Retailers say space is the biggest luxury for them

Retailers say space is the biggest luxury for them
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First Published: Thu, Mar 29 2007. 12 14 AM IST
Updated: Thu, Mar 29 2007. 12 14 AM IST
When Ermenegildo Zegna became one of the first luxury companies to launch in India, it was clear it had big ambitions. But it probably didn’t anticipate being in a nightclub.
Zegna, a Swiss men’s formal clothing maker, first started off in India in 1999 at Crossroads, India first mall, but had to shut shop when it found itself in the midst of discount store neighbours. Around the same time, Zegna had made a huge success of its China business, going from one to 53 stores, which now contribute 8% of global revenues.
With the China model in mind, Zegna’s India head, Rahul Prasad, set out to scout for space for a new, large flagship store. But, with real-estate prices getting steeper by the day and the intricacies of finding a place that is high-end, discreet enough to attract the right clientele but also free of down-market neighbours, Prasad had a real task on hand.
After months, he has found the perfect place: In Insomnia, the nightclub at Mumbai’s Taj Mahal Hotel. Zegna will open a flagship store, the biggest Indian luxury store yet, sometime in April, after gutting and renovating the space that Insomnia used to occupy.
While it may seem like an extreme solution to deal with all the sleepless nights fretting about the right space, Zegna’s decision to go this route is part of a trend among global luxury brands, eyeing a market that is growing at around 20% a year and likely to get bigger in the coming years.
As a result, Insomnia is not the only Mumbai hangout giving way to retail. At Hilton Hotel, the popular, sea-facing coffee shop, Palms, closed to make way for luxury shopping. With India now being home to more than 83,000 people who have more than a million dollars, according to a 2006 study by Merrill Lynch and Capgemini, luxury retailers are scrambling to get their products on display, even if it means paying big bucks to transform existing spaces.
Despite such notable finds, infrastructure—actually the lack of it in terms of appropriate retail space, tops the list of woes facing those who are eager to expand in India, luxury retailers say. “Indians have purchasing power and they also understand luxury and quality,” says Andrea Bonardi, chief Asia representative of La Perla. But finding the right location is an issue. “There are many delicate cultural issues to consider while choosing locations here,” says Bonardi. “It should attract the right kind of people, not be too crowded because the Indian rich may not want to be seen shopping; there has to be parking but it should not be a busy area.” La Perla plans to open its first Indian store in Mumbai this September though Bonardi isn’t yet revealing the exact location.
Louis Vuitton has also found itself running into a similar space crunch. After opening two stores in New Delhi and Mumbai in three years, its plans to open three more are currently on the backburner. “Finding a luxury-retail space has been the only constraint,” said Tikka Shatrujit Singh, a former Maharaja and the company’s spokesman in India.
Little wonder then that luxury shopping is currently restricted primarily to a few five-star hotels. Six luxury retailers have opened shop at Mumbai’s Taj hotel in the last two years, while the Grand Hyatt opened a luxury shopping arcade. The Taj receives over a dozen offers from luxury retailers every month, says Ajoy Mishra, senior vice-president of Indian Hotels Company Ltd, the holding company for Taj. “Luxury retailers don’t have to go looking for clients. The hotel draws these clients for them” says Rattan Keswani, executive vice-president of Oberoi Hotels and Resorts.
An informal survey by Mint shows that in New Delhi, a host of brands including Louis Vuitton, Chanel, and Rolex, are occupying approximately 8,100 sq. ft of retail space, in hotels such as ITC Maurya Sheraton & Towers. But sufficiently large hotel retail spaces are increasingly scarce even as the country is battling a 1,50,000 room shortage. While bigger and more international hotel oper ators, ranging from Accor SA to Hilton Hotels Corp., are eyeing the Indian market, spiralling real-estate prices mean any such space will be dearly priced, until most of these hotels become operational.
Real-estate prices have risen 30% in just over a year in India’s biggest cities, and new hoteliers are being forced to tie-up with real-estate firms for developing hotels, to mitigate the high land costs.
Some of the new hotels in Mumbai, are coming up in locations somewhat away from the city centre, such as lower Parel and Worli.
“If it’s a new property in some wayside area, it would be in the best interest of the luxury brand retailer to wait for a year or so before setting up shop (there),” says Vijay Murjani, managing director of Murjani group, which is the Indian partner for Gucci, La Perla and Tommy Hilfiger.
