The word `luxury` is not new to the Indian market, which has been known for its opulence and extravagance since ancient times. The opening up of the Indian economy, rising income of the middle class and the desire for splurging on the crème de la crème of
The $500 million domestic market for luxury products (apparel, watches, jewellery, spirits and accessories) may grow over 20 per cent year-on-year for the next 7-8 years and more than quadruple to $2.6 billion by 2015. The $4.4-billion Indian market (miniscule in comparison to global standards) for luxury products, services (hotels, resorts, fine dining and spas) and assets (homes, cars, jets, yachts and art) too will become a $30 billion phenomenon by 2015, according to a recent news report.
High-end luxury, fashionable and premium brands all across from the soil of France are now making their presence felt by foraying into the Indian market. LVMH Moet Hennessy Louis Vuitton (luxury), AXARA (apparel), Etam (Lingerie), L`Oreal (cosmetics), Lanvin (perfumes), Vichy (cosmetics), Gautier (furniture), Homme (footwear), Topy (footwear), Jean Claude Biguine (hair-styling), Christian Dior (watches), Lacoste (lifestyle), Thal`ion (cosmetic) Aubade (lingerie), Hermes (lifestyle), Chanel, Chapoutier (wine), Lancóme (cosmetics), Alcome (perfumes), Jean Charles Bosseau (perfumes), Jean-Paul Gaultier (luxury lifestyle), Celio (apparel) & Mod`Art International (fashion institute) all have made presence in India by launching their stores in famous Indian cities to expand their footprint. Talking about the French market Manhad Narula, Director, Ebony Retail says, "Yes, France is known for its stylish luxury and premium brands and Gautier is one of them. It is a good fit with the rising aspirations of the new Indian home-owner who is spending more and more on home adornment and furniture in order to make a lifestyle statement."
Potential market & legal aspects
Premium luxury brands from France foresee India as an attractive nucleus for making its presence through various sectors. Having presence in other international countries, France is now extending its brand presence in the Indian market as well. Studying the market potential, understanding consumers` tastes and preferences, national income, viable entry routes, government rules and other formalities are to be finalised before establishing businesses in another country. A new entrant undergoes different legal formalities and procedures to set up its brand in a new market. Talking about the legal aspects before going into extending operations in the new market, Nicolas Fouchet, Director, Banana Moon clarifies, "I am working a basic market research on the local and international competitors (brands, retail prices per product categories, marketing & communication) and the distribution channel analysis (number of independent stores in the textile field, department stores, chain stores, franchises). I also pay attention to the annual retail sales per product categories. We are then checking the trade mark law protection, customs duties, legal papers, etc."
Narula explains, "If one is looking at a financial collaboration, then a lot of legal procedures have to be adhered to including getting the approval of the FIPB to ensure that all FDI regulations are adhered to." He further says, "As all our furniture is directly imported from Gautier in France, we had to abide by the strict customs regime that exists for the furniture category and we went about it in a proper and organised way." While on other side Arun Kumar Vajpayee, Director, East Face Footwear Pvt. Ltd says, "All standard norms have to be followed up, whereas financial terms and conditions vary from company to company and brand to brand."
French brands seeking viable routes
To set up business in any country, the company has to go through an extensive and detailed research to understand the consumers` tastes, market potential, different industries, income level and searching out right Indian partners and then penetrate the country through viable routes. The entry of globally renowned brands in the Indian market is not only providing a platform to the international companies to expand in the market but it is also giving them the opportunity to make their brand`s presence felt in the country as well. Lots of brands are now setting up their base by entering the country through different financial agreements with Indian firms. Signing a master franchise agreement, setting up a subsidiary, forming joint ventures, licensing deals, marketing or distribution tie-ups are some of the viable routes through which these luxury brands can explore the market. L`Oreal is present in India through a wholly owned subsidiary L`Oreal India. The company has high-end brands like L`Oreal Paris, Maybelline NY, Garnier, Lancóme and Vichy present under its portfolio. Etam Future Fashions, the joint venture between Indus League, a Future Group unit, and French fashion apparel company Etam, is focusing on the French company`s apparel line in India.
Foreign trade commissions set up in the country also provide support to the foreign country to import and export its brands in the market.
"Paramount Surgimed Ltd has tied up an exclusive distribution or master franchise agreement with AXARA, a glamorous, sensitive and contemporary Paris based clothing line to launch its fashion boutiques pan India," informs Shaily Grover, Managing Director, Paramount Surgimed Ltd.
Vajpayee reveals, "Our company has signed a marketing and distribution tie-up with the brand, moreover, we have a free hand to suggest, develop and launch footwear styles as per the Indian customer`s requirements unlike most of the international brands who impose their styles on this market, which is not always the right strategy to deal in a sensitive market like India with very varied design and material choices."
Commenting on its experience of bringing a French brand to India, Narula opines, "Ebony and Gautier have entered into an exclusive distribution arrangement for the SAARC region and it is based on technical collaboration. The objective of this partnership is to jointly bring world class contemporary furniture to the Indian consumer, while providing a good distinctive value."
“We work as the sole representatives, importers and distributors for each of our brands. This means that we decide the brand strategy, marketing, sales and distribution methodologies," says Anil Chandok, Director, Chenab Impex.
Franchising, next emerging industry
Franchising is a proven business model. Except other international counterparts, France is also keen to make a way into the market. Looking at the global slowdown, franchising is one industry which is going to be successful. Talking about the franchising market, Dharmendra Manwani, CEO, Jean-Claude Biguine opines, "India, which has a growing middle-class of over one billion people, is now positioned as a major force in the global economy and fertile ground for investment in luxury and lifestyle segments. The franchising industry in India is expected to grow at an annual rate of 30 per cent, and to drive the country`s current $330 retail sector even higher.” In 2007, more than 750 national and international franchisors were operating in India, employing millions of people, and generating revenues in excess of $3 million.
