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Business News/ Companies / News/  Rich lap up luxury goods with 2,000 bills

Rich lap up luxury goods with ₹2,000 bills

Unintended consequence: Note withdrawal spurs buying spree

Luxury retailers experienced a sudden uptick in business after RBI’s recent mandate to withdraw the highest denomination ₹2,000 note from circulation (Mint)Premium
Luxury retailers experienced a sudden uptick in business after RBI’s recent mandate to withdraw the highest denomination 2,000 note from circulation (Mint)

NEW DELHI : In the luxury tobacco market, weekend transactions are usually steady, except some upswing during the wedding season. But this past weekend, Raahul Kapoor, the co-founder of The India Cigar Club, a seller of imported tobacco, fielded an unusual number of inquiries. Most buyers had an additional query: “Do you accept 2,000 notes?"

The question offered a glimpse into the unintended repercussions of the Reserve Bank of India’s (RBI’s) decision to withdraw the high-value banknotes.

Luxury retailers experienced a sudden uptick in business after RBI’s recent mandate to withdraw the highest denomination 2,000 note from circulation. Although these bills remain legal tender, a reluctance to endure lengthy queues at banks and the potential association of high-value notes with unaccounted funds have driven the affluent to spend money on luxury items rather than deposit it in banks.

Kapoor’s other luxury venture, Surya Concepts, also received more than average inquiries for gold-dusted chocolate truffles and fudges. “We sold 4 lakh worth of truffles in 2,000 notes, unlike in any other month where we sell about 1 lakh worth," he said.

“It will not be surprising if we see a lot of people over the next few months buying massy luxury brands," Kapoor said.

The past weekend also saw a notable shift away from credit card transactions to cash, mostly in 2,000 notes, according to Vishal Anand, the CEO of Moonshine Food Ventures, which operates fine-dining restaurants such as Saga in Gurugram and Farzi Cafe in Aerocity, among others.

“The usage shot up a little bit, but people did not spend more just to get rid of the cash," he said. Anand said that the denomination had been out of circulation for a while now, “so most people knew this was coming". “We are accepting it and depositing in the banks," he said.

Other retailers also said they are open to accepting the 2,000 notes as the RBI has clarified that the bills remain legal tender. To be sure, the sales surge isn’t as significant as expected, said a retail executive requesting anonymity.

Others said it is “too early" to gauge the consequence of the announcement, said Kumar Rajagopalan, chief executive of the Retailers Association of India.

Titan Co.-owned jewellery store chain Tanishq said it continues to accept the denomination in cash in full compliance with regulations both in letter and spirit. “In any case, in Tanishq, we don’t get folks seeking to convert their unaccounted money due to our strict norms on PAN cards, etc., as per PMLA (Prevention of Money Laundering Act) norms. At present, I do not have any data or understanding of any significant jump in cash business in the last three days," said Ajoy Chawla, CEO of the jewellery division at Titan Co.

Safir Anand, a senior partner at the law firm Anand & Anand, which works with several luxury firms, said this panic buying could be a temporary phenomenon that will likely last a couple of weeks. A lot of this buying, he said, could happen in the bridge-to-luxury and luxury brands.

“As this is not akin to demonetization, for multiple reasons, there is some panic buying, but this should not last very long," he said.

Neelesh Hundekari, a partner in the consumer and retail practice at consulting firm Kearney, said: “They are accepting 2,000 notes at duty-free stores. And so, all avenues will be explored, and discretionary ‘stores of value’ things will see a short burst in demand," he said.

For online luxury retailer, which sells bags, shoes and clothing from over 100 bridge-to-luxury and luxury brands worldwide, orders shot up by 30% this weekend. Typically, the months of May-July are the weakest for the company because many customers travel abroad on holidays and shop from there.

“We have done 30% more business this month than we had anticipated, thanks to the weekend that went by. The average order value, which hovered around the 18,000-20,000 mark, also shot up to 26,500. Many customers asked us if we accept cash on delivery and would take 2,000 banknotes. As far as we are concerned, these are legal tenders for now, and we will continue to accept them," said Nakul Bajaj, founder and CEO of the retailer.

During the weekend, Mint observed a substantial increase in shoppers at prominent retail destinations in Delhi, including the Emporio mall, owned by real estate titan DLF. Luxury brands Louis Vuitton, Dior, and Tod’s witnessed a surge in serious buyers, surpassing the typical Sunday footfall. However, some representatives in the food and beverage stands inside the cinema halls were hesitant to accept the notes.

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Varuni Khosla
Varuni is an Assistant Editor at Mint. She writes engaging and informative stories on luxury brands, hospitality news, business of sports, business of advertising and marketing, gaming, tourism and travel, and the business of alcohol. She is skilled in communication, research, and analysis. Varuni is passionate about covering the latest trends and developments in the lifestyle and business sectors.
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Published: 24 May 2023, 12:06 AM IST
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