NEW DELHI — The woman in the crimson sari is making a beeline for the cherry bags.

Immediately upon stepping into this city’s sole Louis Vuitton store, a quiet boutique in the lobby of the lavish Oberoi hotel, her eyes are on Vuitton’s new monogrammed cherry bag collection. Within minutes, she’s swapped the luxe black leather handbag she carried in for the fruit-emblazoned Speedy model, checking herself out in front of the mirror with a wide smile. The red details on the bag almost exactly match the color of her bright, floaty sari.

Welcome to the world of fashion in modern India, where traditional styles like the sari and brand new luxury must-haves are starting to coexist. It’s an interesting mix not seen in many other places in the world, and retailers couldn’t be happier: After all, India is considered by many to be “the next China” as far as luxury consumption and development, and the next few years are expected to bring in a rush of foreign brands hoping to establish themselves before an expected retail boom.

Expansion into the country is happening already. Louis Vuitton, frequently among the first luxury brands to enter a potential market (they had the foresight to open in China 13 years ago), now has two stores in India: the two-year-old shop at the Oberoi and a boutique that opened in September in the swank Taj Mahal hotel in Mumbai, the city formerly known as Bombay. Chanel opened its first India store last month in New Delhi’s Imperial Hotel. And Donatella Versace just made a splash on the front page of the country’s national newspapers when she announced, during a visit to Mumbai in March, that Versace would be opening five boutiques in the country next year.

“As soon as [China’s market] started to grow, everyone began looking at India’s population and demographics and realized that they needed to include us in their global plan as well,” said Superna R. Motwane, editor in chief and publisher of Indian versions of L’Officiel and Seventeen magazines. “A lot of people are banking on India as the new China, and we’re all just keeping our fingers crossed that it actually happens.”

This story first appeared in the May 5, 2005 issue of WWD.  Subscribe Today.

A Merrill Lynch report issued last fall predicts that India, which currently has around 5 million luxury consumers, is about a decade behind China right now as far as market development. The past few years in China have seen many companies scrambling to open stores and establish a presence before the country’s retail market explodes, as it’s expected to do in the next five to 10 years. Now that India is being identified as the next big place to watch, many foreign brands have already started looking into expansion options there so they’re not forced to rush in at the last minute once again.

The similarities between the two countries, at least on paper, are undeniable. Both have populations of more than a billion people (the two combined make up nearly 40 percent of the world’s population), which makes for an enormous amount of potential customers. Both have quickly growing economies and emerging wealthy classes with an increasing number of businesspeople and entrepreneurs who have lots of cash to spend. And both have been opening their doors to Western ideas, companies and lifestyles over the past decade.

These alluring traits have positioned India and China as prime retail spots, and foreign brands are beginning to salivate over the potential success in both markets in the next few decades. But despite the basic similarities, the two neighboring countries have many differences that will shape the way foreign luxury brands — many of which are now established in China — will start to approach the Indian market in the next few years.

The main distinction between China and India is possibly most obvious on the streets of each country’s main cities. China, which was closed off to the outside world for decades under the Communist regime, had long abandoned fancy fashions for the dark, simple suits that are still daily attire for many in Beijing, Shanghai and elsewhere. When Western brands began trickling in about 15 years ago, their colors and styles were seen as a breath of fresh air for fashion lovers who previously had to work with the dowdy shapes and gloomy palettes sold at home.

India, on the other hand, has never lost its sense of traditional style even as its wealthier consumers have developed an interest in Western designers, travel and luxury brands. A walk through the busy streets of New Delhi or Mumbai shows that women regularly wear saris or the salwar kameez, a three-piece outfit consisting of pants, a tunic, and a long scarf. And although many women, particularly younger ones, have begun embracing a very Western style of daily dress, they still have closets full of these traditional Indian designs, which are still the standard formal attire for the country’s frequent, wedding-heavy social functions.

The result has put foreign retailers in a position where, unlike China, they need to meet the need for Western goods while still being somewhat mindful of India’s own fashion history. “This is a culture that still needs Indian clothes a lot,” said Motwane. “I could never have a wardrobe of all Western clothes. But what we’re seeing is that the Western clothes are starting to blend in very well. A woman can wear a suit to the office and then a sari in the evening to go out. Or she can wear a salwar kameez to the office and then a short dress to go out. We have been able to keep our traditional clothes and mix our wardrobes with Western styles.”

But though big-name foreign brands are increasingly showing up in the Indian mainstream, what is different about Indian customers, unlike those in many other Asian countries, is that they still prefer buying pieces that are unique or less mass-produced — a trait they’ve carried over from their traditional clothes, which are often custom-made and always colorful and creative.

“The Indian customer is very individualistic,” said Prasanna Bhaskar, India retail manager for Louis Vuitton. “You will not see 30 people carrying the exact same bag in this market. Unlike a place like Hong Kong, where you do not need to remember what bag you sold to a customer’s sister-in-law, in India you do. They do not want to be sold the same design.”