Commenting on the franchise system Fouchet opines, "As everywhere in the world, the success of a franchise depends on the professionalism, the work and the adaptation of both the franchisor and the franchisee or master-franchisee. If the Indian investor selects the right brand, with adapted products for India`s consumers, and manufactured by a reliable company, he will succeed. And the success will be much quicker compared to an Indian company that will try to do everything on its own. This is mainly based on the fact that with a great franchise system you benefit from the brand experience in one day."
Vajpayee elucidates, "Franchising is going to be a great success in the Indian market, but for luxury brands there are some initial hitches in the market in terms of viability of the franchisee."
Narula informs, "Without a doubt, franchising is going to be an important factor to grow organised retailing in India. With the current FDI regulations on organised retail, franchising would be a viable option for quite a few players. Apart from the legal perspective, franchising is a route that allows a brand owner to minimise his capital investments in the venture." Commenting further on taking the franchise route in the future, he says, "Currently, we are operating on a company owned outlet model. However, if we are able to identify partners who share a similar vision, we are open to looking at them for franchised stores."
Being aware of the competition, French brands are exploring different tactics to give tough competition to their competitors so as to achieve more profits. Followed by the global meltdown, luxury brands are still tying up with Indian retailers to expand their operations in the market. They still believe that India has potential. As a part of their marketing strategy, they are Indianising their brands, especially with the coming of the wedding season, to entice more consumers towards buying luxury brands. In India, sales are higher during the wedding season, so it is the best time for premium brands to reap benefits. It will not only help them to achieve more returns on investment rather it will support them in making their brand identity popular among Indian consumers.
"It is mandatory to have a local flavour in your services to be able to cater to the needs of customers. We have not modified our brand values and bring down the same international experience with a touch of local relevance," elucidates Manwani.
On the other side Fouchet informs, "Our product is unique, and our franchise concept too. We will stick to our brand spirit and philosophy and adapt our distribution to the Indian rules, thanks to the knowledge of our Indian partner."
Like other countries, French players are also keen to explore the Indian market by opening their stores in lucrative cities. Even during a period of recession, these brands are ready to invest in high potential cities like Mumbai, New Delhi, Bengaluru, Pune, Hyderabad, Kolkata, Chennai and Gurgaon.
Rama Gulab Joshi Trust which brought MOD`ART International to India and the UAE, is in talks with some of the clients in Gujarat and the UAE for giving franchise rights. The company is planning to appoint four franchisees in India and one in the UAE by 2012.
Talking about the future plans of the company Fouchet says, "We would like to open our first store in 2009. Then, we are planning to open a chain of Banana Moon franchise stores as well as shop-in-shops in all the best Indian retailer stores. We are targeting Delhi, Mumbai, Bengaluru, Chennai and Hyderabad."
Talking about their recent partnership and plans ahead Manwani informs, "Globally, we have 350 salons and enjoy our presence in 17 countries catering to almost 20,000 customers every day. We are planning to open around 30-40 salon in the next five years. For our rapid expansion, we have recently tied-up with Aditya Birla`s latest retail foray called `The Collective` and we are their exclusive grooming partners. We are to open our first salon with them in November, in Bengaluru, followed by Delhi and another in Mumbai." While on the other side Narula says, "Apart from our store in Noida, we are in the process of opening a second store by the end of the year in Gurgaon. These stores are 15,000 to 20,000 sq.ft each. In terms of our expansion strategy, we would follow a metro-centric approach. We plan to open six more stores in 2009 and are looking at potential cities like Bengaluru, Chennai, Hyderabad, Pune, Mumbai and Kolkata."
Jaydeep Shetty, CEO, ETAM Future Fashions Pvt. Ltd says, "At present, we have 16 brand stores, and 24 shop-in-shops. We hope to expand within the same 8-9 cities next year. These are Mumbai, Pune, Delhi, NCR, Bengaluru, Hyderabad, Kolkata, and Baroda."
Grover reveals, "AXARA currently has three exclusive retail outlets at GK, M Block New Delhi, Crowne Interiorz Mall, Faridabad and City Centre Mall, Chandigarh. We are looking at 2-3 more exclusive outlets in this financial year and 2-3 shop-in-shops with leading multi-brand stores of India. The target cities are Gurgaon, New Delhi and Mumbai."
Bright prospects ahead
The driving factors that make India a favourite hub for global counterparts are huge population, rising consumerism, youth market which is immensely receptive to new concepts, growing entrepreneurship, middle class with higher disposable incomes, a larger number of English speaking populace and better informed people, making it clear that India has potential and it will definitely obtain success in years to come.
Banana Moon, Nina Ricci and Carrefour are planning to enter India soon. Last month, DLF, India`s largest real estate firm announced a franchise agreement with Paris based home décor retailer Sia Group.
Indus League Apparels, part of Future Group is in talks with French brand, Daniel Hechter. The brand is expected to launch by next year in India under an exclusive deal. Daniel Hechter will be sold through Shoppers` Stop and Lifestyle.
India`s vast youth market presents huge potential for overseas investment and is actively encouraging foreign giants to penetrate the market and generate profits. As Indian consumers are open to buying lifestyle and luxury products, French firms are also keen to invest in the market. As a result, the future seems to be very bright and prosperous for luxury brands in the years to come.