DLF and Ferragamo decide to split

After ending its joint venture with Giorgio Armani less than a fortnight ago, DLF has

decided to exit its partnership with another Italian luxury brand Salvatore Ferragamo. According to DLF Brands Chief Executive Officer, Dipak Agarwal, “Luxury is a futuristic business in India at the moment and does not have scale.”

The company would now focus on selling premium and bridge-to-luxury fashion brands such as Boggi, Alcott, Mango, Mothercare, Claire’s and DKNY. After the CII-AT Kearney report on luxury said that India’s luxury market is witnessing a 20 per cent year-on-year growth, there were big talks about the prospects of Indian luxury market. But with many luxury brands exiting their JVs with Indian partners, luxury retail in India seems to be taking a different turn.

In fact, most international brands have decided not to make a solo entry after the government agreed to 100 per cent FDI in single-brand retail. They want to first understand the Indian market with the local partner and FDI rider of 30 per cent mandatory sourcing from SMEs has become a hurdle in the way of those who were considering the option.

Agarwal points out that while luxury brands have a big future in India, it will require another five to seven years to achieve scale and market size. DLF has had only four Ferragamo and three Armani stores since it entered the luxury brands segment in 2008 as expansion of these brands in a limited market was getting difficult.

High rentals of premium properties, lack of quality retail spaces, lack of skilled labour and high import duties have further proved to be mood dampeners for India’s luxury retail.