India is gradually emerging as a major destination for global luxury brands, thanks to the high disposable incomes of the Indian consumer and their penchant for high quality branded products. In an interaction with IMAGES Retail, Ivana Perovic, CEO, AP Group, a 17-year-old company which is into distribution and retailing of international luxury brands in India, talks about the market scenario in India.
Q. What is the size of the luxury market in India?
The Indian luxury goods market is worth approximately Rs.717 bn.
Q. Which markets in India have high potential for luxury retailing?
Luxury brands have their presence in major cities such as Delhi, Mumbai and Bangalore. Demographics of several other cities also suggest huge potential. India, with its growing population of literates with high spending power, attracts most of the international luxury brands to cities such as Chandigarh, Hyderabad, Kolkata, Pune and Chennai.
Q. What difference do you notice in the Indian luxury retail market vis-à-vis other markets?
The US and Europe are still grappling with recession, so global luxury retailers are eyeing markets such as India, which has a rich tradition of luxury. Global brands are now relying on Indian retailers’ understanding of the local market.
Q. What is the most preferred route for luxury brands to enter India – JVs, licensing or franchising?
It depends from brand to brand. Some have chosen JVs, while some have gone for franchising. Some others have even taken the licensing route. It all depends on the local partner, the brand, and the objectives they want to achieve within a given period of time.
Q. What role does AP Group play in assisting luxury brands to venture into India?
AP Group assists luxury and fashion brands in winning over the Indian consumer’s heart. Our expertise lies in in-depth market and consumer knowledge, research and analysis, creation of distribution platforms and introduction to the right target audience.
We act first as a guide for the Indian market and then as a partner in identifying appropriate retail space, developing, implementing and creating a platform for brands to enter the market and making sure the brand grows through our unique systems of operating retail and distribution.
We assist the brands with the right marketing touch to maintain their global brand equity. Additionally, we offer brand entry, development, creation, PR programmes, strategic alliances and business development opportunities. We assist them with business plans and help them identify appropriate retail spaces.
Q. Who are your existing clients? Any other international luxury brands that you are in talks with?
We currently work with Guess for all its accessories in the Indian market – we are their official all-India distributors. We are also the authorised all-India franchisee for Guess accessory stores, of which we have one at DLF Promenade, Delhi; Market City, Pune and one will open soon at Phoenix Mills, Mumbai.
AP Group is also the authorised distributors for Havainas flip-flops and the distribution is commencing as we speak.
We are also the authorised franchisee for Swarovski – we operate their seven boutiques and five shop-inshops across western India. Talks are under way with other international fashion brands for India.
Q. How important is the Indian market for AP Group?
AP Group is an Indian company and, therefore, India is extremely important for us.
Q. How do you plan to increase your share in the indian luxury retail market?
Our focus is on retaining our position in luxury and scale up our focus on fashion. We feel fashion is the next best opportunity in India as the country is an extremely fashion-conscious market. We will be focusing on product, pricing and promotional changes; scaling up the marketing mix by increasing advertising expenditure to improve brand recall; and increasing the share by intensive distribution.
Q. Are you planning to increase the points of sale this fiscal?
All our brands are growing in India and we plan to increase our points of sale year on year, especially in tier II cities.
Q. AP Group is present in both distribution and retail businesses, besides having presence in mall development. How much does each of your businesses contribute to your overall revenue pie?
The business is equally distributed among the three.
Q. What major hurdles do foreign luxury brands face while retailing in India?
The hurdles are many – high taxation, logistics and infrastructure issues, lack of skilled personnel and non-availability of appropriate and well-priced real estate. In short, it makes it all the more challenging to make a brand successful in India.
And, due to heavy initial investments required, heavy rentals and space constraints, break even becomes difficult to achieve. Profitability comes way later and only if you are in the right catchment location.
Q. Of the various hurdles, lack of adequate infrastructure appears to be a major problem that needs immediate attention. What are your views on this?
Luxury retailing implies high profile, strategic locations near high income catchments. Real estate cost is obviously a problem in India. Strategic high street locations in the right catchment are in limited supply, which makes them very expensive. These complications tend to become deterrents for international luxury retailers to do meaningful and profitable business.
Another problem is of high rentals. This is where the constraints of infrastructure come into sharp focus. It is important to create an atmosphere for a luxury retailer in which he can attract footfalls and then convert these footfalls into revenue.
Q. And what solution do you suggest for high taxation – another major deterrent to the growth of luxury retail in India?
As far as high import duties are concerned, I feel consumers can bring a change by voicing their opinion.
Q. What kind of future do you anticipa te for the luxury retail market in India?
The Indian economy has one of the highest disposable incomes – there are around 126,000 HNIs (high networth individuals) and another three mn households – earning over `10 lakh per annum – ready to consume luxury. In short, the number of HNIs is enough to fuel the growth of fashion and luxury brands in India.
Already, luxury brands are available in almost every retail category – there is luxury home interiors, furniture, bathroom fittings and much more – and are growing at 20-25 per cent.
Moreover, BRIC (Brazil, Russia, India and China) countries are predicted to witness the highest growth in the next couple of years. So, the scope is huge. India is a booming economy and luxury retail has a bright future.
This interview was originally published in May 2011 issue of Images Retail.