Luxury brands target India

02 December 2011

NEW DELHI: Luxury brand owners look set to rapidly increase their investment in India, as rising affluence and a more favourable regulatory climate offer considerable growth opportunities.

The Indian government's decision last week to allow foreign firms to take 100% control of their Indian operations, rather than limiting them to a 51% share in joint ventures as at present, looks likely to exert a profound effect on the premium goods industry.

In reflection of this, companies like Armani Junior, Christian Louboutin, Diesel Black Gold, Van Laack and Vertu are all in the process opening stores in the exclusive DLF Emporio mall in New Delhi.

"We are excited on the recent move by the government approving 100% FDI in the luxury space," Dinaz Madhukar, a vice president at DLF Emporio, told The Times of India.

"Luxury has always been a sunrise sector with the capacity to grow at the rate of 25-30% annually and it's clear that people are wanting to experience and taste luxury."

Julius Baer, the wealth management group, has forecast that there will be 403,000 high net worth individuals boasting assets of $1m or more in India by 2015, yielding an attractive audience for luxury goods firms.

ATKearney, the consultancy, also reported that sales of high-end goods in India reached $5.8bn in 2010, an improvement of 20% year on year, and has predicted figures will hit $14.7bn by 2015.

While this would still leave the market around half the size of that in China, on roughly $28bn, ATKearney suggested India's increasingly wealthy and "brand conscious" shoppers held much promise.

"In one stroke, India may have opened the floodgates," Sanjay Kapoor, managing director of Genesis Luxury, which works with Bottega Veneta, Burberry, Canali and Jimmy Choo.

Michele Norsa, CEO of Ferragamo, seemed to confirm such a prediction, arguing: "We expect investments in India from luxury and fashion companies to benefit from this decision and the process of development of infrastructures will improve and boost the growth of luxury industry."

Louis Vuitton currently has four stores in India compared with 36 in China. Tikka Shatrujit Singh, the chief representative for LVMH in Asia, reported its strategy could quickly evolve.

"This was the last frontier to be opened. It will make India a preferred market," he said. "Cities need to develop. Malls need to come up ... The game-changing moment will come when the middle class starts to buy."

Data sourced from Times of India/Economic Times; additional content by Warc staff