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Luxury brands still a tough sell in wealthier India

Other News Materials 25 December 2008 05:28 (UTC +04:00)

On a recent evening at Mumbai's luxury Taj Mahal Hotel, shoppers tried on sequined sandals and handmade moccasins at Joy Shoes, an Indian family business that has sold out of its only shop for nearly 70 years, Reuters reported.

Around the corner, a Moschino store with stylish displays of apparel and accessories off the Milan runways stood empty.

Starting at 3,500 rupees ( 47 pounds) for a pair of men's shoes, Joy is not cheap. But the key to its enduring popularity, says Munna Javery, the third-generation owner, is knowing what customers want and maintaining relationships with them over the years.

These are just two of the already considerable challenges facing global luxury retailers in India.

Despite its growing number of millionaires, India lags emerging market peers China and Brazil because of a lack of quality retail space, high import duties on luxury goods, a cap on ownership in local units, excessive red tape and piracy.

India had 123,000 millionaires in 2007 and showed the fastest pace of expansion, a Merrill Lynch/Capgemini report said, but that was the smallest number in the "BRIC" emerging markets quartet, with China already having more than triple that number of super-rich. BRIC comprises Brazil, China, India and Russia.

Luxury goods in India also make up the smallest proportion of the overall retail market, just 0.4 percent, according to a Bain & Co report, compared to 2.7 percent of China's retail market.

"For luxury in India, the path is bumpy and long," said Mohan Murjani, chairman of the Murjani Group which launched Gloria Vanderbilt jeans and Tommy Hilfiger globally, and partners such brands as Gucci, Calvin Klein and Jimmy Choo in India.

"You need size, experience and patience for the long haul."

Allowing global retailers access to India has long been a controversial topic because of concerns of job losses, and it was only in 2006 that foreign single-brand retailers were permitted to take up to 51 percent in a local venture, opening the doors to brands such as Gucci, Versace, Chanel and Burberry.

But most brands have been forced to curtail their grand ambitions despite an economy that grew about 9 percent in the last three years, with Louis Vuitton only having four shops to show for its five years in the country, compared to 25 in China, already the world's No. 3 market for high-end goods.

"In any emerging market you can only target a very small part of the market for luxury," said Claudia D'Arpizio, a partner with Bain & Co in Milan, who authored a recent report on luxury.

"In India, in addition to that challenge is the regulatory framework and the undeveloped retail infrastructure," she said.

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