Indian luxury market in flux

India’s luxury goods market has hit speed bumps.

Despite fast-growing demand for western luxury garments among the well-to-do in a fast-growing middle class, several international fashion brands are becoming more and more uneasy in their local partnerships.

Recent brands to break up with their local partners include names such as Versace, Corneliani and Guess.

High import duties is a major cause of unease in India’s retail market for western luxury goods. Consumers who can afford shopping high-end goods often travel and can thus source the goods from abroad themselves.

But there are structural problems as well. In a metropolis such as Mumbai, store rental rates are at international levels, while the average sales per square feet per day can be just one-tenth of those of Hong Kong and one-fourth of Dubai. Sources within the retail industry suggest local marketers are sometimes simply too small to handle high profile international brands, and/or little known.

“They go beyond their means,” observed one. “This business needs deep pockets.”

America’s Guess will switch from Planet Retail to Major Brands to represent its range in India.

Planet Retail, meanwhile, is revamping its business. Co-owner and chairman Ramesh Tainwala asserts that the break-up with Guess was anticipated under its restructuring plan. The company is revising its hope of breaking-even in 2012 to 2013. Tainwala says that it will now take twice the time.

“Controlling the bleed is the name of the game,” said Tainwala. “I have no doubt that retail will be profitable. But I doubt if that is two, five or seven years from now.”

Planet Retail has also ditched brands such as OshKosh B’Gosh, Carter’s and Sole effect by halting the opening of independent stores. In its revised attempt to become profitable, it will go for such smaller format brands such as Accessorize and such larger-format retailers as department store Debenhams.

Meanwhile, Versace and Corneliani will probably now cut ties with the Delhi-based and family owned Blues Clothing Company, whose spokesperson is Dinesh Sehgal, MD. He says when the company was established in 1996 its aim was to become the largest retailer of suits in India. Sehgal would not confirm the break-up, only that one Corneliani and two Versace stores had been closed down. 

A Versace team is now on its way to New Delhi on the look-out for other partners. It has not, however, been possible to get details on this from the companies themselves.

Other companies are more optimistic. Aditya Birla Group, according to its COO, Shital Mehta, is seeking exclusive agreements with international brands. Madura Fashion & Lifestyle now discusses upgrading its licensing and distribution contract with Esprit into a full-scale joint venture.

GB

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