Mumbai: American retailer Saks Fifth Avenue sent a delegation of senior executives to size up India’s small but fast-growing market for luxury goods last week, evincing renewed interest in a country it first eyed eight years ago.

Saks’s senior vice-president of international business ventures David Pilnick, who was accompanied by other senior managers of the retail store chain, met real estate developers, consultants and retailers in Delhi and Mumbai on the visit, according to two people who declined to be named.

“The progression in India for a potential market entry and participation in luxury multi-brand retail is very preliminary and exploratory at this point," an advisory company that represents Saks said in an email reply to questions from Mint.

The New York-based seller of high-end apparel, shoes and handbags, beauty products, jewellery and other accessories is among the first multi-brand retailers of luxury products to explore the Indian market, which the government opened up to overseas store chains in August 2012 by permitting 49% foreign direct investment (FDI) in supermarkets and department stores and 100% FDI in single-brand retail, with riders such as the need for local sourcing.

Others that compete in the high-end retail segment are Galeries Lafayette of France, London-based Harvey Nichols and Bergdorf Goodman, another American retailer.

The Saks team met senior officials from the retail unit of conglomerate Aditya Birla Group, which runs a high-end multi-brand department store, Collective, and has brands like Allen Solly and Van Heusen under the umbrella of Madura Fashion & Lifestyle, said one of the two people cited above. An email sent to the Aditya Birla Group to confirm the meeting did not elicit any response.

The first time Saks, which was acquired by Canada’s Hudson’s Bay Co. in July for $2.4 billion, took a look at India was in 2005 when it sent a team of executives to the country to gauge the retail market.

At the time, multi-brand retailers were only allowed to operate via a cash-and-carry or wholesale model, which essentially did not allow them to sell directly to end-consumers.

Since the government opened up multi-brand retail to foreign chain stores, there has only been one significant overseas investment. UK-based Tesco Plc teamed up with Tata group’s Trent Hypermarket Ltd with an initial investment of $110 million in a joint venture (JV) that was cleared by the Foreign Investment Promotion Board in December.

Other retailers have been more circumspect amid resistance to their entry from some political parties and local traders.

One possible business model that Saks could adopt is a franchise agreement with a local company using its brand name, analysts said. The second route could be a JV. A third option is the cash-and-carry model in which it can own the back-end and an Indian company the front-end.

“The entry under any of the business models, except franchise, which can happen quicker, will take over a year at least," said Pinaki Ranjan Mishra, partner (retail and consumer practice) at EY.

India’s luxury goods market is growing at over double the pace of the global luxury market. The Indian luxury sector is estimated to be close to $6 billion a year and growing at 15-20% a year, according to a March 2013 survey by Bain and Co.

The luxury goods segment has been less affected by the economic downturn in India than the overall retail sector, given the high number of ultra-rich individuals who are immune to economic cycles. The number of ultra-high networth households grew by about 24% to 100,900 in the last fiscal year, according to an August report by Kotak Wealth Management and Crisil Research.

“India has a lot of people who would be willing to spend 50,000 or 1 lakh in a store positioned for them. The luxury auto and luxury apartment sales are happening. So luxury apparel departments can also work," said Ravi Shankar, founder of Probe Equity Research, a start-up that analyses financial information.

Luxury car sales in 2013 grew by 25% over 2012 to 30,000 units while overall car sales fell 10% to 1.8 million units—the first decline in 11 years, according to the Society of Indian Automobile Manufacturers.

Many luxury brands are interested in India, but “brands are cautious of their India entry as this is a complex market", said Pankaj Renjhen, managing director (retail services), Jones Lang LaSalle India.

Close to 90% of the luxury market is concentrated in Mumbai and Delhi, and the remaining in Bangalore and a few other cities. The luxury retail market is limited to the Palladium Mall in Mumbai, DLF Emporio in Delhi and UB City in Bangalore, besides a few five-star hotels. However, in the next five years, Mumbai and Delhi-NCR region are expected to get two new luxury malls each and even Chennai is expected to get one new mall, said Renjhen.

Shally Seth contributed to this story.

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