Lack of quality space, environment and dearth of high
street/super premium malls are the prime reasons for restricted presence of
luxury brands in India, according to an ASSOCHAM-KPMG joint study, which mooted
for the need for modernised and dedicated luxury retail areas in protected
vicinities like airports.
“Setting up stores in high streets affects luxury retailers’
profitability due to high rental costs. Also these high-end areas are
cluttered, crowded and are unsuitable due to the absence of the exclusive
ambience that luxury retail demands,” according to a study on ‘Challenges
highlighted by luxury retailers in India.’
The Indian luxury market grew at a healthy rate of 30 per
cent to reach $8.5 billion in 2013 and is likely to reach $14 billion by 2016
owing to rising number of wealthy people, growing middle class, affluent young
consumers and other related factors.
Though, India currently enjoys just 1-2 % share in the
global luxury market, it is the fifth most attractive market for international
retailers.
Fragmented and diversified consumer base in India is another
significant challenge being faced by luxury retailers in India as High Net
Worth Individual (HNI) consumers are not easy to reach, noted the study.
Luxury brands need to strategically design their growth
plans to tap demand across three categories of HNIs namely - the inheritors
(traditionally wealthy) who are habitual spenders; the professional elite who
are discerning spenders; a large segment of business giants (entrepreneurs,
owners of small and medium enterprises) who have the money but lack
appreciation for fine luxury goods because of no prior exposure to such
products, it added.
“There is a need for luxury brands to focus on expansion in
the type and nature of products being offered and increasingly adopt innovative
marketing plans to tap rapidly evolving consumer behavioral trends,” said DS
Rawat, secretary general of ASSOCHAM while releasing the study.
“Luxury retailers need to plan out of the box marketing
strategies and come up with products that are tailor-made to suit the whims and
fancies of varied Indian customers,” said Rawatm adding, “Luxury is no longer a
‘status symbol’ but is now a lifestyle and the global brands need to fast
evolve and learn ways to adapt within the local environment so that they can
get accustomed to nuances of the market by understanding the cultural identity
of Indian consumers.”
Lack of policy support is another prominent challenge being
faced by luxury brands in India, noted the ASSOCHAM-KPMG study. “Despite strong
demand momentum, Indian luxury market has not been viewed as policies and
regulations friendly for the luxury retailers,” it said.
“Import duties (20–150 per cent) are relatively higher and
this is considered as a key apprehension factor among the international
players, who may resist them to frame aggressive growth plans for India,” noted
the study, adding, “Clauses such as — 100 per cent foreign direct investment
(FDI) in both single and multi-brand retail requires 30 per cent of local
sourcing, announced in the liberalized FDI policy in luxury retail in November
2013 could be difficult for the international luxury players to comply with.”
Lack of trained staff is another well-acknowledged challenge
facing Indian luxury retail industry which requires greater discretion and
knowledge on the part of a salesperson, further highlighted the study.
Growing prevalence of counterfeit luxury goods and grey
market are also hampering the growth of the industry, noted the ASSOCHAM-KPMG
study. “Luxury players in India continue to face supply side issues such as
legal loopholes pertaining to intellectual property rights, inadequate means to
monitor various emerging channels, and a growing number of online portals,
among other factors,” the study added.
“Measures in the form of effective intellectual property
enforcement, plugging loopholes in the legal and judicial structure and higher
conviction rates can help curb the growth of fake luxury products,” added
Rawat.
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