Despite the entry of top-rung luxury players into the Indian market and rising income levels, growth in the $4.8 billion luxury retail market remains sluggish, due to dearth of luxury shopping destinations, high pricing of products and low brand awareness, analysts say. ?The Indian luxury market forms only 2% of the global market for luxury goods. There’s enough potential, but most brands are reluctant to invest. They don?t have much faith in the revenue-generating capability of the market,? said Pinakiranjan Mishra, partner for retail and consumer products, Ernst & Young.
In the lifestyle segment which includes apparel, footwear and accessories, premium global brands like Armani, Tommy Hilfiger, FCUK, Calvin Klein, Louis Vutton, Dolce and Gabbana have entered the market in the last five years. However, their reach and visibility is limited to metros only. The Collective, a super premium lifestyle retail chain, stocks about 100 luxury brands in its three flagship stores in Delhi, Mumbai and Bangalore. Ram Iyer, COO, The Collective, said, ?We?ve maintained a growth rate of 19% in the last three years. Our best-selling brands have been Hackett, which has grown at 50% and Armani, which has grown by 30%. Though the overall growth has been on the slower side, we expect it to rise as the customer?s propensity to spend is increasing.?
The lack of good luxury shopping centres is another factor that has impacted retailing in this segment. A recent report by JLL, on India?s retail opportunities, yield that luxury retailing in India is limited to a few shopping plazas, select high street locations and five-star hotels. Only three centres, which are in the luxury segment are DLF Emporio in Delhi, UB City in Bangalore and Palladium in Mumbai. Darshan Mehta, president and CEO, Reliance Brands which operates a joint venture with premium apparel brand Paul & Shark, said, ?Finding the right location and retail ambience for our brand remains a constant challenge. Lack of proper retailing channels across the country can mar the growth of a brand.?
The dented growth of high-end brands is also being attributed to their high pricing. Mishra said, ?Luxury retailers offer a limited product range and stock second-rung products at astronomical prices. In a value-driven market, the wealthy consumer would rather go abroad and get a wider choice of products at a lesser price.? Another drawback is the lack of brand awareness among consumers. Ramesh Srinivas, head ? consumer markets, KPMG said, ?There is no brand consciousness in India as in the West. Consumers are not drawn to stores.?
Despite the challenges, retailers are hopeful for a bright future. Iyer adds, ?India?s luxury market is estimated to touch $14.7 billion by 2015.
