The Indian version of the Fifth Avenue (New York) or the Bond Street (London) may be a long way off, but luxury brands hold significant promise in this market. So, in the absence of high streets, which are synonymous with ultra-expensive shopping in cities like London, Milan, Paris and New York, luxury brands are heading to international airports as an alternate destination in India. Hybrid retail formats where ‘luxury’ can co-exist with ‘premium’ brands is yet another option, point out analysts and consutants. That is, when luxury brands want to step out of the 5-star hotels or the exclusive malls, which are very few in number anyway.
Jaideep Wahi, director, retail services (India), Cushman & Wakefield, a real estate consulting firm, cited market research reports to point out that star hotels account for almost 80 to 90 per cent of luxury retail space in India, with the prime focus being on the tier-I cities of Mumbai, Delhi and Bangalore. The retail boom of the last few years has led to the emergence of newer retail formats dedicated to specific segments, for instance luxury malls like the DLF Emporio in New Delhi and The Collection at UB City, Bangalore, Wahi said.
However, “an emerging alternative destination is the new modernised airports”, Wahi said. Many luxury brands are learnt to be in talks with the international airports in major cities of India.
On whether luxury brands could find a place outside of star hotels and exclusive malls, Sachin Sandhir, managing director and country head (India), Royal Institution of Chartered Surveyors (RICS), a body for regulating property professionals and surveyors, said hybrid retail concept was an innovative option.
“Given the huge demand from luxury brands wanting to expand in the Indian market, it is time that developers gain exposure to international standards and look at hybrid retail concepts with an innovative interplay of luxury and premium brands,” Sandhir said.
Of the world’s leading 500 global luxury brands, only 30 per cent are present in India as compared to 70 per cent in China, according to industry estimates. The luxury brands which have entered India include Giorgio Armani, Jimmy Choo, Cartier, Tod’s, Dior, Fendi, Burberry, Hugo Boss, DKNY, Ravissant, Louis Vitton, among others. Also, India accounts for less than 1 per cent of the global luxury market while China accounts for 10 per cent of this market. From 1.2 million sq ft in 2008, (3.8 per cent of total retail space), the luxury retail space is estimated to grow to around 1.6 million sq ft by 2012 (3 per cent of total retail space).
As for the potential of the segment, the Indian luxury market is expected to grow 10 times, from $3 billion at present to $30 billion by 2015, industry estimates suggest. The stats also show that around 40 per cent of the country’s wealthy households are in Delhi and Mumbai, while the remaining 60 per cent are spread across Pune, Hyderabad, Chennai, Bangalore, Ludhiana and Kolkata.
Saloni Nangia, senior vice president, retail, Technopak Advisors, explained why a place like Connaught Place in Dehi or Linking Road in Mumbai cannot be a high street equivalent of Fifth Avenue or Bond Street. “You need to develop these places afresh for them to be high streets,” Nangia said. But, according to Sandhir, such high-end locations have the potential for some component to be redeveloped with excellent infrastructure and environment that this concept demands. “Main streets in India unlike their European or American counterparts have a tenant mix, which is unappealing to luxury retailers, besides lacking basic infrastructure facilities for shoppers such as proper pavements and parking spaces,” said Wahi.
As for now, luxury brands have to be housed in controlled environment in India, Nangia pointed out, for them to have that air of exclusivity about them.
According to Sandhir, developing luxury malls require commitment to high quality standards and creating an exclusive ambience. “All this comes at a cost that makes this asset type a comparatively risky proposition for developers,” he said.
On whether smaller cities and towns could offer retail space to luxury brands, Cushman’s Wahi said, “as for tier-II and III cities, many may have a large section of consumers with heavy purse strings, but such customers are yet to be educated adequately in branding and quality consciousness.” It is not just about going ahead and developing a space since operational costs too needs to be taken into account as this is a segment with very limited footfalls, stressed Wahi.
Source : Business Standard