'Luxury Retailing in India' is a factual report on the category of fashion luxury - the brands, number of stores, future entrants, new entrants and their plans. The article was first published in the Images Year Book 2015 in February 2015.
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It is with immense gratication that we present to you the rst of its kind analytical report on the impact of communication tactics employed by Luxury brands on Indian millennial segment. Only second under the wing The Ghost of Luxury: Luxury Industry Analytics, “The Indian Millennial Codication of Luxury Communication 2017” as a heartbreakingly unadulterated report exposes the long prevalent myths about wealthy Indian luxury clientele.
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It is with immense gratication that we present to you the rst of its kind analytical report on the impact of communication tactics employed by Luxury brands on Indian millennial segment. Only second under the wing The Ghost of Luxury: Luxury Industry Analytics, “The Indian Millennial Codication of Luxury Communication 2017” as a heartbreakingly unadulterated report exposes the long prevalent myths about wealthy Indian luxury clientele.
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January 2014 Edition of BEACON, A Monthly Newsletter by SIMCON.
Inside this issue:
CONFLUENCE’14 : The Consulting Conclave
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2. Images Yearbook 2015 presented by snapdeal.com Volume XII No. 1 99
LUXURY RETAILING IN INDIA
Abhay Gupta, Founder & CEO, Luxury Connect & Luxury Connect
Business School explores the luxury retail industry in India;
challenges to the growth of the industry, leading cities in
luxury retail, incredible Indian luxury consumer and much
more.
LUXURYRETAILSCENARIO
T
he emerging markets in the next five years are expected to make upto 50 percent of
the luxury retailing industry, and BRIC (Brazil, Russia, India and China) economies will
contribute to the growing sector. According to a recent study released by ASSOCHAM,
Indian luxury market is estimated to be worth $18 billion by 2017 from the current level of
$14 billion.
The market is likely to witness unprecedented growth in luxury categories including fashion,
automobiles and fine dining, as per the ASSOCHAM-Yes Bank joint report. Driven by increasing income
and aspirations, Indian consumer’s spending is expected to grow four times to $4.2 trillion by 2017.
However, the question then rises, where does India stand when it comes to luxury retailing? The
answers to this question might come as a surprise to many:
The Indian luxury retail is not on radar in numbers, yet! It is just a tiny fraction of what it can be.
The growth in luxury retailing is certainly not in line with keeping India’s status as the second
fastest-growing economy.
India’s contribution to the luxury industry is less than a tenth of that of China while Russia is about
half that of China.
In terms of brand presence, out of 500 leading international luxury brands, only 30 percent are
present in India, while over 70% have a presence in China. So the next logical question that arises is
What is causing this slow growth of luxury retailing in India?
A lot of factors contribute to the slow growth of luxury retail in India. A report published by AT
Kearney on the luxury retail scenario in India has listed five main challenges faced by the luxury
industry:
section 1 c h a p ter 8
3. 100 Images Yearbook 2015 presented by snapdeal.com Volume XII No. 1
Lacking Policy Support: The government allowed 100 percent FDI
for single-brand retailers, making it mandatory that 30 percent
of the value of goods be sourced from India, making it difficult for
brands to enter India. Can one imagine a luxury brand who plays on
a brand DNA that originates from the ‘Country of Origin’ as a base
emotion, source 30 percent of its product from India?
High Import Duties: Import duties (20–150 percent) are relatively
higher in India. This is considered as a key apprehension factor
among the international players, who may resist them to frame
aggressive growth plans for India.
Untrained staff: A considerable need for trained professionals in
the luxury retail and service sector. By the year 2022, Indian Luxury
Products & services will be requiring manpower to the count of 1.76
million head.
Diversified Consumer: The luxury consumer in India is widespread.
As the brands don’t have physical presence in all the cities, it gets
difficult to reach the potential consumer.
Lack of Quality Infrastructure: There is a dire need for modernized
and dedicated luxury retail areas in protected vicinities for luxury
brands to open their retail outlets.
Nearly 20 brands
are waiting for
space in Emporio
– Dinaz Madhukar,
Senior VP, DLF Emporio Mall, Delhi.
