Global luxury is dancing to a new tune in India: infrastructure blues.
High rentals and lack of proper infrastructure for luxury retailing are forcing brands including Christian Dior, Louis Vuitton and Omega to restrict the number of outlets in India.
In India, the rent component in retailing cost, at 40%, is much higher than the global average of 15%, according to estimates by leading retail consultancy Luxury Connect.
Sample this: Christian Dior, which currently has two outlets in India, is hunting for appropriate locations across India to expand its retail presence, but is yet to firm up its plans.
“We are forced to open outlets either at five-star hotels or luxury malls, which are few in number,” said Kalyani Saha Chawla, vice-president, marketing and communications, Christian Dior Couture India.
The growth of luxury brands such as Jimmy Choo, Paul Smith, Giorgio Armani, Canali, Dior and others is limited to metros due to the lack of appropriate infrastructure outside. Besides a few up-market and known destinations such as DLF Emporio in New Delhi, Taj Colaba in Mumbai and UB City in Bangalore, there are no other options for luxury brands to increase their retail footprints.
“Luxury brands need a certain environment in which they can operate to bring their customers the true experience of what these brands stand for. Apart from few locations, retailers don’t have much choice,” said Roasie Virq Ahluwalia, director, corporate affairs for Genesis Colors, a company that imports ultra up-market brands such as Armani, Canali, Etro and Paul Smith.
Louis Vuitton, which recently indicated it would go slow on its global expansion plans, is looking to open stores in Chennai, Kolkata and Chandigarh. “We would have wanted to expand in many smaller towns but infrastructure is a problem,” Tikka Shatrujit Singh, adviser to chairman, Louis Vuitton, told HT earlier.
“India is also probably the priciest property for retail. Landlords need to be reasonable in terms of rentals if there is to be a growth in this market,” said Chawla.
The domestic market for high-end products and services is estimated at over $8 billion and is currently growing at an annual rate of about 20%. It is likely to cross $14 billion during the course of the next three years on the back of rising per capita income and evolving consumer trends.