Luxury Brands Go To India Road For A Long Time.

Retailer

How should we enter this potentially promising market?

Nita Ambani lived in the southern part of Mumbai, India. When she wanted to buy 25 thousand Japanese advanced pottery, she did not choose to go to Noritake store nearby.

On the contrary, the wife of the India first richest man went to a Japanese military store in Sri Lanka, where she could buy cheaper and high-grade sets of tableware for her new family worth 1 billion dollars.

Nita Ambani's decision also shows why more and more wealthy people in India have not become the source of wealth of luxury brands such as LVMH or Prada (Prada). It seems that these retailers are not in the business level.

Rich people in India do not like luxury goods.

Nearly 9% of India's economic growth has generated more than 200 thousand millionaires, following the US and China.

Statistics on people with high net worth (defined as net assets exceeding US $5 million) show that their net assets totaled 1 trillion US dollars and are expected to exceed 5 trillion dollars by 2016.

However, the luxury sales market in India is only 846 million dollars, accounting for only 0.5% of the global luxury market.

On the contrary, luxury goods sales in Greater China are US $17 billion, accounting for 10% of the global luxury goods market.

Selling expensive luxuries in India will face many problems: up to 30% of import tariffs, imperfection of luxury retail infrastructure, real estate regulations, and money and public trust. India rich people prefer to buy goods abroad.

Terry, director of development of Palladium company in Mumbai, said: "India is a complex market and the system is very imperfect."

Palladium is a multi brand shopping mall, including luxury goods and some high quality goods.

Gayatri Ruia also said: "the consumption structure of India is also different.

In Japan or China, you can see that even a junior secretary has a LV Louis Vuitton brand handbag.

Wealthy Indians are not opposed to buying expensive items, which can be seen from the increasing number of Porsche and other premium cars in many cities in India.

But Gaya Terry Ruya, for example, a wealthy businessman driving expensive foreign cars may not spend money on luxury brands.

He said: "moderately wealthy Indians feel that luxury is of no value, and those who think luxury goods are valuable are used to shopping when they travel abroad."

There are signs that this phenomenon will not change immediately.

According to Bain analysis by consulting and research company, from now to 2013, the average growth rate of India's luxury market is 5% to 10%, while the booming Chinese market is 25% to 30%.

Lack of retail infrastructure

At present, the streets of India are filled with garbage, and the dirty slums are just opposite the fashionable buildings. So part of the problem to be solved is to provide consumers with luxury consumption experience.

Luxury retailers try to solve this problem. They sell their brands in five star hotels, international airports and stores that only sell design brands.

But there are only two luxury stores in India. One is in New Delhi, the capital of India, and the other is in Bangalore, the southern city of India.

But in Mumbai, the place where the India's rich are most concentrated (with billionaire Ambani brothers and Bollywood actors), there are no stores that sell luxuries like China, Singapore and Western capitals.

"The problem is infrastructure," said Anand Ramanathan, manager of KPMG, one of the four largest accounting firms in the world. "The problem is infrastructure," said KPMG.

Luxury goods need to belong to their own ecosystem.

He continued: "it doesn't make sense to open a luxury shopping mall on a rugged street.

Now the so-called luxury shopping mall in India is not really a luxury store.

These shops themselves have problems such as infrastructure construction, staff training, and so on, which simply can not provide consumers with the luxury experience they deserve.

The first independent luxury retail store in India opened in July this year. The Hermes store, which has 3000 square feet, has an art gallery on the second floor. There is a glass elevator between the two floors.

"We do not need two kinds of storefront stores," Bertrand Michaud, managing director of the Asia Pacific region, told the media at the opening ceremony of the Mumbai flagship store in Hermes.

We had to appear in the streets, not in the guesthouse.

We will also provide everything we offer overseas. "

The problem is that most wealthy people in India have always preferred to buy luxury goods abroad.

Chaupa De, a social celebrities and novelist and India newspaper columnist, said: "because this is not like in the west, India has such a situation because wealthy Indians have a strong sense of value."

India imports tariffs up to 30%, of course, luxury goods purchased abroad are cheaper.

"Besides, there are more kinds of foreign countries and better services. Generally speaking, luxury experience is better."

Chaupa de said that her daughters often buy luxury goods abroad.

In a recent popular movie in Bollywood, India, "you live only once," the actor asked his friend in Europe to buy a Kelly bag of $17 thousand worth of Hermes ostrich skin and give it to his fiancee, which reflects how rare the luxuries are in the third place in Asia.

In recent months, several Bollywood actors have been detained by Customs at the airport because of tariff problems, because they bought them privately and did not declare brands in India, requiring them to pay thousands of dollars before releasing them.