FDI
•FDI in single-and multi-brand retail will bring foreign capital and
expertise
•While local sourcing norms will be difficult to meet at first, major
players believe the Indian supply market will mature with time
Reaching
the
consumer
•Micro-segmentation is still nascent in India; targeting and positioning
will continue to be sub-optimal until micro-segmentation is developed
•Identifying the right companies to partner is an ongoing process in India
as companies are maturing
Duties
•Many companies have identified high import duties as one of the
greatest challenges in succeeding in the Indian luxury market
•The duties have consistently been higher that other Asian countries
Real Estate
•Lack of availability of high-streets and over-reliance on hotels; no new
pure-play luxury malls added in 2012
•Rentals continue to be very high in metros and basic infrastructure is
still weak
Talent
•Manpower in India not attuned to requirements of luxury retail;
companies feel skill development is one major area requiring
government intervention
•Very few organisations such as Luxury Connect focused on talent
development
Partially addressed Minimally / not addressed
Out of the listed challenges only FDI has been partially addressed,
while the others are either minimally addressed or not addressed at all.
According to the AT Kearney report, Luxury Connect Business School
(LCBS), is the only organization that understands the need of skilled
manpower and is focusing on talent development for the luxury industry.
Yet and despite the problems with India’s retail, the new market is
attracting brands. A lot of luxury brands have housed themselves in
the luxury malls and hotels, and a few others are finding their way to
enter India.
According to KPMG-ASSOCHAM India Luxury Summit 2014, India
is responsible only for 1-2 percent of the global luxury market. Luxury
retailers, both national and international are racing to expand their
footprint in India. “Nearly 20 brands are waiting for space in Emporio”,
says Dinaz Madhukar, Senior VP, DLF Emporio Mall, Delhi.
The report states that, luxury retail is growing significantly at the
rate of 20 percent. The definition of luxury is very relative and changes
from country to country and among different income groups. However,
most households those are earning more than INR 1 million or above
4. 1.5 luxury retailing in india
Images Yearbook 2015 presented by snapdeal.com Volume XII No. 1 101
annually opt for luxury goods in India. With the significant growth of
this income group, luxury retail in India is expected to witness steady
growth in the coming years.
Though the luxury consumer is fragmented in India, however, luxury
retail is concentrated mainly to tier-I cities luxury retailers open in
luxury malls (DLF Emporio, Palladium, UB City, etc.) or preferably in
luxury Hotels.
Ranking of India’s Leading Luxury Retail Cities
Delhi NCR
Here is the most enriching retail legacy among the Indian cities,
therefore the city tops all real estate drivers.
Mumbai
Mumbai has the highest retail demand potential. However, a lack of
availability of land parcels leading to high rents in prime areas act as a
dampener that causes Mumbai to lag behind Delhi.
Bangalore
Affordable rents in the city compared to other tier-I and some tier-II
cities have helped the retail to flourish here. However, the city has
lesser household expenditure even when compared to Kolkata and
Chennai.
Chennai
Chennai, with its affordable rents and good high street stock in
contrast to the organised retail stock has received the fourth rank.
Kolkata
The best that Kolkata can offer to retailers is the attractive household
expenditure and an illustrious high-street variety retailing. However,
rents in prime areas are not affordable and the retail stock is also low,
both of which make penetration of the retailers difficult.
Hyderabad
Hyderabad offers attractiveness in terms of affordable rents, which is
higher only to Pune among the tier-II cities. However, lesser household
income and household expenditure has ranked it lower.
Pune
Pune provides the most affordable rents in prime areas among tier-I
and tier-II cities. However, low household income and expenditure
compared to most other cities has ranked it the lowest.
The Incredible Indian Luxury Consumer
Despite so many challenges, the luxury sector is growing steadily at a
pace of average 20 percent PA for past several years at a row. So who
is fuelling this growth? How are the absolute numbers so attractive in
spite of a low percentage wise penetration?
Luxury goods are considered something that is not meant for the
masses. The target market for such goods and services should be
clearly defined. The foremost criterion to be segment the consumer
has to be Disposable Income. In India, perception of luxury varies
between those born with a silver spoon in their mouth and belongs
to a wealthy family and those belonging to new elite class of wealth
creators.
