Even the richest Indians are reluctant to purchase for Diwali the new line of Hermes saris priced between Rs 4-10 lakh. The French luxury brand has managed to sell only six of its 28 limited edition saris launched a month ago. The saris are available exclusively at Hermes' Mumbai store. When correspondents from this newspaper visited Hermes' stores at the Horniman Circle in Mumbai and at the Oberoi Hotel in New Delhi, where orders are taken for the saris, they found them empty.
Hermes is not the only high-end foreign brand that is staring at a bleak Diwali. Other high-end brands such as Dior, Louis Vuitton, Boggi Milano and Steve Madden, with products ranging between Rs 7,000 and Rs 1 lakh are not doing great business. A visit to their showrooms in malls such as DLF Emporio, Ambience and Select City Walk in New Delhi during peak evening hours showed that they were fairly empty. Customers were not splurging the way they would normally do during Diwali.
When contacted by this newspaper, the companies refused to disclose their sales figures for the season by saying that their figures will be available when this quarter ends, that is the end of December. Their cumulative Asia figures excluding Japan are available till August. But these numbers do not quote Indian sales anywhere.
Off the record, shop assistants in many of these stores admitted that sales had not picked up. "You can see for yourself. The mall is empty," said one salesman at DLF Emporio.
Even stores belonging to high-street brands such as Paris Hilton, DKNY, Zara, Mango, Aldo and Guess, with products ranging between Rs 3,000 and Rs 50,000 were relatively empty when compared to other stores.
Will "Indianising" their products help these high-end brands capture the market? "I am not convinced that international companies will be able to attract more buyers by 'Indianising' their products. For example, we already have a successful jewellery and luxury domestic market, which cannot be replaced by foreign brands," said Abheek Singhi, retail analyst with Boston Consulting Group.
Status symbol is not enough to bring in customers. "These brands make their line of clothing and jewellery for the elite. But at the same time, an elite Indian customer is also looking for products that offer visible value, which is missing (in these products)," said Sonal Khare, merchandiser with Impulse India.
Indian designers welcome the new entrants, but believe that they will experience slow growth. "These brands have a 0.01% clientele, which is only helping them build their brand name but not helping them grow. I agree that the real market belongs to the masses, but luxury brands do not cater to them," said Anju Modi, a Delhi-based designer.
According to a recent study by CII-A.T. Kearney, the luxury market is expected to reach a value of $5.8 billion by 2015. It has witnessed a growth of 20% in 2011 compared to 2010. But experts say that this projection seems ambitious as the key challenge of reaching the target consumer has not been tackled. "High-end brands cater to a very niche market, which comprises only 2-5% of the elite class in India. We do expect a 20-25% growth rate for luxury brands. But they do not sell in India as much as they do in China," said Abheek Singhi.
Purnendu Kumar, retail analyst with Technopak India said, "Today, luxury goods are a necessity for the affluent segment in India, with a marked shift in mindset. But 20 million people buying from high-end stores does not account for even 5% of the Indian population."
The other big challenge for the Guccis and Versaces of the world is that they cannot set up mono brand outlets because of the 51% cap on FDI in single brand in retail.
Poor infrastructure is another big dampener for luxury brands. One DLF Emporio in New Delhi is nowhere close the umpteen stylish malls and high streets in China. "With taxes on luxury goods above 35% in India as opposed to just a 15% levy in China, the Indian luxury consumer would normally pick up the same product from abroad than here," said an official from the Associated Chambers of Commerce and Industry of India (ASSOCHAM).
(With inputs from Mamta Sen in Mumbai)
23 October 2011 in The Sunday Guardian.
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