Gayatri Ruia said, "this question is like chicken or egg.

Variety is scarce because franchisees think sales are slow, so the sales plan they buy is temporary, and slow sales are partly due to scarcity of varieties. "

Heavy barriers affect luxury experience

Business in India faces excessive import tariffs, scarce and expensive real estate, a 51% cap on foreign ownership of single brand retailing, and other political institutions, and there are few customers left behind after heavy barriers.

There is a LV shop at the famous The Taj Mahal Hotel in India financial center, which sells signature bags.

There is also a Dior (Dior) store in the hotel, which sells women's dresses priced at around $5000 and about $2500 in dollars.

But here, the two shops are almost empty except for occasional curious visitors.

Many international luxury brands are losing market share in India, including Hermes, who wants to break the status quo in a year.

Ma Bojun said: "doing business here is very difficult and frustrating.

Real estate rules, political institutions, and many other problems, it will take several years to establish offices here, and the goods will be detained for several months at the customs.

But I still hope they can make a difference. "

Most luxury brands are much better in China than in India.

LV has 35 retail stores in China, but there are only 3 in India.

Claudia DArpizio, a Milan partner of Bain, said: "the main challenge is that these international brands can reach consumers through heavy barriers."

Claudia DArpizio also said: "China's infrastructure construction is more developed than India, so there are all kinds of luxury shopping malls.

Brands that control the market are closely related to consumers and work together with them to provide customized retail experience and consumption choices.

Luxury goods need to blend into local customs.

Many luxury retailers are trying to overcome their obstacles to design their products better for the India market. Most women's clothing and jewelry are designed on formal occasions.

For example, Ma Bojun told the media that Hermes plans to launch sari in October this year.

Sari will be made in Paris at a price of about $2000 each.

There is also a matching blouse for sale in India, which needs more money.

Ma Bojun said: "if the brand wants to succeed in India, the brand must integrate into India's local life."

PPR group's brand and Italy luxury retailer Bottega Veneta recently launched a limited edition "India knot" dress, which combines traditional embroidery and symbolic Bottega weaving in India, and underneath the English "Italy made" decoration is decorated with "pure silver" in English "India".

Italy men's luxury brand Kang Nali (Canali) has designed a neck seal traditional clothing Bandhgala (India language refers to the silver Muslim turban) jacket, which is specially tailored for India men, and inspired by the jacket of the first Rijawaharal Nehru in India.

Sanjay Kapoor, the sales manager of Genesis Luxury, said: "customers like this product for two reasons: first, it is combined with India's traditional culture, and the second is that India customers have limited products that they can't buy anywhere else in the world. This feeling is very special."

Genesis Luxury sells its brand in India, including Jimmy Choo, Kang Nali and Po Tejia.

Sanjay Kapoor said: "limited edition" India unique "products, this trend is obvious, more and more brands are joining the trend of customizing products for India customers.

LVMH group's Asian Private Equity Investment Firm L Capital bought a 25.5% stake in Genesis Luxury in July this year.

Potential young consumers

The luxury jewellery market in India is dominated by local brands. Compared with platinum and diamonds, prosperous business groups prefer gold based ethnic design products.

Take a look at the India version of fashion magazine. Although there are many luxury watch ads, there is a clear lack of advertisements for international costumes, accessories and jewelry.

The only photo of Cartire (Cartier) is an exquisite jewellery, but the number of the contact telephone in it is foreign. The luxury chain store from France has only one jewelry store in India.

Tiffany, an American luxury jeweller known for his small blue box, has not yet opened a store in India, but they told the media that they plan to open their first store in India soon after Tiffany.

Laxman Narasim, manager of McKinsey, an internationally renowned management consulting firm, said: "weddings are an important part of India's jewelry consumption. The wedding accounts for 50% of the India jewelry market."

The traditional wedding in India needs a lot of heavy gold ornaments to make a good impression on relatives and friends, or even to surpass them.

"If your product does not reflect the figure of 50%, it will not sell."

Laxman Narasimhan said he was in charge of McKinsey's emerging market consumer insight team.

Gayatri Ruia said, but in India, there is still optimism.

Luxury is also a dream, and the younger generation grew up looking at Gucci's famous brand bags or the high-end shoes of Jimmy Choo, and when they grew up, they would also want to buy them.

Gayatri Ruia said, "a young man bought Mango products when he was 18 years old. He wanted to buy Armani (Armani) when he was 24 years old, but the key is that the young man needed to see Armani when he was shopping at the age of 18. The adult generation in India has no such experience."