The market for luxury brands in India is pegged at approximately $ 5.75 billion and is growing at about 20 per cent annually. It is a well-known fact, however, that in India, high-end malls are hard to come by and the sales at five-star hotels are still meagre.
The most important criterion for housing a luxury brand is the ambience that the location can offer. While luxury brands are aggressively looking to expand footprint, real estate developers have shied away from building high-end malls. This has forced the luxury brands to seek out heritage properties for setting up their stores. Designer wear brand Kimaya Fashions has set its shop in a 16,000 sq ft bungalow in the upscale Jubilee Hills. "It is not necessarily out of choice; this is the only way to expand presence in India because of the limited options,” says Pradeep Hirani, Managing Director, Kimaya Fashions. Genesis Luxury has experimented by opening a store for Italian menswear Canali at Mumbai's Palladium Mall. A luxury consumer will prefer to shop in an environment that brings out the best values of the brand that they patronise. Even Tag Heuer has opened a 600-sq ft store in Bangalore's Phoenix Market City Mall. Hotels across cities such as Mumbai, Delhi and Bangalore account for as much as 80-90 per cent of luxury retail space in the country. While a luxury mall seeks rentals of Rs 550-600 per sq ft, standalone outlets and malls, with a mix of high street brands, are available at half the cost.
Dearth of space
Since luxury high streets, such as New York's Fifth Avenue and Madison Avenue or London's Bond Street, are absent in India, most luxury brands choose to open their outlets in five-star hotels. “Luxury brands need an environment that replicates the brand values of luxury in properties that they chose to set up their boutiques in. Hence, the options in India so far have only been 5-star hotels and a few luxury mall spaces such as DLF Emporio in New Delhi, the UB City in Bangalore and to some extent, the Palladium Mall in Mumbai,” says Roasie Ahluwalia of Genesis Luxury Pvt Ltd. In Mumbai, nothing less than locations such as Breach Candy, Colaba or Linking Road sound really viable for luxury retail. In Delhi, with locations such as Connaught Place and Khan Market, the opportunities for luxury retailing are limited. Same is the case for Bangalore’s MG Road. “Right now in India there is definitely a paucity of the right luxury infrastructure outside of 5-star hotels. The right malls are very few and there are hardly any high street options that provide a luxury heritage location advantage,” says Ahluwalia.
Transparency, quality of infrastructure and legality are other concerns. These complications tend to become deterrents for international luxury retailers, who find themselves unable to sort them out and do secure, profitable business. The returns from businesses, such as jewellery, are higher as compared to those that a Burberry, Armani, Fendi or Gucci store would fetch either on a pure rental or a profit-sharing basis. Will the footfalls this store generates justify the high rentals? This is where the constraints of infrastructure come into sharp focus. Luxury retail consumers expect the right kind of convenience while visiting such a store. The footfall versus rental cost is therefore a concern.
The format of luxury retail is still not understood very well in India. It is important to create an atmosphere for a luxury retailer in which he can attract footfalls and then convert these footfalls to revenue.