MUMBAI, India — Diane von Furstenberg may have little in common with French shoe designer Christian Louboutin or executive director of Harrods Michael Ward, but all of them were here to discuss the $6 billion Indian luxury market at the Mint Luxury Conference.
This story first appeared in the April 2, 2012 issue of WWD. Subscribe Today.
A major concern was the announcement by the Indian government last November that requires brands that wholly own their single-brand stores in India to source 30 percent of their products from India. This condition implies that global brands that come into the country without a local partner would have to source at least a third of their materials from India.
“The new regulations in FDI are a joke in the perspective of the luxury goods industry,” said Armando Branchini, executive director of the Fondazione Altagamma, which represents more than 70 Italian luxury brands. “Thirty percent of what is retailed in luxury has to be made by cottage industries and local craftsmen in India; it will be impossible for luxury goods, which represent a culture, a philosophy, a heritage, a DNA of a brand and a product line to move to change the business model to multibrand to fit into these markets.”
He said that some of the old problems continue. For example, customs duties are very high, three times more than those in Europe and at least two times higher than the custom duties in China.
Despite all the regulations, the luxury market is expected to grow fast in the next three years. Neelesh Hundekari, principal of AT Kearney Ltd., observed that the Indian luxury market was growing at 20 percent a year and would be worth $15 billion by 2015.
“Those not buying in India could be about 25 percent of this latent market. The other part of it is people who have the money and don’t spend. I am not sure whether marketers are going out aggressively and capturing that market,” he commented.
In the last three years more than 15 luxury brands have entered India, with more biding their time and searching for the appropriate business model.
Mark Henderson, director of Walpole, the British association that has more than 100 members from British luxury companies, said that British companies were slowly entering the luxury space in India, but that “tax on luxury brands, import duties, infrastructure, are some stumbling blocks for luxury brands to come to India.”
Von Furstenberg, who was the keynote speaker, brought with her a sense of passion and possibilities. She said that she focused on “real design at affordable prices” and considered herself a “feminist because it’s my mission in life to empower women — through my work, through mentoring, through philanthropy.”
Louboutin, whose first store in India opened this year, said, “From a business point of view it makes sense to open a store in a country where you have lots of customers. You can ignore one or two requests, but it came to a point that I couldn’t ignore requests from Indian clients [at my London store] anymore.”
His own association with India goes back many years, and the country has inspired his shoes and bags. “You can find a lot of things, even travelling around your bedroom … so imagine what the world would throw up. I like archaeology, architecture, fine arts as well, but none of these influences are literal,” he said.
“The center of luxury is shifting. Today, luxury is exploding in Asia,” said Abhay Gupta, who has just launched Luxury Connect, a company to add a practical edge to the market with training and education, consultancy, sourcing and e-commerce. “There is a sea change in the attitude to luxury in India today, but for luxury companies coming into India there are two big challenges: one is in terms of real estate and the other is the knowledge and the experience for selling luxury, which is really like selling a dream.”
Gupta was earlier executive director of Blues Clothing Company, which brought Versace, Corneliani, John Smedley and other labels into India.
He observed that there will be 209,000 ultrawealthy households in India by 2015–16, and the country’s luxury market has seen growth of 20 percent from $4.77 billion in 2009 to $5.8 billion in 2010, with a major share going to the luxury apparel and jewelry segment. He also added that 1.76 million people will be needed to work in the industry in India by 2022.
Retailing remains challenged, however, even as consumers are enjoying a boom with an evolution of shopping malls, several of which are dedicated only to luxury, including DLF Emporio in New Delhi, UB City in Bangalore and Palladium in Mumbai.
Ward said Harrods’ 1-million-square-foot store is equivalent to “40 percent of the retail luxury industry of India.”
“We are increasingly being taken to the land of the average. But customers don’t want more of the same; they want the different. And this is repeated all along high street — a poor environment. Products are today engineered for margins, and not for exquisite taste,” he said. Instead of “knee-jerk reactions to cut costs” and going into the land of the average, Ward suggested doing what Harrods does.
“Our single motto is when we walk into a room we have refitted, we go ‘Wow!’ ” he said.