Indian consumers of luxury goods could be generally divided into
various categories:
1. The ‘Khandani Raees’ or people with ‘Old Money’: Born with a
silver spoon in their mouth, these small percentages of Indians
perhaps contribute a maximum value to the luxury sales. For them,
luxury goods, brands, products, services are a way of life and just
an extension of who they were. The elitist, original, sophisticated,
upper class spill over from the erstwhile nawab’s , kings, rajahs
and maharajas…despite the privy purse restrictions, have
continued their traditional conspicuous consumption all through
the post independence decades and have not been dependent on
the new wave of luxury goods into India.
2. The ‘New Maharaja’ or people with ‘New Money’: Created post
the industrialization phase of the sixties, the new industrialists,
the noveau rich, the new upstart, is a staunch consumer of luxury
goods. This next generation having studied abroad has acquired
sophistication reserved earlier for the khandaani raees strictly!
3. The partition affected SME entrepreneur: This enterprising
community invaded the trading world with a vengeance, working
long hours making money through fair means or foul. Always
felt ‘enjoyment’ was not for them…until their new generation
started to pull them out of the closet. They spend in cash – abhor
sophisticated sales people are crude yet gentle and value the
Tupungato/Shutterstock.com
5. 102 Images Yearbook 2015 presented by snapdeal.com Volume XII No. 1
Luxury players in
India
Delhi
NCR
Mumbai Bangalore Chennai Kolkata Hyderabad
Hermes 1 1
Louis Vuitton 2 2 1
Gucci 3 2 1
Chanel 1
Jimmy Choo 2 2 1 1
Burberry 3 1 1 1 1 1
Dior 1 1
Bottega Veneta 1 1 1
Cartier 1
Canali 2 1 1 1 1
Bvlgari 1
Christian Louboutin 1 1
Bally 1 1
Salvatore
Ferragamo
1 2 1
Emporio Armani 1 1 1
Ermengildo Zegna 1 1 1
Micheal Kors 1 1 1 1
Hugo Boss 1 1
Paul Smith 1 1
Corneliani 1 1 1
money they spend because they earned it the hard way. This class
perhaps considers ‘jewelry’ as the only safe investment in luxury
goods! Yet their off springs connive to splurge on luxury vehicles as
a show-off ‘we- have- arrived’ kind of syndrome!
4. The returning NRI: The reverse brain drain brings back a whole lot
technocrats and their ABCD (American born, confused desi) off
springs! They seek the westernized lifestyle which they left behind
– some still use artificial accents to show their superiority to local
Indians and at times end up being made mockery of!
5. The educated professional – HENRY: The management graduate
with MNC income – the DINK (double income no kids) category
– the ‘high income not rich yet’ (HENRY) category shops luxury
like there is no tomorrow. They buy luxury brands to meet high
aspirations. Easy finance options – eat out – entertain – chill out
– hang out groups in large numbers. They need to dress well, drink
well, and socialize well and live for today. Luxury automobiles to
latest mobile phones to season wardrobes – they are the next big
spenders.
6. The YUUMY or The Flaunter: ‘The young urban upwardly mobile’ –
basic amenities being provided for by the parents, this generation
spends only on themselves. Hence, luxury consumption is on top
of their agenda. Starts with a big flashy car–an expensive mobile
...and so on.
7. The value seeker or Closet Consumer: They are cost conscious
and seek ‘value’ even when buying luxury products. And,
their definitions, symbols of luxury are often in variance with
conventional definitions and symbols of luxury.
8. The bargain hunters: This class is visible during EOSS (end of
season sales). Comes out in large numbers – walks around show
rooms wondering why the goods are so expensive even during sale
periods, buys small but will graduate to higher level purchases as
their career progression supports them.
LUXURYRETAILPLAYERSININDIA
Apart from the above mentioned names, brands like Fendi, Giorgio
Armani, Versace, DKNY, Diesel, TOD’s, Tom Ford, Roberto Cavalli and a
few others are only operating at DLF, Emporio in Delhi.
