Tuesday, September 13, 2011

Luxury Retailing in India

 

Last week was a fascinating one to the world of Travel Retail and Luxury Retail. One of the world’s most coveted luxury brands, Louis Vuitton from the house of Moet Hennessey Louis Vuitton (LVMH) finally debuted at Incheon Airport in Korea (which has also been ranked the number 1 airport in the world in passenger satisfaction by ACI International) amid much fanfare and excitement according to the first online update from The Moodie Report. Korea, which is famous for its “cheaper” alternatives in electronic products and automobiles (led by Hyundai) was the obvious choice for the cult brand since it is the most preferred transit destination between Mainland China, Japan and Korea and the rest of the world. Louis Vuitton was also ranked the number one luxury retail fashion brand (behind Hermes, Gucci, Chanel and Cartier) by the media house “My Retail Media” recently. LV, as it is popularly known, is most famous for its accessories & luggage (which ranges between USD 500 – 5,000) and is one of the last brands in the “Luxury” segment to enter the glamorous world of Travel Retail. Such is the potential of passengers travelling through airports!

(Suggested Reading: Travel Retail)

When LV entered the city of Bangalore in India (2008), it had installed a huge trunk outside the terminal building of Bangalore International Airport (BIAL), a first of its kind in the country but one which the brand does quite frequently across the world. Apart from this, LV operates at Delhi and Mumbai and is looking forward to expanding across other Indian cities in times to come. Hermes opened its first outlet in Pune this year, which was later followed by its flagship store at Mumbai. The beauty of this location is that it opened its store where the distance from / to Mumbai is ‘0’km (zero km)! Other luxury brands such as Gucci, Chanel, Cartier, Rolex, D&G, Armani, Hugo Boss, Omega, etc. have their standalone stores at Mumbai, Delhi and Bangalore. Although, the offtake is not as expected, according to market reports. There was even a recent article online in which the writer claims that the “Indian Luxury” market is a not as successful citing examples of how Nita Ambani (wife of Mukesh Ambani, one of the world’s top billionaires and the Chairman of Reliance Industries) shopped her porcelain from nearby Sri Lanka for their new billion dollar home! Indeed, Gucci, Prada and their ilk in Luxury Retail have not taken off the same way in India (estimated at less than USD 1 billion compared to that of USD 17 billion in China) but I wonder if that’s just the measure.

(Read: World’s cheapest car and its possible impact on Retailers)

The article also quotes the number of dollar millionaires – I guess, the methodology in itself is flawed. There is probably more “black money” in India than in white, hence it is not the best way to assess the wealth of native Indians. Mercedes Benz, the oldest German luxury automobile in India along with with its country counter parts Audi and BMW sold over 2,500 cars last year (at an average price of USD 100,000). Property Developers such as DLF, Prestige, Sobha and many more are developing high-end customised villas that range from INR 2 Crores to 5 Crores (USD 500,000 onwards). A typical Indian middle class family spends between USD 20,000 – 50,000 – something that’s unheard of in the Western world where Church weddings do not accommodate more than a 100 people while the big fat Indian weddings feed over a thousand people, twice a day, for 3-7 days! If western wear and accessories are any measure to say that Luxury Retail in India hasn’t take off, that’s right. But then, the Indian shopper doesn’t consider Western wear for day today use and hence their usability is restricted. The article claims that even an entry level secretary in Japan or China would sport a LV bag (it doesn’t mention if original) which is not the case in India. (But they do sport gold jewellery which is not considered…). High end electronic gadgets are favourites with the working middle class including the iPod, the iPhone the iPad and a wide range of mobile phones and related accessories.

I wonder why “Luxury Retail” in India is always connected with western apparel and accessories. Women do not sport western wear to work everyday! And the reason is simple – an average Indian (women) is more comfortable in her Indian clothing. The climatic condition is more conducive for comfortable dressing and hence their preference. Would this change in the next 20 years, yes. Would it match the world markets? No. I can assure that this market will never be the same in size as what it is in Japan or China, forget Europe or the US. Indian women and the society at large are indeed embracing western wear in a big way, especially for formal occasions at workplace. Even for holidays and other occasions. However, the appreciation for high-end Luxury remains lukewarm since the reasons to wear (other clothing) is far more. Cufflinks are famous all over the world to match blazers, jackets or suits. But a majority of people in the working class do not wear a full-sleeve shirt to work, forget other accessories! And the reason is that the Indian weather conditions do not permit wearing a heavy suit all day at work. Two thirds of the working class still commute in public transport (Metros / A/c buses) and two-wheelers and hence prefer an easy attire than the complicated ones. This is one reason why “wrinkle-free” shirts and trousers are a big draw in the country.

(Also Read: Luxury Retail at Airports)

But no one bothers to compare the gold consumption in India – the most coveted precious metal with the rest of the world. Some one from the Jewellery industry told me recently that if all the gold in Indian houses is collected and offered in the world market, the price of it would be cheaper than that of copper! Really. That’s the amount of gold that is collected and retained in India. For Indians, gold (Swarna, as in Goddess Lakshmi) is bought for various reasons – as traditional jewellery, as savings for future, as a means to display wealth and so on. A former minister from the state of Karnataka who was recently arrested and jailed apparently had a gold-plated chair and even cutlery / crockery for dining at his home according to press reports when the CBI raided his house!

I am sure that the Luxury Market as opined by experts will indeed grow - Coupled with better Retail Infrastructure and Government taxation norms. Soon, one can expect an LV at an Indian airport too. You never know. It’s just a matter of time.

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