Downturn melts luxury brands, demand nosedives 60%

Written by Mona Mehta | Mumbai | Updated: Jun 5 2009, 04:56am hrs
Demand for luxury brands in India is dipping to the tune of 60% in the first quarter of the 2009-10 fiscal in the wake of increasing negative trend in the purchase of luxury products due to economic downturn.

Bappaditya Basu, associate director (retail services), Jones Lang LaSalle Meghraj, told FE, The drop in demand is not for certain brands, but for items that are priced highly solely because of their brands. The accent is now on value retail and items that meet actual consumer requirements. Snob value itself has fallen from grace with the current slowdown.

During the previous corresponding boom period, the demand was huge because of the effervescence on the stock market that resulted in considerable disposable income, Basu added.

Luxury brand Gitanjali Diamonds is witnessing only 12% incremental rise in overall sales this quarter, Sadanand Pawar, president of Gitanjali Gems, told FE. He said, This can be mainly attributed to promotional activities launched by us which also includes our association with i-mint loyalty programme, thus motivating repeat purchases. Apart from Gitanjali Diamonds, Just in Vogue premium designer watches too is using i-mint loyalty programmes in order to trigger repeat purchases of designer watches.

Vijay Bobba, founding CEO of i-mint & marketing strategist, comments, All luxury brands want an emotional connect with their customers through exclusivity, quality and varied benefits on repeat purchase. It is thus a key vehicle to enable repeat purchase. i-mint is a leading multiple partner consumer rewards programme, which is pioneered by Loyalty Solutions & Research Ltd (LSRL), a company funded by ICICI Ventures.

Amidst the scenario, while developers too are shying away from planning luxury malls. There is no specific international luxury mall developer planning an entry in India either. Basu said, a few luxury brands are planning an entry into India however as retailers and not as mall developers. As of now, luxury players are looking at only the three major metros of Delhi, Mumbai and Bangalore, which are cities where luxury retail is understood and a certain degree of corresponding demand exists.

Brands like TopShop, Zara, Diesel, among others, have already secured local partners for their expansion in India, and a few of them are talking to potential partners for JVs. Currently, there are only two luxury malls operational in India. These are UB City in Bangalore and DLF Emporio in Delhi. Beyond that, most 5-star hotels such as the Grand Hyatt, Taj Mahal Palace and Oberoi Trident in Mumbai and similar establishments in other cities, have a component of luxury shopping.

However, there are still luxury shopping components to existing malls, such as Phoenix Palladium in Mumbai and Spencers Mall in Kolkata, who plan to have such luxury outlets. According to Sanjiv Goenka, vice chairman, RPG Enterprises, We have not yet decided on which branded luxury outlets should be launched at Spencers Mall in Kolkata.

Moreover, it is becoming increasingly evident that India is currently not a suitable launch-pad for further luxury malls, since even the two operational ones are not meeting expectations, Basu summed up.