New Delhi: Italian luxury fashion brand Prada SpA 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.
The Italian label’s spokesperson would only say that “at the moment, it’s too early to talk in depth about our strategy in India”. The comment was made in an email in response to queries.
“Prada has been in talks with various retail partners in India since a few months, but nothing has been confirmed yet,” said a New Delhi-based retailer who was in talks with the company in Italy through a representative a few months back. None of the three persons cited above wanted to be named.
Listed in Hong Kong, Prada had a market cap of Hong Kong $183.2 billion (around Rs.1.3 trillion) as of Tuesday, according to Bloomberg data. Sellers of luxury products are seeking to move out of developed markets that have been hit by global economic uncertainty and find new buyers in emerging economies.
According to an October 2012 report by Euromonitor, the value of luxury goods sold in India was pegged at $2.18 billion (around Rs.11,660 crore) in 2011, and is expected to rise to $7 billion by 2017.
Prada is one of the top few luxury brands that doesn’t have a retail presence in India. Globally, it competes with brands such as Gucci and Louis Vuitton, and specializes in men and women’s clothing, handbags, shoes and accessories.
India allows 100% foreign direct investment in single-brand retail and up to 51% in multi-brand retail. Luxury brands have mostly entered India through partnerships with companies such as Reliance Brands Ltd and Genesis Colors Pvt. Ltd.
Real estate is one of the stumbling blocks for Prada.
“There is no real estate space for many brands looking at India to enter,” said another of those cited above, a Mumbai-based retailer who said he has had meetings with Prada executives. “If any brand wants to enter, they will want to be present at a DLF Emporio, but there is no anchor store space available.”
DLF Emporio is India’s only mall devoted entirely to luxury brands. Palladium in Mumbai and UB City in Bangalore are also home to such labels, although offering more of a mix. These malls are either fully occupied or the best spaces have already been taken. DLF Emporio, for instance, has a 100% occupancy rate.
A real estate consultant at a New Delhi-based agency said Prada had sent a team of consultants to look at likely sites some three months back. “They were evaluating the market,” he said.
Apart from its signature black bag, the label acquired a place in popular culture with The Devil Wears Prada book (2003) and film (2006) that offered an overview of the fashion industry that was at times bitingly satirical.
According to analysts, Prada is therefore bound to have a strong connect with potential consumers in India.
“It’s a brand that Indian consumers are definitely aware of. They do shop for this brand outside India,” said Neelesh Hundekari, a partner at consultancy AT Kearney.
India Ratings and Research Pvt. Ltd, a part of the Fitch Group, maintained a negative outlook on the retail sector for the current year despite the easing of overseas investment norms for the industry. The report also suggested that luxury retailers would be impacted the most owing to the challenging macroeconomic environment—India is battling flagging growth and high inflation.
“In terms of revenue growth, the worst affected would likely be retailers focusing on the premium and luxury segments,” it said. “Such retailers may continue to show flat to negative revenue growth.”
Prada, which had sales worth €2.34 billion (around Rs.16,700 crore today) in the nine months ended 31 October, also owns labels such as women’s luxury fashion brand Miu Miu and men’s footwear brands Church’s and Car Shoe. The company had operations in 70 countries through 388 directly operated stores, 30 franchise stores, and a network of high-end multi-brand stores and luxury department stores as of a year ago.