Hotline: 1800 102 2007
Hotline: 1800 102 2007
Search Business Opportunities
Business Categories
Oct, 16 2012

LUXURY OF MAKING A FORTUNE IN STYLE

The Indian retail market is today one of the most promising and dynamic markets with a huge yet-to-be-realised potential. With more and more Indian consumers yearning for an ostentatious lifestyle, global luxe and premium fashion and lifestyle retailers a

THE Indian luxury retail landscape has dramatically changed over the last 15 years or so. Luxury is no longer limited to the elite only. Extravagance has also found its way into the lives of the now-affluent middle class. According to experts, the Indian luxury market is growing at a CAGR of 20%. It is expected to nearly double its current size of $ 4.3 billion to $ 6.8 billion by 2015 and become the twelfth largest luxury retail market in the world. It is not that Indians have not experienced global luxe and premium brands before. All these years a number of globally recognised brands such as Burrbery, Versace, Gucci, Louis Vuitton, Hugo Boss, Bulgari and Mont Blanc have been present in India. But now the market is ready, and more importantly, willing to accept more such brands. India is a complex and diverse market for foreign luxury marketers; therefore, they often seek entry via joint ventures, licensing or the franchise route. It's noteworthy that in several cases their local partners may also opt for franchising to further develop the brand's presence.  Being a high cost business model, luxury and premium retailing is more suited to high net worth investors. Thus, the big ticket investors wanting to fast track their entrepreneurial ambitions via franchise partnerships with renowned luxe brands may check out the promising business opportunities featured here.

Market review

Despite the international economy going for a toss, the Indian market has shown resilience and the demand has not weakened much. Unlike other retail sectors, the luxury market is driven largely by consumer sentiments and at this time, it is upbeat in India. Reportedly, there are 1, 53,000 HNIs with liquid assets of over $ 1 million in India and still growing. Indian consumers are educated, well travelled and acquainted with international luxury trends. They are increasingly spending on luxury assets and products and creating a sustainable demand.  Besides metros, tier I and II cities like Surat, Ahmedabad, Chandigarh, Ludhiana and Pune are emerging on India's luxury map. These cities have a sizable market comprising cash-rich business owners and high-income professionals who like to indulge themselves and have a strong desire to connect to an international luxury brand, as it gives them a chance to flaunt their social status. These factors are providing massive sales opportunities for luxe and premium retailers.

Key players & franchising 

In luxury retail space in India, the sectors that have witnessed a lot of action lately are Fashion (apparel & footwear) and Lifestyle (electronics & watches). World's top fashion brands like Roberto Cavalli, Armani Junior, Van Laack, Dune, Thomas Pink, Diesel Black Gold have entered India, and in the lifestyle segment, couture audio/visual brands like Loewe, Triangle have expanded into the market. Established players like Kitsch and TAG Heuer are also spearheading their operations in India. Several of these brands have selected the franchise route to grow their presence.

TSG International, a luxury retail company, currently runs three high-end Kitsch multi-brand stores in Delhi, Mumbai and Pune. It is the exclusive licensee for the most fashion forward brands for men and women, namely Alexander McQueen, Diane Von Furstenberg, Halston Heritage, Stella McCartney, YSL, McQ, etc., in India. Kitsch plans to expand pan-India via franchising. Extolling the virtues of franchising in retail, the brand's Founder and CEO, Charu Sachdev, says: “Having a local partner helps us in knowing and connecting with the local buyers. A personal touch is given to the business, which is important in luxury retail.  It gives us a clear understanding of the requirements of the particular market or city as well.”

World luxury leader LVMH retails Watch & Jewellery brands like TAG Heuer, Zenith and Dior Timepieces in India. For TAG Heuer, the company follows franchise model.  Believing that the brand has the potential to become a leading watch brand in the coming years, Franck Dardenne, GM, LVMH Watch & Jewellery India Pvt. Ltd declares, “We do not want to have a 'wait and see' behaviour towards the Indian luxury market; we believe in it and think that our fate is associated with it." On franchising he says, “Franchise model is very light and flexible, not only because it does not require equity investments, but also because it us enables to cope up more quickly with differences such as state regulations."

Market challenges

The luxury market in India is typically challenged by high import duties, paucity of quality infrastructure and high streets, etc.  Luxury brands are always insistent on finding ideal real estate locations for setting up their stores. In this category, the right ambience is very critical in order to woo the luxe shoppers.

With the introduction of a large number of international luxury brands, competition is heating up. Delhi-based FX Entertainment (FXE) distributes foreign audio/visual brands such as Cambridge, Mordaunt-Short and Quadral in India, with the recent addition of Triangle, a French luxury loudspeaker brand often referred to as the Rolls Royce of the audio industry. The company currently has 40 point of sales, including two franchise FX stores, one each in Ludhiana and Kolkata. Shane Choitramnai, MD, FXE, said: “A growing number of foreign brands are looking at India as an ideal market and the competition has increased by almost 40% in the last three years. The challenge is posed by import duty; this is where countries like Dubai and Singapore take advantage of since they are duty-free and re-export into our market. So, pricing is a very sensitive issue, and we have to be almost on a par with these countries.”

