Luxury back in style as economy recovers4 min read . Updated: 09 Dec 2009, 10:20 PM IST
Luxury back in style as economy recovers
Luxury back in style as economy recovers
Mumbai / New Delhi: Retailers of luxury clothes and accessories are finally seeing signs of a recovery, even as India saw a surprise 7.9% economic growth in the second quarter.
At least 40% of the new Gucci fall-winter collection that arrived in early November at the eponymous store in the Galleria at Mumbai’s Trident-Oberoi hotel was picked up in a week, a sales executive at the store said.
Also, the Rs28,500 apiece perspex (poly fibre) bags in pink and yellow from the Jimmy Choo Pep collection that was unveiled in India a week after its global launch in mid-November are among the fastest selling this winter, a sales representative at the designer’s store in Galleria said.
“The slowdown that started last September has now come full circle with sales picking up early August this year," says Charu Sachdev, founder and chief executive, TSG International Marketing Pvt. Ltd, which retails and markets brands such as Moschino, Alberta Ferretti, Jean Paul Gaultier and Stella McCartney in India.
Sales staff at luxury stores at Galleria—home to stores such as Gucci, Salvatore Ferragamo, Todds and Versace—are upbeat. “We have approximately five-six walk-ins on an average day but the conversion is close to 60% (in the past two months)," said a salesperson at Versace.
Conversions are high at Delhi’s Emporio mall, too, which houses 75 international brands and 111 Indian brands and designer labels under one roof, including heavyweights such as Todd’s, Louis Vuitton Moet Hennessey (LVMH) and Armani.
The luxury clothes and accessories market accounts for about 3% of the Rs1,750 crore organized retail market in India, where family-run stores are a dominant feature. But reviving sales in the segment is a good indicator of an economy that’s gaining strength, backed broadly by government spending, manufacturing, easy money policies by the central bank, and good farm output.
Consider this: at Hugo Boss, where the least expensive product is a pair of socks at Rs1,000 and suits for men kick in at Rs1 lakh, conversions are as high as 80%, according to Jyoti Chauhan, assistant store manager at the designer’s retail store in Delhi.
Until recently, spooked by a global economic slowdown, luxury brands such as Bottegga Veneta, Chopard, Roberto Cavalli, Givenchy and Davidoff, among others, ran extended sales and discounts as deep as 80%. The Murjani group, which marketed a number of luxury brands, entirely exited the business earlier this year to focus on premium brands, which are a rung lower.
“Last year, people were just being slightly more cautious and there were no impulse buys. Products which promised lasting value were doing much better," said Sanjay Kapoor, managing director, Genesis Luxury Fashion Pvt. Ltd, which markets brands such as Paul Smith, Canali, Kenzo and Aigner.
Sangeeta Assomall, chief executive, Marigold group, which brought Judith Leiber handbags to India earlier this year, said: “We are meeting our targets of selling 10-14 numbers a month and expect this to increase to 15-20 per month over the next two months." The bags sell for Rs1-6 lakh.
The luxury market in India is different from that in mature economies, where clothes and accessories are the largest components. In India, jewellery and watches, at 31%, have the largest share of the luxury market, followed by clothes and accessories at 23%, said Neelesh Hundekari, principal at global consulting firm AT Kearney Ltd.
Meanwhile, purveyors of luxury are expanding their presence, even as they woo value-conscious Indian consumers with discreet discounts and gifts. The initiatives include lower inventory and, wherever possible, absorbing the luxury tax to make pricing globally competitive, said industry experts.
For example, the Emporio Armani store in New Delhi’s Emporio mall—the names are a coincidence—last year stocked inventory when it launched but now stores only one piece in each size. “From August till November this year, we have already sold 60 (pieces of) merchandise at the store and in the next two months we expect to sell at least another 20% before we go for sale in February," says Jawhar Abbas, the Emporio Armani store manager. “The response is very good and we sell about 40 items across categories everyday at the store."
However, the sales may have had their downside. “Consumers have got spoilt in the last year and ask us for discounts even when there is no sale," said a salesman at Aigner, while conceding to indulging the occasional regular shopper. He declined to be identified.
And in a mark of optimism that the good times are back, luxury marketeers are looking at expansion. “We are doing trunk shows to explore newer markets in tier-I and tier-II cities and have found a great response," says Kapoor of Genesis Luxury, who plans to have 50-70 luxury retail stores nationwide over the next four years.
Sachdev has also revived her plans for expansion as rents have fallen by up to 30% from a year ago. “We’ll have over 30 point of sales in the next five years up from the current seven," she said.
Brands have also started offering globally competitive prices despite a higher luxury tax being levied here. “Our consumers are well travelled and aware of prices… Hence, we, along with the brand, have to compensate for the higher taxes by offering competitive prices," says Anu Sabu, head marketing at Ethos Summit, a luxury retail watch chain that houses brands such as Cartier and Rolex.