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Mohan Murjani brings his expertise to India’s booming retail scene.
Throughout a distinguished career that has included launching brands like Gloria Vanderbilt and Tommy Hilfiger, Mohan Murjani contends he was simply preparing for his ultimate professional task: bringing his business home to his native India.
“All of the experience I’ve gained over the years — and, in particular, within the fashion industry — has really been a prelude to me going back to India,” he said.
Murjani, who serves as chairman of the 77-year-old Murjani Group, is now “taking those values back home and trying to do the best we can to bring India into the global scene.”
Already Murjani has introduced India to brands like Tommy Hilfiger (within the country’s first single-branded international retail shop), French Connection and Calvin Klein. Earlier this year, the Murjani Group opened a 3,400-square-foot Gucci store, which is currently the largest luxury retail unit in India, and this month Murjani will open The Galleria, India’s first luxury mall. Over the next five years, the company plans to establish 500 single-brand retail stores.
Although Murjani’s achievements allude to an inviting Indian retail landscape, the process of establishing single-brand stores within India has been long and arduous. While international retail has been present for decades in much of Asia and the Middle East, from Hong Kong to Dubai, “India has always been bypassed,” Murjani said. “Until the mid-Nineties there were practically no retail stores as we know them today. All brands, even if they were foreign, like Lee or Benetton, were locally produced, so the product was not the same as what [Indian consumers] would buy when they traveled abroad.”
In addition, multibrand stores operated by overseas firms are still banned in India, while monobrand stores continue to require a local partner, although overseas firms can now own a majority. The change in Indian law to allow this has resulted in the recent rush of overseas luxury brands into the subcontinent.
Murjani believes India’s political history has been a major inhibitor to the country’s retail development. He traces the phenomenon back to 1947, when India gained its independence from the British Empire. “The way to be self-sufficient, and accelerate manufacturing and growth in India was to ban the imports of consumer products,” Murjani said. “Until 1987, it was technically as serious a crime to import a T-shirt into India as it was to import firearms or drugs.”
Even after India’s Prime Minister Rajiv Gandhi moved apparel imports out of the “banned” category in 1987, duty rates on imports of those products were as high as 200 percent, making it “almost impossible to develop brands in India,” Murjani said.
India’s economic liberalization program in 1995, though, ushered in a new dawn of retailing, including the establishment in 1999 of India’s first mall, Crossroads in Mumbai.
Less than a decade later, by the end of 2008, Murjani estimates there will be approximately 100 million square feet of retail space in the nation. “In India, everything is on fast-forward,” he said. “While the American consumer took 100 years to move from streets to malls, the consumer in India is being taken through that experience in a very condensed period.”
The rapid development of the Indian retail scene was a theme throughout Murjani’s presentation, as was the unique nature of the Indian market. Murjani, who grew up in Hong Kong and Shanghai as well as India, said the common misperception is that India and China are both developing in a similar manner in terms of luxury goods. This is not the case, he stressed. “India is not China,” Murjani said. “They are completely different.”
Nonetheless, it’s a fine time to be in the retail industry in India, as the population is experiencing unprecedented growth, Murjani said. Thanks to the development of India’s outsourcing industry, from simple credit card call centers to fully staffed American legal practices, the Indian consumer is now more sophisticated and has deeper pockets. The average salary in India increases more than 14 percent a year — the highest rate in the Asia-Pacific region — and the country has the largest number of billionaires in Asia. The number of “rich” Indian households has grown to 5.2 million, from just 1.2 million in 1996, according to the Murjani Group.
With an overwhelmingly young population — over 50 percent of all Indians are under the age of 25 — continued growth is certain, especially in light of India’s tradition of weeklong weddings.
“The amount of gifts given and purchases made [for Indian weddings] is astronomical,” said Murjani, pointing to a recent wedding where each of the couple’s 500 guests received a TAG Heuer watch. “Although that consumer may only be a luxury consumer for that one period, there are so many thousands of them that keep getting married every year. You really have a luxury base, which is uncharted.”
Still, India’s explosive growth does not come without challenges, many attributable to the country’s antiquated real estate policies. Unlike New York’s Fifth Avenue or London’s New Bond Street, India has no high streets, said Murjani, because property owners cannot ever be evicted in India. Adding to the difficulty of buying a property, he continued, is the fact that if a store was rented 50 years ago, “the ownership of that one store now vests in maybe 49 of his [the owner’s] descendents. To buy that location, you need every one of their signatures agreeing to the sale.”
Malls have had growing pains as well. “The first malls that were developed are now unsuitable for use,” said Murjani. As a result of improper zoning, poor marketing and lack of mall management, few retail tenants ever opened stores, and many of those who did quickly went out of business. “Now you have empty buildings with 100 different owners. For them to get together and decide what to do [with the property] is tough, and to buy each out is difficult. So these properties are just laying around.”
But finding real estate for internationally branded retail is not the only obstacle. Duties on imports remain high — around 35 percent — and, said Murjani, there is a “shortage of trained personnel, especially at the managerial level.” The Murjani’s Group’s Gucci operation relies on a Parisian Gucci employee to run the store, because “merchandising skills are just not available within India. You have to augment what you have in India to bring business to an international level.”
Still, Murjani believes in the potential of branded retail in his home country, pointing out that only 4.6 percent of India’s $300 billion retail industry is organized, versus 80 percent in the U.S. Organized retail is growing at 34.8 percent a year, and apparel constitutes 19 percent of that organized retail. He concedes that, because of high rental costs, “returns are not good in terms of retail,” yet.
But the brand demand is there, Murjani said. “We’re in it because we believe in it in the long run. Indians are huge spenders, but they spend in a different way. The opportunities are incredibly huge in front of us.”