Npooli Visavanathan had lost eight kilos and all his clothes were loose on him. He needed a new wardrobe. He could afford the best: His property development business took him around the world, and had treated him well. But the 55-year-old from Tirunelveli (a district in south Tamil Nadu) had very particular requirements: In keeping with the traditions of his community, he wears only white.
At the Chennai outlet of The Collective, a super-premium fashion retail chain, they knew just what to do. “We offered him whites in Armani, Versace and Lagerfeld,” says Amit Pande, brand head of The Collective. “This was our ‘last mile’ translation, finding the right connect [between] brand and individual.”
The Collective, like other Indian retailers of high-end fashion, is learning, on the fly, to understand its customer.
High Street India
There was a time when India’s rich perforce had to do their luxury shopping abroad. But in the post-liberalisation years, the number of affluent people—and the amount of disposable wealth they have with which to indulge themselves—has mushroomed, making India an attractive market for the world’s luxury brands, and they have been coming in over the years, via the franchise route, through distributors, then joint ventures (JVs) and now majority-stake and wholly-owned companies.
It started with less upmarket brands like the French clothing firm, Lacoste, which entered India through a JV with local firm Stencil Apparel in 1992, followed by other giants like Reebok and Benetton a few years later.
By 2003, more exclusive brands like Gucci, Guess, and Hugo Boss, had all come in, either through franchises or distributors. When, nearly a decade later in 2012, India’s regulations changed to permit 100 percent foreign direct investment in single-brand retail, many foreign brands quickly set up majority-owned JVs.
Also along the way, Indian fashion designers began to find their feet and a clientele, and many opened their own stores.
Single-brand high-end fashion stores can now be found even in tier two cities. And in the metros, the market has matured enough to support the existence of large specialist malls, like Palladium in Mumbai (where the likes of Armani, Bobbi Brown, Chanel, Ed Hardy, Ermenegildo Zegna, Gucci and Jimmy Choo vie for a share of the multimillionaires’ purses) and DLF Emporio in New Delhi (home to Hackett, Cartier, Chopard, Dior among others), and others like Bengaluru’s The Collection UB City, Kolkata’s Quest Mall and Bergamo in Chennai.
The Sell Noveau
Multi-brand luxury stores offer more variety, obviously, than single-brand shops, and arguably more exclusivity than the malls. Being less well-known, they work hard to attract the A-Listers.
The Collective, launched by the Aditya Birla Group-owned Madura Fashion & Lifestyle in 2008 as a pure high-end luxury retailer bringing multiple brands into the country, showcases 100 of the world’s best fashion brands in its eight stores across India. The Collective offers men’s and women’s casual wear, denims, designer outfits and special-occasion wear, including accessories. Its best-performing brands include Hackett, Ralph Lauren, Ted Baker, Fred Perry, True Religion, Armani and Dsquared2. This season, it added British brand Belstaff, T-shirt brand Dom Rebel and Japan’s Evisu. As with several businesses, its price points underwent adjustments with experimentation in portfolios and brands. “India’s market was not ready for it at that time, prices were an issue,” says Pande, who had worked with parent firm Madura as a retail director for Louis Philippe earlier.
The Collective reaches out to its customers through two specialised services: ‘Made to measure’, where tailors who have worked at Armani and Richard James stores handcraft suits; and ‘personalised shopping’, where their staff visit clients and help them pick products in the styles and colours that best suit them.
Price isn’t all that Indian customers want. “If they spend, they like approval,” says sixth-generation entrepreneur Vatsal Poddar, vice chair and executive VP at Bengaluru-based IT firm Unilog Content Solutions, which in 2009 forayed into luxury retail with Crisp, and in 2013, Fervour. He adds, “They are also more herd-mentality-driven, out to make a statement.”
The absence of quality global luxury brands was the trigger for Poddar. Until the mid-1990s, he says, “there was so little available in the country in terms of luxury.” He decided to set up Crisp in 2009 with partners Shailesh Musaddi and Shivkumar, starting out with a loose licensing agreement for Gucci and Dolce & Gabbana. Crisp and Fervour offer casual, formal and winter wear, and footwear, besides accessories for men and women. Crisp now houses 19 brands, including Dirk Bikkembergs, Gianfranco Ferré, Emilio Pucci, and Bruno Magli. Fervour houses eight brands, notable among which are Dsquared2, Marc Jacobs and Nina Ricci.
Fervour conducts ‘coffee mornings’ and ‘champagne afternoons’ to give their clients soft introductions to the collection for the season. Poddar plans to expand to other parts of south India in the next 12 to 15 months, starting with Hyderabad and then Chennai, before a pan-India presence, with outlets in Delhi and Mumbai over the next five years.
Ffolio, a premium boutique in Bengaluru, founded by Yashodhara Shroff in 1991, sells only high-end Indian designer wear. It began with the creations of the late designer Rohit Khosla, who at that time was looking to market his collections, and soon stocked couture from Rohit Bal, Anu Mafatlal, Geetanjali Kashyap and Amaya, and in later years, also Ashish Soni, JJ Valaya and Sabyasachi.