“Finding the right location is the key and it’s a logistical nightmare as we do not have an Avenue Montaigne or a Via Monte Napoleone,” says Christian Dior India spokeswoman, Kalyani Chawla, talking about the European and American tradition of high streets.
In Paris, Christian Dior is on Avenue Montaigne. Sandwiched between the Champs Elysees and the Seine river, the sweeping street with stately buildings is one of the fanciest avenues of Paris where an Emmanuel Ungaro store rubs shoulders with a Nina Ricci as well as the likes of a Calvin Klein.
In New Delhi, local celebrity designer have for decades made do with dusty streets and often illegal buildings that sit close together and have become synonymous with designer wear.
Many roads that have emerged as the Indian version of a luxury row, such as MG Road and Hauz Khas Village, however, have been cleared of several store-fronts in a recent municipal drive to clean up the country’s capital of illegal constructions.
And that has forced almost everyone to go back to the hotels. The Leela Palace Hotel, for instance, houses one of the Bangalore’s largest luxury shopping arcades.
But not everyone can afford to move into scarce hotel space. Some, who are in there, don’t necessarily think it is the right space for the future.
“Hotels shrink the scope of our customers,” says Xavier Bertrand, managing director of Chanel India. “They were the first wave but now money raised from real-estate funds will drive the market. So, we could see more high streets and luxury malls coming up.”
Chanel does operate a store in the lobby of central Delhi’s Imperial hotel. The soaring interest in India from luxury brands and their desperate quest for space has spurred some of the country’s biggest developers to build space that is intended to house just luxury brands.
For starters, DLF Ltd is set to open a luxury mall, branded Emporio, in the southern suburbs of New Delhi. Emporio will be a 300,000 sq. ft mall that will be home to a host of luxury brands such as Tiffanys and Salvatore Ferragamo and many of the high-end Indian designers. “Obviously there’s a huge appetite for luxury space,” says Kajal Aijaz, head of the project for DLF.
“In the last 10 years, consumerism has been on the upswing.” It also helps that a clutch of domestic brands have also started vying for the luxury consumer, be in diamonds, watches or apparel. “Now there are enough brands to hold up a luxury mall,” says Kishore Biyani, managing director of Pantaloon Retail (India) Ltd, who is considering reopening Crossroads as Mumbai’s only luxury mall.
The city’s heritage precincts, in Ballard Estate and Kala Ghoda, are also being seen with renewed interest as potential sites for new luxury malls.
“Everyone is choosing locations, and these choices will be crucial for the success of the brands because some of these developments will work well while some brands will find themselves stuck with bad neighbours and in unsuitable neighbourhoods,” says Simrita Dhillon, an independent consultant for international luxury retailers in India.
But with airport retailing being privatized, the likes of Emporio, and Pantaloon, India’s largest listed retail company, luxury shopping could start getting out of hotels in coming years.
However, a majority of the hundreds of malls that are currently being built across the country are not going to be the right locations, say some high-end retailers. The luxury brands want to be located in a mall that provides the proper ambience similar to what you might find in a five-star hotel, they say.
Still, Sonica Malhotra, executive director of New Delhi-based developer, the MBD Group, says luxury malls will provide something that shoppers don’t get at hotels: Convenience and greater choice. The company is building the two million sq. ft MBD Zephyr, a mall in Bangalore that will feature a luxury hotel, entertainment, premium retail and 150,000-sq. ft of luxury retail.
“At the end of the day, it’s frustrating to hop from one place to the other looking for luxury retail,” Malhotra said.
Pranay Sinha, president and CEO of Select Infrastructure Pvt Ltd, says that while there is a strong demand for luxury retail right now, an oversupply of new stores could dilute the market and make the brands less exclusive. He is building the 1.4 million sq. ft mall called “Select Citywalk” in Delhi’s Saket area.
The project includes cinemas, office space, a shopping centre and a 60,000 sq. ft dome-shaped structure at the top dedicated to luxury retail, he said. The luxury shoppers will have their own lobby, concierge and “somebody to take you up to the dome,” and is expected to open by September, he said.
Prashant Gopal, Saurav Sarkar, Gouri Shah, Rana Rosen and Rasul Bailay contributed to this story.
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First Published: Thu, Mar 29 2007. 12 14 AM IST
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