India emerging as the global luxury fashion hotspot

The fashion industry has plenty of reasons to look towards India as the preferred global growth destiny. In the coming decade, the economy could grow by 8-9 per cent per year. India remains one of the most visible growth opportunities in a global economy suffering from a slowdown in China, economic crises in Russia and Brazil and widespread uncertainty elsewhere.

A recent UN report revealed that India, with a population of around 1.3 billion, is on course to overtake China in just six years to become the world’s most populous consumer market. But for this demographic dividend to pay off, the country needs to overcome obstacles hindering its progress, such as unemployment woes, cluttered infrastructure development as well as haphazard urban development.

India will never follow the Chinese trajectory in terms of pace and velocity of growth. India will be the next India, highlights concedes Darshan Mehta, Chief Executive of Reliance Brands, a subsidiary of Mukesh Ambani’s powerful conglomerate Reliance Industries, which has partnered with international brands like Ermenegildo Zegna and Diesel to tap the Indian market. It will be steady and rising. Sure, there will be blips along the way (like) a season or two of subdued demand. But (seen) from a 20,000-foot view, the oncoming tide ... will continue for the next few decades.

Changing consumer behaviour

This is a significant shift in consumer behaviour, as more and more urbanised Indians are preferring Western — not Indian — clothes on a day-to-day basis, although Indian clothes remain the default for special occasions. As a result, India’s own high street players — such as Pantaloon and Cover Story, a new brand in Kishore Biyani’s Future Group portfolio — are brimming with promising prospects. Local brands score well over international players in terms of understanding of the market’s tastes, trends, ethnic wear silhouettes and the vast repertoire of Indian clothing traditions.

The number of Indians able to afford branded fashion is set to quadruple in the next five years. There have been some heavy-duty entries into Indian markets in the last two years, says Sahana Sarma, Partner at McKinsey & Co. Since launching in Delhi a year ago, H&M has opened five stores across the NCR, an outlet in Bengaluru and one more in Mohali, Chandigarh. There is so much excitement about the fast fashion brand that in August, 1,500 people waited in queues outside High Street Phoenix for the opening of its first outlet in Mumbai — for more than 30 hours to secure discount coupons for a bargain on their first H&M purchase. The brand is said to be targetting a footprint of 30 Indian stores within five years’ time.

Unlike H&M, Zara entered India six years back through a joint venture between its parent company Inditex and Trent, the retail arm of India’s Tata Group. Zara’s India unit reportedly earned revenues of over $100 million last year, a new high in the category for the country, from just under 20 Indian stores.

Gauging the pulse and wealth of India’s luxury market reality is Sanjay Kapoor, the founder of luxury conglomerate Genesis Colors which owns upmarket sari brand Satya Paul and distributes Giorgio Armani, Jimmy Choo, Michael Kors, Coach and other brands through 120 mono-brand, multi-brand and shop-in-shop stores across India. He feels GST is in the right direction for growth of the industry. LVMH’s Singh acknowledges that the government has been slow to make reforms, but says it’s a matter of time before they take more decisive action. The government’s restrictions on FDI have been a major dampener on the luxury market for years. The same has been eased a bit by the present government.

However, India is still cited as a difficult place for overseas investors, with a lack of transparency in several parts of the economy and a high start-up cost. More than that, it’s the insufficient luxury retail infrastructure, that has been plaguing growth momentum.

Luxury brand owners see growth opportunities in cities like Bangalore, Hyderabad, Kolkata and Chennai after serving the most important luxury markets of Delhi and Mumbai. A lot of new development has been on the anvil such as Palladium in Chennai and the Reliance Mall in Mumbai, which would offer luxury brands a much-needed infrastructure.

According to LVMH’s Singh, one of the reasons for the luxury retail space shortage is there has been a disconnect between foreign brands and Indian developers in terms of zoning and architecture expectations. New Delhi’s DLF Emporio Mall got it right because they started discussions with brands while they were designing the mall.

Another dampener is that foreign brands are still treating the Indian luxury market as if it is only an accessories play, with small ready-to-wear assortments in their boutiques. The reality is, India is the next global fashion luxury hotspot, whoever steps in here will have the first mover advantage.