Bangalore/New Delhi: When India’s first two luxury malls opened in 2008—DLF Emporio in Delhi and UB City in Bangalore—it was welcomed by luxury retailers that had otherwise struggled to find suitable space to sell their wares.
They could now consider expanding out of the corridors of five-star hotels, where they traditionally had to confine themselves. But while the Palladium mall opened in Mumbai more than a year ago, real estate is still a challenge for luxury retailers, restricting growth in the country.
Take the French label Christian Dior. The apparel to fragrance brand scouted for a suitable space in Mumbai for more than four years before finally settling for a store in the upscale Taj Mahal Palace Hotel in October 2010. The company hasn’t found a suitable space in the city for its men’s collection, Dior Homme.
“Retail real estate is a huge challenge in India. Positioning is the primary factor for any luxury retailer. This is a brand building exercise for us in India right now,” said Kalyani Saha, vice-president for marketing and communication at Christian Dior Couture India. “We are here to create and maintain our brand image, correct positioning is of utmost concern.”
Genesis Luxury Fashion Pvt. Ltd, which runs outlets of various luxury brands, including Bottega Veneta, Canali and Jimmy Choo, has been unable to open stores in cities such as Pune.
“I think the market has potential but we need to find the right real estate, environment to set up these stores,” said Sanjay Kapoor, managing director of Genesis Luxury.
Saloni Nangia, senior vice- president, Technopak Advisors Pvt. Ltd, a retail consultancy, also points to the lack of appropriate real estate as a major challenge.
“The ambience and environment are of utmost importance for a luxury retailer to provide the right experience,” she said. “Luxury retail is a long-gestation business and takes at least five-eight years to develop.”
Indian consumers have an appetite for luxury and big brands would like to expand in the country, but infrastructure is a problem, said Tikka Shatrujit Singh, advisor to Louis Vuitton in India, which runs three stores in the country. “We need many more malls like DLF Emporio for luxury brands to grow.”
There isn’t much interest among developers in India to create malls purely for luxury retailers, said Shubhranshu Pani, managing director for retail services at real estate consultancy Jones Lang LaSalle India.
“Developers are shying away from doing the luxury component,” Pani said. “So you won’t find many players other than UB, DLF (which owns Emporio) or, to some extent, Palladium in Mumbai.”
Developers aren’t too keen because quality standards are high and the focus is on exclusivity, he said. The number of luxury retail companies in India is also very small to justify that kind of investment, he said.
“So, it’s a chicken-and-egg situation. Until you get more momentum and more number of brands, we will find the base very low,” said Pani.
It costs Rs800-1,000 per sq. ft to rent space in a top five-star property in New Delhi or Mumbai while space in DLF Emporio or UB City is available at Rs600-700 per sq. ft, Pani said.
With little expansion in the luxury mall space, what is emerging is a hybrid retail concept where luxury and premium brands are juxtaposed, according to Nangia of Technopak.
For example, while there are pure luxury brands such as Burberry and Armani at Palladium in Mumbai’s Lower Parel, premium brands such as Diesel and Zara on the ground floor ensure accessible luxury for the Indian shopper, who is gradually being inducted into this space, thereby inviting both exclusive and new-age luxury shoppers.
Even in a pure luxury space such as UB City, Bangalore, Diesel, a premium brand, set up a store where Armani was initially supposed to come in.
UB City occupies 125,000 sq. ft space and houses nearly 40 luxury brands, including Louis Vuitton and Bottega Veneta.
Barring the luxury malls that are already open, very few new ones are coming up, said Sunjay Dutt, chief executive, business, Jones Lang La Salle India.
“Going ahead, we will see a lot of luxury brands looking at high streets in the top five-six cities and hotels, the original preference of brands before luxury malls were set up,” said Dutt.
According to Pani, things could change if India allows wholly owned foreign subsidiaries into the country as many luxury brands are waiting on the sidelines until this happens.
India currently allows 51% foreign direct investment (FDI) in single-brand retailing and 100% in wholesale cash and carry.
“Once FDI is opened they will come in full force,” Pani said. “Then they will have a reason to invest in their brand, invest in the country and own their business as well.”
Abhilasha Ojha in New Delhi and Sapna Agarwal in Mumbai also contributed to this story.