Luxury brands seek riches of India
Priya Chabbra likes to describe herself as a modern city girl. With long, glossy hair, manicured nails and designer jeans, she picks up a US$500 (Dh1,836) pair of gold-coloured Jimmy Choo sandals with delicate diamanté straps.
"I love these. They are so modern and would work with many different outfits," she says.
Ms Chabbra, 27, is shopping in Mumbai's exclusive Trident Galleria, where high-end brands such as Gucci, Tod's and Bottega Veneta tempt shoppers with their luxury products.
"Brands are important to me because they guarantee the quality of the product," she says. "But I also look for practicality. I want to be able to wear these shoes for a variety of occasions - from weddings to cocktail receptions."
Ms Chabbra is the type of personthe global luxury industry wants to target in India amid ailing sales in economically struggling Europe and the US. India is a huge, largely untapped market, with more wealthy households, because of its large population, than many European nations, including Germany and France, according to the research house TNS.
The figures look promising. A recent AT Kearney consultancy report projected the Indian luxury industry would grow by 25 per cent per year to $14.7 billion by 2015, faster than the projected global average of 8 per cent.
Opportunities exist because sales are still modest in India by global standards. Total luxury sales are expected to hit $6bn this year in India, against China's $17bn and the US's $77bn, with the global market worth $250bn, according to a study by Bain & Company, a business and strategy consultancy.
But while India is potentially a lucrative market, it is also a tricky for western brands. Part of the problem is that western luxury brands do not seem to fully understand Indian shoppers.
To succeed in India, fashion groups need to localise their marketing strategies and even product designs.
"Some western luxury brands have spent time understanding the needs of the Indian consumer and come up with product offerings that suit their taste," says Sanjay Kapoor, the managing director for Genesis Luxury, which retails international brands such as Burberry, Canali and Paul Smith. "Others need to understand the basic fact that the luxury shopper here is very discerning, quality-conscious and looks for the best products at prices that are at par with the rest of the world."
It is through these so-called "Indianised" products that luxury brands can gain acceptance. Many retailers have already developed this concept. For instance, the French fashion house Hermès launched its "Hermès sari" last week, just in time for the festive season beginning with Diwali.
Last year it was Louis Vuitton's Diwali collection that grabbed the headlines, while the shoe and accessory brand Jimmy Choo has launched the "Chandra" clutch especially for India. Etro, an Italian luxury brand, featured India jackets in this year's autumn-winter collection, following in the footsteps of the European high-end designers Canali and Ermenegildo Zegna, which have introduced clothes with Indian designs.
India is a country of more than 1 billion people comprising many cultures, languages, religions, festivals, colours and tastes, and a one-size-fits-all retail policy may not always work. Genesis Luxury has what it calls "India-specific products" inspired by the heritage and culture of India and available nowhere else in the world.
"India-specific collections work very well because Indians are culturally more traditional and they prefer to wear Indian-looking outfits at traditional events such as weddings and festivals," Mr Kapoor says. "Weddings, in any case, are a time when people splurge freely, and it is an opportunity for brands to tap into this market by offering products that are relevant."
But in addition to creating appealing products and marketing strategies, any western luxury brand that tries to crack the Indian market needs to keep in mind that it is still in its infancy.
Shoppers here are brand-conscious but may not always differentiate between luxury and other brands.
"The consumers need to be educated on the heritage and value of luxury and their brands," says Saloni Nangia, a senior vice president at the research house Technopak. "There are about 15 [million] to 20 million consumers in India who can afford a range of luxury products, but are not oriented to luxury. So the brands need to communicate and educate them.
"There are a limited number of companies who understand luxury in India, but this challenge is becoming easier with increasing experience in the sector."
Most international brands would want to set up businesses that they own 100 per cent to ensure they stay in control of their products. But Indian rules allow only 51 per cent foreign investment in single-brand retail and none in multi-brand retail. This means any luxury brand wanting to enter India needs to find the right local partner.
The lack of malls and suitable shopping areas is also a problem. "The main challenges that still remain are a lack of adequate luxury retail infrastructure outside of the main metros and a relatively high duty structure," Mr Kapoor says.
Customers such as Ms Chabbra are keen to splash the cash that makes the market worth exploring, despite existing challenges.
"The new Indian luxury consumer is the young, educated and well-travelled individual who is either a professional with a high disposable income or an entrepreneur of the first generation," Mr Kapoor says. "This new category, on top of the erstwhile luxury consuming business families, has added huge numbers to the overall luxury consumers in India.
"It makes sense for global brands to explore this market and tap into the new and rapidly growing consumer base."