Wednesday, April 22, 2009

Luxury Retail at Airports

The so called economic slowdown has not dented the prospects of Luxury Brands and labels, atleast in India. According to recent reports, Luxury Brands across categories are actually opening more stores and are recording higher sales than before. One of the reasons stated was that these consumers would have normally bought these products at Singapore or Dubai or Hong Kong while they were travelling (on vacation or business) and now since they are not travelling too much, they are buying these products in their neighborhood... err., that’s within India!

Sounds logical, but personally am unsure how true it is without a sound research or backing. Another reason that is usually stated is that these consumers are price inelastic (or rather recession inelastic, if you may allow me to say!). And that’s why more people are interested to procure that coveted C-Class or 7 Series at 5% Interest or low EMIs. Sometimes, I get confused with what recession does to people.

Having said that, it’s always interesting to watch how people embrace luxury. The new age malls are creating a niche (if not already) for a select breed of people to meet in a defined environment. Whilst sipping that decade old wine, they also talk about how a European Airline treated them so badly, by not upgrading them to First Class from their Economy Class tickets, in spite of having enough air miles to their credit (and anyway the planes fly empty these days).

These are the same consumers who are the core audience for Luxury Brands at Airports. And these coveted Brands take up prime space at Airports mainly to be in touch with their audience - to launch a new line, to talk about new promotions and to keep pampering their regular shoppers with exciting offerings. Many wonder if these Brands actually do any business at all, and if yes, would that be enough to sustain the (perceived) high rentals at Airports. Contrarily, these Brands actually take space to showcase themselves for their markets. And then, of course over a period of time, they build reputation and connect with the frequent travelers. And thereby it becomes a strong reason for them to expand inland. This is one way of course.

However, many Brands prefer to do it the other way – to first open large stores inland and expand within the city/country and then to come to the Airports. It’s quite difficult to say which model works best, but keeping in mind high operating costs in the city and in the country, it may look more feasible to take shop-in-shops or run Specialty stores with the main Airport Retailers. One way or the other – it’s just another reason to be in touch with their consumers. In today’s market scenario, one would agree “out of sight is out of mind”, all the more reasons to be in touch.

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