ENTRANTSIN2014
Global real estate consultants, Cushman Wakefield have estimated
that the luxury retail space in India will rise to 1.44 percent in 2015
as compared to 1 percent in the past. At present Luxury brands are
present in the top seven cities of India. 38 percent brands are present
in NCR, followed by Mumbai at 21 percent and then Bengaluru at 17
percent. Few brands that have housed in India in 2014 are:
1. HARTMANN: Joseph S.Hartmann, a Bavarian trunk-maker, in
Milwaukee, Wisconsin, founded Hartmann in 1877. Hartmann
has been making exquisitely crafted luggage, travel cases and
fine leather goods for over 135 years. The American luggage
brand entered the Indian market by opening its first store in
Bangalore, with plans to open another five outlets by end of next
year. Samsonite South Asia, makers of Samsonite and American
Tourister, which had acquired Hartmann, will be targeting to
capture the top end of the market with the brand.
6. 1.5 luxury retailing in india
Images Yearbook 2015 presented by snapdeal.com Volume XII No. 1 103
2. HEEL BUCKLE: Heel Buckle, London is a multi brand retailer
for luxury-handcrafted footwear. They have launched Heel
Buckle, India and are aggressively expanding their footprint
thereafter. They opened their first store at Palladium, Mumbai and
second store at Ambience Mall, Delhi. They are planning to expand
across all metros and mini-metros.
3. STEFANO RICCI: This Italian ultra-luxury fashion and lifestyle
brand Steffano ricci has launched its first flagship store in India
in Taj Mahal Palace Hotel, Mumbai. Steffano Ricci offers a subtle
blend of contemporary style and mid-century elements The luxury
store houses the brand’s most unique and exclusive products
that include a wide range of menswear-suits, dress shirts, casual
shirts, jeans, polo shirts, casual wear and neckties, in addition to
bags and accessories made from the finest exotic leather.
4. JOHN LOBB - REGALIA LUXURY RETAIL: John Lobb has been into
making the finest shoes for gentlemen since 1866 in London. In
1902 in Paris it debuts its made-to-order ‘By request’ service. The
Hermes Group acquired Jonh Lobb in 1976. The brand will foray
in the Indian market with Regalia Luxury Retail LLP, a retailer
partnering with leading luxury houses in introducing brands at the
forefront of the industry in their respective categories.
By request service allows connoisseurs to customize shoes as per
their style preferences and have a pair unique to them. Each pair
spells sartorial elegance with its quality and selection of only the
finest full-grain and exotic leathers. John Lobb has partnered with
the Taj Group to launch its shoe-care services in Mumbai, they will
soon launch services in Delhi also. The company will customize
shoes prices between 45,000 INR and 6 lakh a pair. It will later
open exclusive stores in the country as well.
5. KITON MULLS: Kiton is an Italy-based menswear-clothing brand.
Kiton is known for its made-to-measure (bespoke) suits. It is
coming to India by signing a mast franchise agreement with
Regalia Luxury Retail.
The stores will be launched in Delhi and Mumbai by the end of
2015. The brand will sell bespoke suits priced at Rs. 3 to 25 lakhs,
shirts and jackets will also be in the offering
FUTUREENTRANTS
1. PRADA: Italian luxury fashion brand Prada is in talks with various
prospective partners for an India entry and has even scoped out
the market in advance of this, said at least three people familiar
with the development. But finding the right retail space may prove
to be difficult, they said.
2. Juicy Couture : Reliance Brands, part of Reliance Industries Ltd,
today announced a tie-up with New York-based Authentic Brands
Group, LLC (ABG) to bring casual luxury lifestyle brand, Juicy
Couture to India in the second half of 2015.
Under the partnership, the two firms are looking to launch 20
Juicy Couture single brand stores in India during the first five-year
phase, starting in Fall 2015, the company said in a statement.
The Future of Luxury Retailing: With such a diversified variety of
customer base, a large geographical spread of the customer variety,
how does one sustain Luxury retail in India? With the e-commerce
boom becoming a cause of worry to the malls and traditional retail,
how is Luxury going to respond and evolve in India ?
The digital dilemma: Worldwide, luxury is a hesitant acceptor of
the digital medium. Most brands realise that they cannot ignore
it anymore and are creating web based interactive platforms to
disseminate information about their products, their designs and their
inspirations. Digital engagement is changing the brand perception
from ‘dictating’ the market to ‘learning’ from the market. No longer
can luxury brands isolate themselves and claim to restrict to sell to a
select few.