Shroff has seen luxury Indian designer wear change over the years. It is now commonplace, she says, for designers to have their own workshops as the style shifted to more stylised forms of clothing. “Many of our discerning customers look for clothes which would work just as well in New York, London Paris or here. As they travel more, this has become a requirement.” She looks for interesting ways to court potential buyers, like wine-and-cheese evenings. “Each event usually leads to a spike in walk-ins.”
Yashovardhan Saboo, who owns Ethos Summit, a retail watch chain selling brands like Rolex, Breitling, Longines and Carl F Bucherer, says, “This is a very tough market… the size is not large and there is not enough [impetus] to make it grow faster. The purchasing power in India is a fraction of global levels.” He adds, “Indians have traditionally been brand-suspicious, where traditional values have always mattered more than talk. Only the young India thinks differently.” He has decided not to expand beyond the current eight stores this year, and instead, the group will focus on two ignored areas: Educating customers about risk factors in purchases and interacting with watch experts to help them make an informed purchase.
Success in India could lead to an international footprint, as Nirav Modi has proven. His Delhi and Mumbai clientele includes several Indian billionaire wives, and he has now successfully taken his Indian jewellery retail brand overseas, with stores in Hong Kong and New York.
Modi’s diamond jewellery (sold under the eponymous brand name) is meant for “everyday spectacular” and the price tags range from a comparatively frugal Rs 2,00,000 to a jaw-dropping Rs 50 crore. But he offers no discounts; he makes sure his sales staff go through intensive on-the-floor training, understanding how the jewellery is made and how to deal with his exacting customers.
While the luxury attire business may seem to be one that could only thrive with personal touch, with polished staff gliding over plush carpets in exquisitely designed stores, one entrepreneur has found a way to take the business online. Nakul Bajaj got his big idea in 2009, when he was studying in the US, at Emory University, Atlanta, Georgia. “Friends always asked me to bring back Ralph Lauren Polo T-shirts. An online purchase sitting in India would cost $90, but if one bought the same at a US boutique, it could cost less than half, at $39.” This, Bajaj thought, was a great business opportunity. “There is a huge price difference, which I could help eliminate and enable people to buy the same product, sitting at home, at the same price available internationally.” He founded Darveys, a members-only online luxury fashion store dealing in clothes and accessories for men and women, from brands like Armani Exchange, Bally, Fendi, Givenchy, Jimmy Choo, Michael Kors and Stella McCartney. It has relationships with around 300 stores worldwide and a simple proposition: The best price, from the boutiques it works with around the world, which is then shipped directly to customers. It isn’t just the metros that his clients are logging in from; huge orders have come in from smaller towns like Agra, Aligarh and Allahabad, and they’re predominantly young people.
The Bottom Line For The Top End
A Euromonitor International report released this year predicted that India’s luxury market would grow by 86 percent in constant value terms between 2013 and 2018, comparing favourably with China, Malaysia and Indonesia (which are likely to grow by 74, 62 and 59 percent respectively).
Another recent study released by the Associated Chambers of Commerce and Industry of India (Assocham) and Yes Bank said rising income and aspirations could drive consumer spending in India to grow four times to $4.2 trillion by 2017. And India’s luxury market, the report estimates, will grow from $14 billion to $18 billion by 2017, with fashion, automobiles and fine dining the fastest growing segments of the sector. These figures are impressive but it must also be acknowledged that this growth comes from a low base: India has 17.5 percent of the world’s population, but is responsible for only one to two percent of the global luxury market.
The current economic climate isn’t very encouraging for the sector. Abhay Gupta, founder and CEO of Luxury Connect, a boutique consultancy and luxury training and sourcing firm, says consumer spending has pulled back. “Money circulation has come to a stop,” says Gupta, who was responsible for the franchise tie-ups with brands like Versace and Corneliani coming to India in the previous decade.
Luxury retailers aren’t exactly looking at ‘achche din’ either.
Pande says his same-store sales have grown 10 times faster than the Madura division in the Birla group in the last fiscal, but he still calls the business environment “not too hot” at the moment. The Collective had achieved its target of eight stores, but two years behind schedule. Pande says, “Luxury in India has not grown at the pace we thought that it would.”
Poddar of Crisp and Fervour concurs: “People are spending when they travel overseas, they prefer to have the choice of 50 brands instead of eight.”
The billionaire jeweller, Modi, is more positive. His year-on-year sales have jumped by 100 percent, but from a low base. “When you are looking to buy jewels of Rs 10 lakh, there are many people who can buy that every year. As long as you love the jewellery, you will come back.”
Entrepreneurs in the Indian luxury retail business face hurdles like high import duties on luxury goods (these range from 20 to 150 percent) and high rentals for retail space, especially in the metros.
Discounts, loyalty programmes, luxury education, personalised services: No clear growth strategy has remained consistently successful for any luxury retailer in India. So while they attempt to consolidate and grow, it is also clear that they must be ready to try out new strategies. There is more gold to be had at the other end of the rainbow.
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(This story appears in the 13 November, 2015 issue of Forbes India. To visit our Archives, click here.)