What’s also a challenge for foreign brands is setting up a high-end, stand-alone store in a country where shopping has long meant a trip to a local market. A dearth of central destination malls has, for now, forced brands into safe spots like the lobbies of high-end hotels. Foreign retailers in India are finding that they’re still in untested territory, which often presents difficulties that are not unlike the problems they faced in China until relatively recently.

“We do think the market in India is going to explode in about five years, but there are still plenty of challenges here,” acknowledged Bhaskar of Louis Vuitton. “Infrastructure is probably the biggest challenge in India. There are no roads here that you could easily walk on in Louis Vuitton shoes, and that’s an issue. Location has always been a challenge. There are no luxury malls here yet, and even if there were, there are not yet enough [high-end] brands to fill them. We are still waiting for the day when there are at least 10 luxury brands here who can move into a luxury lifestyle mall, like Pacific Place in Hong Kong.

“The chance of an Avenue Montaigne developing in India is very low. We do not have the kind of roads and promenades here that customers could easily walk down. A street of high-end retailers is definitely a distant dream.”

One of the other big hurdles for luxury brands establishing a presence in India is getting customers to stay at home to shop. Wealthy Indians have long traveled abroad — primarily to spots like London and Dubai — to buy their Western wardrobes each season. Even with more stores opening in the country, going abroad maintains its appeal because of the wide selection of available brands, although luxury retailers say they are finally convincing customers that they can shop just as well in India.

“It took years for people to start getting used to the idea of shopping for international brands here,” said Anna Bredemeyer of Entrack International, who manages the Mont Blanc, Canali and Girard-Perregaux stores down the hall from Louis Vuitton in the Taj Mahal hotel in Mumbai. “Part of the problem was just the mind-set about the currency. People were used to shopping abroad, and a higher-end product that costs 100 pounds [$190] in London would translate be the equivalent of about 80,000 rupees here. It’s the same price, but just the thought of spending in the thousands versus in the hundreds — people still felt like they were spending less if they shopped abroad.”

Taxes on imported luxury goods in India have, in fact, raised prices in the country by up to 30 percent more than stores abroad. Companies like Louis Vuitton absorb some of the taxes to keep their prices closer to the world standard, a practice they also maintain in other countries with high import tariffs, like China. But the difference in cost isn’t much of a sticking point for shoppers who have the money to spend, Bhaskar said.

“I think Indian customers are much more comfortable shopping in our stores and are willing to pay a premium for the service they get,” she said. “Our Indian customers lead lives of royalty. They do not like to queue up. They do not like the idea of going to a busy store where they’d be one of 700 customers at a time waiting to see a bag. I have heard this time and again from clients who say that they prefer to come [to our local stores] because a bag will be reserved for them or because they can easily come often and spend an hour in the store. They are very conscientious of service, and they become very loyal if you offer them good service.”

Motwane added: “What customers are really starting to look for here is the buying experience. For shopping in India, this is a very new idea. But this luxury customer the brands are now after is a well-traveled woman. She knows what the buying experience is like in a place like New York. If you can replicate the experience here that you would get anywhere in the world, then that’s what’s going to grab your customer in India.”

The trouble is simply finding the location to grab them. Retailers estimate there are about 25 to 30 pockets of wealth scattered around the country, which can be tough to tap into with only one or two stores in New Delhi and Mumbai. And both of those cities are so spread out that it can take hours to get from one section of town to another.

“Brand awareness is not a problem in India,” said Swapan Bharma, retail head of Bulgari, which has a shop in the Oberoi hotel in New Delhi. “What is the problem is just getting people to the store.”

In fact, unlike China, where many brands have to work on increasing their recognition, most Indian consumers are well aware of Western labels and the products they’re known for. A growing number of local magazines has helped, and there are four dedicated almost solely to fashion: Indian versions of international titles L’Officiel, Cosmopolitan and Elle, and locally owned magazine Verve.

“When I started L’Officiel three years ago, everyone told me India was not ready for a luxury fashion magazine,” said Motwane. “But looking back, it was absolutely the right time. Today, it has a circulation of 50,000. It does very well with readers, and very well with advertisers. Obviously, the readers were ready for an international-quality magazine with a local focus.”

She followed up with the launch of Seventeen in 2003, targeting India’s very youthful demographic (the median age is about 24 years old) who are expected to be a big consumer base for the country in the future. The pages of such magazines mirror the changes in the country, combining local Indian styles with Western fashion — a mix that everyone expects to see more of as companies continue to flow into India and set up shop.

“Right now, India is a country where you cannot walk out in the morning and buy a Gap T-shirt, or a Prada suit, or a pair of Diesel jeans,” Motwane said. “Now, I think every brand is probably going to be here in the next two years. It will be exciting to see what happens.

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