Luxury Shopping in India

Is India ready for luxury shopping? Let us look at this question logically. Luxury shopping is a function of considerable disposable income, which only now coming back into evidence after the global economic slowdown in India or for that matter in the rest of the world.

The foundation of luxury is customer service that is what we are hearing. The designer’s growing chain of fashion houses we will see because of the economic crisis is that you lose a certain amount of that aspiration customer. Somebody who will buy a couple pairs of shoes over the course of the year is making other choices. The core for a luxury brand is a customer with very considerable wealth.

The issue of who will remain wealthy over the next two years, and how they might spend their disposable cash, was very much on the minds of the panelists, including top marketers with experience at some of the most storied names in luxury items and apparel — from Gucci and Prada to Tom Ford and L’Oréal.

As long as there’s affluence to any degree, the yen to go buy luxury goods follows – to that degree. So there is demand for luxury brands right now but when it comes to India. I don’t blame luxury players for looking only at the three major metros of Delhi, Mumbai and Bangalore for expanding their foot print right now. After all these are cities where luxury retail is really understood and where a certain degree of demand for luxury retail exists.

The critical mass needed to sustain profitability of luxury stores is currently not available even in these cities. There’s no getting way from the fact that at the core, Indian retail will continue to be defined by value consciousness which means the value retail will always have the upper edge in terms of numbers. And so, there are still only two full fledged luxury malls operational in India.

On the other hand Indian shopper sensibilities and inclinations are slowly evolving. We are beginning to see wealth creation happening even in the smaller cities and towns of India. So, other than the three major metros of India cities like Chennai, Pune, Hyderabad, Kolkata and Ludhiana are also on the radar for the future expansion plans of luxury retailers. On the first place these cities have always been traditional centers of commerce and they also have a high concentration of old money families,, But luxury retail coming there in force over the next two years? No, really it is not so.

At this point of2010, developers are still a bit leery of planning luxury malls anywhere in the country .That is not to say that there’s o evidence of luxury retail at all – there certainly are luxury shopping components to existing malls. Also, 5 star hotels and similar establishments have a component of luxury shopping.

Are any new luxury brands planning as entry into India right now? Yes – but as retailers not as mal developers. In that spirit several brands have already tied up with local partners so that they can get football on Indian soil. In fact a few of them are even talking to potential partners for JVs.

Even so, luxury retail is going to face some challenges in India over the next two years. During the boom period, there was an incredible demand because the stock market was sizzling and that resulted in considerable disposable income Compared to those high times matters are still sort of stagnant on the luxury retail front. And why should that surprise anyone? After all, luxury retail requires very high initial investment .There are pricey factors like standardized fit out procedures high import duties and what have you to consider.

Also, it doesn’t make much sense to launch mall at the faltering beginning of revival in Indian retail – the gestation period to break even in this business can be as long as far as 5 to 7 years. And we’re not even talking of the high rents applicable to luxury retail rents high enough in cities like Mumbai to cross the eyes of even the most well heeled international brands.