Challenges for the luxury brands!
Traditionally Infrastructure hassles and lack of clear guidelines along with high import duties & counterfeit market are few substantial reasons to prevent luxury retailers from directly investing in Indian markets.BY Shipra Srivastava | Mar 14, 2017 | comments ( 0 ) |
In the last decade the Indian luxury market is in the spotlight with global luxury brands showing a growing presence. The current Indian luxury market which is valued at 18.5 Billion USD ( Source : ASSOCHAM) has right potential to reach more than 100 Billion USD in the next 7-8 years. India's growth in Ultra High net worth Individuals has also been impressive. As per latest Knight Frank wealth report India's UHNWI count rose by 340 per cent (to 6,020 persons), whereas global growth was 61 per cent (to 187,468). The report also says that India will account for five per cent of the total UHNWI population and six per cent of the billionaire population across the world by 2025.It's an ideal senario for lxury market to flourish in the country. However, contrary to this, the suvival of the luxury brand is not easy in the country. Last year LVMH discontinued the Indian operations of Tag Heuer and handed over the distribution to a local company. The said reason behind the exit was country’s tax structure. Well, it is not the sole reason, let’s throw light upon few more.
Numbered luxury malls
Luxury retailing in its nascent years was just confined to the aisles of 5 star hotels. With the increase in number of HNI’s and their disposable income, the demand for more luxury brands in the country triggered the need for an organized retail format. Through the luxury market is growing rapidly but the number of luxury malls is confined to hardly four including Palladium mall, Mumbai; DLF Emporio, New Delhi; UB City, Bengaluru; Bergamo mall Chennai.
Speaking on same, Rajendra Kalkar, President - West at Phoenix Mills Ltd, said, “The current scenario is going to be change, growth expectations among the world’s biggest luxury goods manufacturers are highly optimistic. This is a country, after all, where as many as one million young adults are entering the job market every month and it offers a potentially unrivalled demographic dividend. With the increase in the middle class wealth in India along with increased internet penetration there is a new segment of first time buyers who buy luxury products & thrive on good deals and hence a lot more luxury malls will slowly be emerging.”
With high-end brands such as Gucci, Tag Heuer, Michael Kors and The Collective setting up stores, the Palladium Mall promised to be the destination for high-end luxury shopping in Mumbai. Palladium will be soon launching in Chennai this year as informed by Kalkar. Speaking on the best performing brands he said, “All our Luxury brands are doing well notably – Burberry, Gucci, Tumi, Bottega, Emporio Armani, Canali etc. Since we really don’t have poorly performing luxury brands can’t really say but yes we work closely with our Luxury brands putting together exclusive and unique experiences in the ART, Music and events space that are bound to excite a luxury customer.” Kalkar also informed that luxury brands including Longchamp, Selected, Scotch N Soda will shortly be opening their doors at Palladium mall, Mumbai.
Tedious Regulatory Mechanism
Traditionally Infrastructure hassles and lack of clear guidelines are few substantial reasons behind to prevent luxury retailers from directly investing in Indian markets. The other deterrents for consumers in this segment being high import duties & counterfeit market which contributes 8-10% of the overall luxury consumer market. However, with the opening up of FDI in single as well as mutli brand retail & potential GST roll out will minimize these deterrents to a certain extent.
As kalkar feels, “A sound and stable government and opening up of FDI in retail will have a pervasive impact on India’s business environment and is bound to help the luxury industry as well. India’s impressive growth story in luxury goods sales has been the result of a number of factors. The traditional Indian custom of personal adornment has led to strong demand for luxury accessories, luxury jewellery and timepieces, and designer clothing and footwear. “
Going further Kalkar said, “ I think a little relaxation in terms of taxes on Luxury goods will help shoppers perceive luxury goods as an investment and will help drive luxury spending in India especially as a hedge against inflation and currency risk.”
He also informed that latest demonetisation drive has had effected the luxury mall. “Every new initiative faces a few teething problems but now the consumer mood at the mall are is buoyant and booming. Yes demonetization did have a small impact on the mall in the first few weeks it was announced. However, within a couple of weeks things bounced back with the festive season and now things are back to normal.”
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