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Luxury goods hit last frontier
Flanked by a swish Swarovski store and a Ruby Tuesday restaurant, India's first Versace boutique has opened in an upmarket Mumbai mall, its steel-and-white interiors drawing several shoppers.
The Italian luxury brand is the latest to enter India on the heels of others such as Hugo Boss, Burberry, Cartier, Chanel, Louis Vuitton and Tommy Hilfiger.
Their numbers have swelled since foreign chains selling single brands were allowed in January to take up to 51 percent in Indian joint ventures. Other brands waiting to launch include Gucci and Giorgio Armani.
“India is really the last frontier,” said Darshan Mehta, president of Arvind Brands, the licensee for VF Corp, owner of brands such as Nautica and Tommy Hilfiger.
“Those who came in have been surprised by the response to high-priced items in a market that's just beginning to open up,” he said.
Versace bags start at 18,500 rupees (C$450), more than half the annual per capita income of 31,000 rupees.
But India's market for luxury goods and services, already estimated at between 15 billion rupees and 20 billion rupees (up to C$486 million), could grow by 15 percent to 20 percent a year over the next five years.
Analysts estimate there will be six million rich households by 2006-07, doubling from five years earlier. Other households with earnings of up to C$25,000 a year could rise to 91 million by year end, with another 90 million waiting in the wings.
That is a far cry from the time when luxury was the exclusive preserve of maharajas and rich industrialists.
More than half of India's billion-plus population is below the age of 25 years, and youngsters are snapping up everything from snazzy mobile phones to designer suits.
“In the past few years, salaries have grown tremendously,” said Christian Dior brand manager Shantanu Mukerji.
“There is also easy availability of credit.”
Luxury retailers are also drawn to India because it does not have a big problem with counterfeit luxury goods.
Analysts expect restrictions on foreign investment in luxury retail to be eased.
But there are wrinkles: Retail space is pricey while high import duties push prices beyond those in Dubai or Singapore. Also, Indians may simply lack interest.
“Even those who have the money may not be aware of luxury brands, or lack the inclination to buy,” said Raghav Gupta at retail consultancy KSA-Technopak.
Luxury brands are betting that their initial clients would comprise businessmen and Bollywood stars, many of whom are being roped in to endorse the brands. Aishwarya Rai, voted among the world's most beautiful women, is seen in global advertisements for Longines and L'Oreal Paris.
Luxury brands have also found eager business partners in the wives of wealthy businessmen. One such wife is bringing in Valentino.
Still, it is not that easy to convince Indians.
“You really don't have enough choice,” said consumer Rami Desai, 25. “I still find it easier to tell somebody (from overseas) what I want, and ask them to send it over.”
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