New Delhi: French luxury brand Hermès, famous for its scarves and ties, is headed to India. The Paris based Hermès Group has applied to India’s Foreign Investment Promotion Board (FIPB), the government agency that regulates foreign investments in the country, for permission to sell Hermès products through retail and wholesale outlets.
The company has formed an alliance with Khanna Specialty Retail and Distributors Pvt. Ltd, a firm promoted by Ashok Khanna, the entrepreneur behind the Rishikesh-based luxury spa, Ananda.
Hermès will hold a 51% stake in the venture and Khanna Specialty Retail the rest, according to a person close to the development who did not wish to be named. Indian laws currently allow 51% foreign investment in single-brand retailing.
Hermès is the latest in the long line of luxury brands including Louis Vuitton, Chanel, Valentino and Ermenegildo Zegna that have been lured to India by the promise of a large and growing market.
A 2006 study by investment bank Merrill Lynch and IT consultant Cap Gemini said that India had 83,000 dollar millionaires. India’s $850-billion-plus economy grew by 9.2% last year and is estimated to grow by 8.5% this year.
According to an industry study titled India Retail Report 2007, the Indian market for luxury products is worth $450 million (Rs1,845 crore) and growing fast. The market for luxury cars, it added, is growing by 50% a year; luxury watches and jewellery by 40%; and wine by 30%.
Hermès is currently scouting for space in New Delhi and has talked to East India Hotels, which runs the Oberoi chain of five-star hotels, about renting space in the company’s New Delhi hotel.
Luxury retailers find the scarcity of appropriate retail space the biggest challenge in India. Most of them prefer to do business from stores located in five-star hotels.
The New Delhi Oberoi already has stores of Louis Vuitton and Christian Dior. A few developers are in the process of developing luxury malls, where brands such as Hermès can showcase and sell their wares.
Most luxury brands operating in India, including Chanel and Louis Vuitton, operate through franchisees.
The companies have said they will invest in Indian arms when they are allowed to operate through wholly owned subsidiaries.