The Physical store and experience: So is Omni channel the solution?
With a fragmented market size, it is not practical to sustain a physical
store in every part of the country. Even if good quality real estate is
made available, product categories which are the starting point of
indulgence in luxury (example accessories, fashion, eyewear, beauty
etc) cannot afford to create a store everywhere.
Economic pundits the world over predict India to be the largest
playing field in the next decade. With the political scenario promising
7. 104 Images Yearbook 2015 presented by snapdeal.com Volume XII No. 1
‘acche din’ to the consumers, more and more
brands want to pitch in and enter the country.
Luxury brands realise from earlier mistakes
made by them or by their peers and are taking
control of operations to ensure brand experience
in a controlled environment. From fashion to
cars to hospitality, the focus is changing from ‘just
product’ to ‘product with experience’. This is requiring
special training of talent and mind sets, extra care in
brand management and brand projections.
The Growth drivers: Fashion, apparels, accessories,
footwear, eyewear, bijou jewellery are sectors which
have continued to charm the urban as well as not so urban
consumer. A new phenomenon of ‘Urbanisation of the Mind’
has been reported from smallest of the small town – thanks
to the macro-economic reach of digital media; the extensive
coverage by television and socio-economic escalation
patterns, the youth eyes and covets products even before
REFERENCES
1.http://www.brandscapesworldwide.com/newsletter/page5.htm
2. http://businesstoday.intoday.in/story/how-luxury-brands-are-changing-to-win-the-indian-market/1/197547.html
3. http://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/KPMG-ASSOCHAM-India-Luxury-Summit-2014.pdf
4. http://www.indiaretailing.com/7/11/12/10784/Indias-Luxury-Retail-Quotient
5. http://www.indianretailer.com/article/sector-watch/luxury/Global-retailers-eyeing-Indian-market-2634/
6.http://www.indianretailer.com/article/sector-watch/luxury/The-lure-of-luxury-retail-155/
7.http://articles.economictimes.indiatimes.com/2014-10-08/news/54784962_1_juicy-couture-reliance-industries-ltd-reliance-brands-president
8.http://www.livemint.com/Companies/ZN9OBSs1nCfP1W4BGeBBPM/Prada-said-to-be-intalksfor-India-entry.html
9.http://www.business-standard.com/article/news-ani/stefano-ricci-launches-first-flagship-store-in-india-115020700357_1.html
10.http://www.indiaretailing.com/7/23/24/9578/Luxury-Clothing-Brand-Kiton-Mulls-Exclusive-Stores-In-India
11. http://articles.economictimes.indiatimes.com/2014-04-24/news/49378401_1_shoe-brand-exclusive-stores-john-lobb
12. http://www.business-standard.com/article/companies/france-s-louis-vuitton-plans-larger-stores-in-india-113113000381_1.html
13. http://www.indianretailer.com/magazine/2008/may/Gucci-much-loved-in-India_17-2-14/
14. http://www.indiamarks.com/jimmy-choo-opens-in-india-its-first-exclusive-store-in-mumbai/
15. http://luxpresso.com/news-couture/gurgaon-is-jimmy-choos-fourth-stop-in-india/8404
they are physically available to him. Travel, tourism, health and
wellness, beauty and skin care, etc. are fuelling growth as the luxury
service industry up’s its ante.
Products and assets have seen a new demand in unheard sectors
of branded residences; high-profile automobiles, sports cars, yachts;
private jets and helicopters, etc., while the traditional jewellery and
watches has seen new demands from new consumer sectors. The
‘Make in India’ campaign is also expected to give rise to the Indian
luxury creators in not only fashion but products like home, art,
gourmet, gadgets, appliances etc.
All in all, with the rising disposable income, change in spending
pattern of the youth, globalised lifestyle culture, the consumption
pattern is surely moving north - towards a more sophisticated and
refined taste for good things in life.
The new global Indian youth is on a natural high - they will not
accept sub standard goods, services and products any more – for
them -the reality mantra is ‘work hard -party harder’!!
Don’t wait for the ‘day after’: Kal ho na ho ?