was a time when the Murjani Group was synonymous with luxury retail
in India. It offered Indians a taste of luxury by bringing in
iconic brands such as Gucci, Jimmy Choo, Bottega Veneta and La
Perla. However, the luxury powerhouse exited all its
joint ventures in just about two years, and has now moved to premium
What went wrong? Imbalance between franchisers and franchisees
is one of the biggest challenges for luxury retail in India,
says Mohan Murjani, the group's chairman. Experts note that though
margins are quite high in luxury business, Indian partners often
get only a small share.
The Indian luxury market is going through a shake-up. Even as
the country went full throttle in projecting itself as the most
happening destination for luxury sales, recent developments seem
About one-third of 150 international fashion brands launched
in India since 2006 have either changed partners or exited the
market. Twenty-six brands changed partners, and as many brands
exited the market, says consumer goods and retail consultancy
Take the case of Alfred Dunhill. The British luxury menswear
and accessories brand is winding up its India operations. It has
already shut its stores in Delhi, Mumbai and Bangalore. Dunhill
was partnering Brandhouse Retails, which also deals with global
brands such as Reid & Taylor, Belmonte and Carmichael House.
Analysts say the disconnect between partners is one of the major
reasons for 'separations'. Deals fall apart when one fails to
meet the other's expectations. In the case of Dunhill, S. Kumars,
which owns Brandhouse Retails, apparently did not have sufficient
experience to market a luxury brand. Most brands in its portfolio
are, at best, premium.
Luxury is a high-gestation business. You need to wait for
eight to ten years to reap the returns. S. Kumars might not have
wanted to wait for that long, says an investment banker
who has worked on deals with the brand.
Also, store expansion of luxury brands happens at a slow pace.
For instance, in the past four years, Dunhill opened just three
stores in India.
Basically, there is a very different thought process needed
to market luxury, says Neelesh Hundekari, principal at consultancy
firm A.T. Kearney. The luxury market in India is still at
a very nascent stage. Consumers in India are still evolving and
we have not even completed a cycle.
While Dunhill chose to quit India, several other luxury brands
have been breaking away from partners and realigning their India
operations. DLF Brands, the retail vertical of India's largest
real estate developer, recently parted ways with Italian luxury
major Giorgio Armani. It has also put on hold its expansion drive
with Salvatore Ferragamo.
DLF Brands started off in 2008 with huge plans. It even started
a dedicated luxury shopping destination, Emporio Mall, in Delhi.
But it could not maintain the momentum. With the parent company
under financial stress, DLF Brands was not able to invest into
its partner brands. Also, it could not reach its five-year targets,
which restricted growth further.
The group is now going the Murjani way and gradually freeing
up its portfolio of luxury brands. Luxury is a futuristic
business at the moment in India. The premium segment is much more
profitable and scalable, says DLF Brands chief executive
officer Dipak Agarwal.
He adds that luxury brands do have a big future in India, but
they will need another five to seven years to achieve a strong
scale and market size. For us, size with speed was important,
he says. The company opened only four Ferragamo and three Armani
stores since it entered the luxury brands segment in 2008 as expansion
of such brands in a limited market was difficult.
In comparison, its British partner in the premium segment, Mothercare,
which sells prams, pushchairs, car seats, baby clothes and maternity
dresses, entered India in 2009 and already has 42 stores. It will
add another 15 outlets this year. Understandably, DLF has planned
aggressive expansion for premium brands in its portfolio.
Another separation story is of Delhi-based Blues Clothing Company
and Italian brands Versace and Corneliani. Blues, which started
off as a suit retailer, shot to fame by tying up with the two
marquee brands. But the partnership hit the wall as, sources say,
Blues did not have sufficient financial wherewithal and management
International brands are looking for Indian partners who
have the ability to facilitate growth and help multiply their
presence across the country, housing them in the right environment
and coming up with out-of-the-box ideas, says Roasie Ahluwalia,
general manager (marketing), Genesis Colors, which markets Burberry
and Jimmy Choo.
The global slowdown, too, has been a spoiler. It extends
the gestation period for a business to break even. It also reduces
the ability of companies to pump money into a venture, says
Devangshu Dutta, CEO, Third Eyesight.
And to top it all, policy roadblockschiefly FDI in retailhave
irked foreign brands planning Indian launches. It is a great
disappointment that the government has not been proactive in pushing
policy reforms, says Tikka Shatrujit Singh, chief representative
in Asia, Louis Vuitton Moet Henessey. Instead of encouraging
investment, they have delayed the whole process. And for want
of a suitable avenue, investments may go elsewhere.
(This article appeared in Week.)