For expansion-minded retailers seeking to tap China and India, the learning curves are steep and the surprises are numerous.
This story first appeared in the January 13, 2011 issue of WWD. Subscribe Today.
“The real growth opportunities in China are in the second- and third-tier cities,” such as Xian, Xiamen and Tianjin, said Patricia Pao, chief executive officer of Pao Principle consulting, in her presentation on 10 things luxury marketers in China should know. In the secondary and tertiary cities, Pao said, there’s more purchasing power, better leasing terms and better manpower.
Based on her firm’s research of China’s luxury consumers, Pao advised the Chinese market is “regionally fragmented with different psychographics and needs, and that Chinese sales people are quick to judge customers and not always nice to them. You need to train sales people to not judge a book by its cover.”
She also said consumers are increasingly discerning and that Chinese want to receive something extra in a transaction. It could be a gift-with-purchase, points or invitations to special events.
India is the world’s second-fastest growing economy behind China, and the fourth-largest economy in terms of purchasing power, next to the U.S., China and Japan, said Robert Damuth, economist and principle consultant at Nathan Associates Inc.
But there’s no telling when the country will liberalize its policies on foreign investment, he added. Mom and pops, including small groceries and stores and street carts, account for about 97 percent of the market, Damuth said. Currently, multibrand retailers can’t enter India, except if they’re cash and carry operators. Single brands, like Tommy Hilfiger, can operate in India but can only be up to 51 percent owned by the brand.
Damuth said growth in spending by consumers in India is projected to rise 7.5 percent, following the 10-year trend; 700 million Indians live in 627,000 rural villages; half a billion Indians live in urban areas. TV and cable are raising brand awareness, but it’s difficult to establish brand loyalty, and packaged food and bulk purchasing are not popular. “Indians have little storage space and buy in smaller quantities with higher frequency,” he said. India’s retail market will grow from a current $467 billion to $681 billion in 2014.
Elsewhere at NRF:
• The closing session featured Terry Lundgren, Macy’s Inc. chairman, president and chief executive officer, interviewing four retailers and two consultants on matters ranging from leadership to innovation. “If you’re not overinvesting in mobile, you’re making an enormous mistake,” said Gilt Groupe president and founder Kevin Ryan. Gordon Segal, founder and retired ceo of Crate and Barrel, said the culture is to get the customer into the store, but “you gotta serve the customer the way they want to shop.”
When asked for one word to describe retail today, HSN ceo Mindy Grossman said “boundary-less.” Ryan said “curated.”
• Outlier Co. of Atlanta showed mobile loyalty and gift cards that dozens of retailers have signed up for, including American Apparel, American Eagle, Arden B., Wet Seal, Crocs and Steve Madden. The cost of Swagg varies by retailer, but it is less than credit card interchange fees, said Outlier senior manager of product marketing Amy Hollister.