready cities Luxury ready by 2010-11 •80-100 mono-brand stores Luxury ready by 2015-20 •‘Political Capital’ of India •Luxury consumers: politicians, Chandigarh beauraucrats, businessmen & senior executives • Currently only 2 Mumbai luxury ready Jaipur cities compared •35-40 mono-brand stores Ahmedabad to 15 in China Kolkata •‘Commercial Capital’ and home of the movie industry Bollywood Surat • Opportunities in emerging cities Pune - 7 more in 2/3 •Luxury consumers: Filmstars, CEO’s and executives, socialites Hyderabad years - Another 4 in Bangalore 7/10 years Chennai •25 – 30 mono-brand stores •Currently untapped has huge •‘IT Capital’ of India with an elite potential with high income group of CEO’s and executives… Coimbatore and spending of consumers Kochi •…but, Luxury retail has not made •Luxury consumers: filmstars, an impact due to “prudent” politicians, businessmen spending attitude of consumers 12
  • IND-MFFne-081119-LuFerr-P13 ) # $ $ $ Key Success Factors Description • Treat the market as a long term opportunity and not as “the flavour of the month” Have a long term - - Be prepared to bear losses in the short-run and continue Commitment / investing investment view • Strong organizational commitment by assigning a senior manager to work with established local team • Partner with a reputed player that has a strong competence in - Retail - Consumer Understanding Find the right - Real estate partner • Track record of the partner in JVs with international players and a shared vision for the JV is critical • Customise the merchandising mix according to local flavor, body structure, climate, customer behavior,… Get the - “Single Season” collections in most cities merchandising right - More bright colours for womens apparel compared to Europe (customisation !) - More accessories for women - More executive wear rather casual wear for mens apparel 13
  • IND-MFFne-081119-LuFerr-P14 * www.valuepartners.com luca.ferro @valuepartners.com Milan London Rome Munich Mumbai Via G. Leopardi 32 Greencoat House Via di Porta Pinciana 1 Maximilianstrasse 35a 8°floor, C block 20123 Milan Francis Street 00187 Rome 80539 Munich - Germany Devchand House, Shiv Sagar Tel. +39 02 485 481 London Tel. +39 06 697 6481 Tel. +49 (0) 89 24218 445 Estate Fax +39 02 480 090 10 SW1P 1DH Fax +39 06 697 648 51 Fax +49 (0) 89 24218 200 Dr. Annie Besant Road Tel. +44 (0) 20 7630 1400 Worli, 400 018 Fax +44 (0) 20 7630 7011 Tel. +91 22 6611 9700 Fax +91 22 6611 9988 Beijing Buenos Aires Hong Kong Istanbul Tower A, Suite 1702, Alicia Moreau de Justo 550 - Room 2602, 26/F, Vicwood Sunplaza Vantone Centre 4 Piso Plaza, Dereboyu Sk. No:24 Maslak Jia 6 Chaoyangmenwai C1107AAL 199 Des Voeux Road. 34398 Istanbul – Turchia Avenue Buenos Aires - Argentina Central Hong Kong Tel. +90 212 276 98 86 100020 Beijing - People' s Tel. +54 11 4314 4222 Tel. + 852 2103 1000 Republic of China Fax +54 11 4314 6111 Fax + 852 2805 1310 Tel.: +86 10 5907 0616 Fax: +86 10 5907 0383 Dubai Sao Paulo Shanghai Singapore Sydney Business Central towers Rua Padre João Manuel 755 Fortune Gate office building, 7 Temasek Boulevard King Street Wharf, Suite 302 Suite 1304A 1°e 2°andares - cj. 11, 12 e Unit 02, 25/F Suntec Tower One #26-04 45 Lime Street Sheikh Zayed Road 21 1701 Beijing Rd (W) 038987 Sydney NSW 2000 Dubai Media City Cerqueria Cesar 200040 Tel. +65 6820 3388 Australia UAE San Paolo - Brasile Tel. +86 21 6132 4230 Fax +65 6820 3389 Tel. +61 2 9279 0072 Tel. +971 50 788 0187 CEP 01411 - 001 Fax +86 21 6132 4238 Fax +61 2 9279 0551 Tel. +55 11 306 809 99 Fax +55 11 308 141 38 14