BackOpportunities aplenty; challenges plentiful
Opportunities aplenty; challenges plentiful
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The great Indian luxury story is yet to happen. Reason? Even though luxury-brand retailers began building their presence in India almost a decade ago, they are still struggling with basic infrastructure issues and other bottlenecks such as the tariff structure and absence of the right kind of marketing vehicles to communicate with their target consumers.
Still, luxury-brand retailers are doing all they can: opening new stores, bringing in new brands and scouting for opportunities in cities beyond Mumbai and New Delhi. They are banking on India’s surging salaries and the increasing willingness of Indians to spend on luxury products. Most companies, however, realise that they are up against things they might not necessarily control. “While market forces may indicate that the moment is right for luxury goods to be in demand in India, the fact is, we have miles to go before we realize the real potential of this market,"says Anna Bredemeyer, manager (marketing), MontBlanc.
Many companies have had to revise their expectations for growth after realizing that the market has far too many barriers and constraints. The most basic of these is finding an appropriate place to set up shop and provide high-end services.
Most major cities across the world have ‘high-streets’ dedicated to luxury goods shopping. New York has its 5th Avenue; London has its Oxford Street; and Paris, the Champs Elysees.
“Unfortunately, we don’t have any high streets in India," says Tarun Joshi, CEO of Brandhouse Retails Ltd, the exclusive franchisee in India for Dunhill and Escada. And given that companies have no time to waste, “you can’t wait for one to emerge", he adds.
Thus, the biggest challenge that luxury retailers face in India is lack of suitable space and, in particular, a place where several luxury brands can congregate.
“In Paris, we have five Louis Vuitton stores and the biggest of them is spread across 10,000 sq. ft. In New Delhi, we have only one on a 1,500 sq. ft area," says Tikka Shatrujeet Singh, advisor to the chairman of Louis Vuitton. Singh says Louis Vuitton, which so far has only two stores in the country, in Delhi and Mumbai, would like to open at least one each in all the metros and big cities, but it is not able to do so because of the unavailability of space.
“Luxury retailers are clearly dissatisfied with the present state of the retail scenario in the country," agrees Devyani Raman, CEO of the India chapter of the Luxury Marketing Council Worldwide, and a luxury-retailer consultancy, Leading Brands of the World. As there is no large space available in the main cities, most retailers are taking refuge in five-star hotels. “The place where we open our stores has to match our profile" says Singh.
But things are beginning to change, at least in the Capital. A Delhi-based property developer, the DLF Group, is opening a mall in the city that will cater exclusively to the needs of luxury retailers. Prekash Ramsingh, CEO of a top-of-the-line electronics brand, Bang & Olufsen India, says that he has almost decided on the space his company will occupy in the mall. “Getting the right space is crucial for luxury brands to be able to successfully reach their target audience and create the right impact," says Sanjay Kapoor, managing director of Genesis Colors Pvt. Ltd, the company behind the well-known Satya Paul label.
The other big challenge that luxury retailers in India are grappling with is building awareness about their brands. Most of them argue that the country lacks the ideal marketing and communication channels that can help them reach their target-consumers. “Since we are not a mass-marketer, there is no point in us advertising on popular television or print platforms. We are niche players and we need niche communication platforms that go with our profile and also address our target consumer," says Singh.
“India is a multidimensional society. Reaching out to one’s core consumer group is almost like peeling an onion," adds Bredemeyer.
In countries such as the US and UK, luxury brands advertise in publications such as Vogue, GQ and Vanity Fair, which have a loyal readership. The brands, therefore, can be assured of being seen by their target audience.
But in India there are fewer publications with such power. “Chanel is still concerned about the distribution and circulation of Indian magazines. We hope it will improve with the entry of the big global players," says Xavier Bertrand, managing director, Chanel India Pvt. Ltd.
As the media industry wakes up to this opportunity, luxury retailers will have more options. “There is such a huge boom in very niche magazines on fashion, lifestyle, golf," says Amit Dutta, head of marketing, consumer cards, at American Express India. “As they start getting more segmented, you will see more advertising." Though new platforms are emerging and some ambitious marketers are creating properties that will only cater to luxury consumers, companies in the business of luxury brands insist they are yet to see any effective channels.
These retailers face another problem: not having enough trained professionals to manage their stores. Word-of-mouth advertising is an important factor in case of luxury goods, so, along with the quality of the product, the consumer experience, too, has to be flawless. Most marketers rue the fact that there are not enough personnel trained to serve luxury-brand consumers . Leading players such as Chanel are getting their employees trained by professionals either in Paris or India. Yet, retailers only have so much control over the luxury experience they provide in India. “High streets look to me like something of a very distant future. To start with, we can do a great deal by simply keeping our streets clean and buildings well preserved," says Bredemeyer of MontBlanc.
Ravi Thakran, group director, South Asia, Moet Hennessy Louis Vuitton (LVMH Group), says, “If the client lives in Juhu (in Mumbai), it’s very unlikely that he will go through heavy traffic and tolerate bad roads just to buy a bag from a store in South Mumbai. When the experience is more about pressure than it is about pleasure, you can be sure that the consumer will look for other alternatives. He is more likely to pick up the bag from Dubai or Singapore."
There are also other reasons for consumers to shop abroad: Indian duties and tariffs. Many luxury consumers frequently travel abroad and can easily pick up an item that costs more in India. Thakran says taxes in India are the highest in the region. Retailers have to work hard to provide an equal experience and added convenience to entice these consumers to shop locally despite added costs. Still, marketers are betting that luxury-brands will become objects of desire for the large Indian middle class population.
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