Nuances of luxury retail

Luxe and premium retailing is a different ball game and this business usually has a long gestation period. Hence, it will be prudent for retailers and their franchisees to consider a long term view of the market while devising their sales strategies. It may take a couple of years for retailers to achieve break-even. Delhi's Navshiv Retail, an exclusive distributor of international high-end brands, has tied up with Germany's couture home entertainment brand, Loewe, for the Indian market. It plans to create both company-owned as well as franchise Loewe galleries.  Dr Naveen Rao, CEO, Navshiv Retail Pvt Ltd, says: “Over the past five years, Navshiv has built a strong market position and infrastructure in India. This combined with Loewe's exceptional product range and the comprehensive service and support afforded by Loewe AG, paves the way for a strong and long-term collaboration in the Indian market. We aim to create a niche in the luxury space and are looking at sales of about Rs 100 crore next year.”

India is still at the first stage of luxury shopping, so how difficult is the market for retailers? “India isn't a tough market anymore, the young and the rich are well-versed with and live up to global fashion trends. Now they only look for source assistance and regular updates, the retailers need to ensure they are keeping pace with global fashion and are able to cater to the needs of customers in time,” says Kitsch's Charu Sachdev.  Moreover, premium retailers prefer financially strong franchise partners who are very well connected locally, and preferably, with a background in retail.

Buzz in Indian retail

The latest buzz in the Indian retail sector is related to the e-tailing model and the government's decision to allow 100 % FDI in single brand retail. Let’s see how will these trends impact the franchising sector?

E-tailing: Online shopping in India is in its infancy and experts believe that e-tailing cannot wholly replace the brick and mortar stores, as customers like to touch and feel the products before deciding to buy them. Established five years ago, Singapore-based premium shoe brand Heatwave Shoes has successfully expanded into multiple international markets via franchising. It also has an online store to sell products to brand conscious and fashionable consumers. Elizabeth Tan, Business Development Director, Heatwave Shoes Pte Ltd, says: “Both online stores and retail stores have to work closely to provide the ultimate shopping experience to customers. Our online stores consistently stay in touch with our retail stores and often customers shop both online and offline, alternating between the two. So, it is possible for the retailer to have an integrated online and retail store strategy.” Premium brands use digital presence not only for e-tailing but also for engaging and analysing consumers that may end up in a purchase relationship at retail stores. Therefore, franchisors will continue to expand their physical retail store presence.

New FDI law: The Indian government has allowed 100% FDI in single brand retail, prompting international retailers to set up their business on their own in India without local partnerships. In such a scenario, prospective franchisees may think that business opportunities for them will dry up but industry experts believe otherwise. Since it is perceived that Indian consumers buy their products because they are quintessentially European or American, high-end retailers may not be able to source 30% of their requirements from local producers as required by the new law. To bypass this caveat, they will look for local partners, including franchisees.

Opportunity

Kitsch intends to open two more point of sales (POS) by the end of 2013 and another five POS by 2016 through a mix of company-owned and franchise locations. It is targeting select cities like Bengaluru, Chennai, Hyderabad, Kolkata, Chandigarh, Ludhiana and eventually tier II cities.  Depending on the size of retail store, investment would vary. The complete set up cost would be within Rs 1 crore.

Presently TAG Heuer has seven franchised boutiques in India and would like to have a better and stronger monobrand presence compared to its competitors and plans to open some boutiques with franchisees.

Navshiv plans to create seven Loewe Galleries (company-owned and franchise) across Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, Ludhiana, and Chandigarh by the end of 2012. An investment of approximately Rs 1.2 crore and an area of 800-1200 sq ft are required for a Loewe Gallery. Looking for a capable master franchisee, Heatwave plans to increase its brand presence by opening stores in major cities.  An investment of Rs 1.2 - 1.5 crore and area of 500- 600 sq ft are needed to partner with the brand.

FXE will open franchise stores in Bengaluru, Pune, Ahmedabad, Chennai and Hyderabad within the next 12-18 months. The investment criteria will vary according to city.

Future beacons

Retail industry experts say that it is a good time for premium fashion and lifestyle brands to take the plunge in the Indian market. FDI will open up the much-needed variety and different price segments as well, says Harish Bijoor, owner of a private-label consulting firm, adding: “I do believe we will take off in the luxury space. Our development will be slow but solid, quite unlike the Chinese model which is fast and dissipated.”

Comment
image
image
image
image
Insta-Subscribe to
The Franchising World
Magazine
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities
More Stories

Free Advice - Ask Our Experts