BANGALORE WEDNESDAY, FEBRUARY 20, 2013
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Waiting for a silver lining
It has been close to five years since luxury brands made their way to Bangalore, looking at its wealth and youth. The luxury market here is said to have plateaued, but there are no hard numbers to prove things either way. Subir Ghosh takes stock of the situation along with Supriya Ghorpade
Footfalls, yes. Stampede, no.
hen UB City was launched with much fanfare some five years ago, the establishment of India’s first luxury mall was heralded as the dawn of a new era of luxury. If one was expecting a big boom, that expectation has been belied. Yet, it is not easy to pin such an assertion on a wall. Numbers pertaining to the size of the Bangalore luxury market are hard to come by, and not everyone is willing to give out footfall, or even sales, figures. In other words, trying to put pieces together to present a bigger picture is as good as fumbling in the dark. Nevertheless, few detractors would dispute the contention that luxury retail indeed is growing, though not exactly booming, in Bangalore. And what most experts and observers concur about is that the market has not been growing at the anticipated pace. So, what’s holding luxury back, if at all? One of the best persons to contextualise the issue is Anuj Puri, chairman & country head, Jones Lang LaSalle India, financial and professional services firm specialising in real estate services. Points out Puri, “Real estate cost is obviously a problem. Strategic high street locations in the right catchments are in limited supply in our primary cities, which make them very expensive. Also, there are many other businesses that are equally attractive for organised investors, and they have the option of giving out their spaces to high profit margin businesses such as jewellers. The returns from such a business as compared to those that a Burberry, Armani, Fendi or Gucci store would fetch either on a pure rental or a profit-sharing basis are much higher. “ This, of course, the brands did — by realising the potential of the Bangalore market, which has grown to be the third largest in the country after Delhi/NCR and Mumbai. The ever-growing population of high net worth individuals (HNWI) backed by an upwardly-mobile youth exposed to the global ways of living and dressing made a number of high-profile uber luxury labels flocking to Bangalore. Lured they were. Many problems that Bangalore faces are not unique to it. But they get accentuated more here compared to the much bigger Delhi or Mumbai. Contends Puri, “The format of luxury retail is still not
understood very well in India. To a large extent, developers of luxury malls in this country come from a residential or commercial real estate background. While they have invested in educating themselves and bringing in the best architects, the principles of running an organised luxury retail development are ignored.” Neelesh Hundekari, partner AT Kearney, however stresses on the need to look beyond malls, especially those that stay restricted to luxury. “There are still a lot of affluent people around who are unaware about luxury brands. This segment, which is a buyer of premium brands, is always ready to migrate/graduate to luxury brands.” Hundekari was one of the co-authors of ‘India Luxury Review 2011’, a landmark report produced jointly by AT Kearney and the Confederation of Indian Industry (CII). So can there be a formula that works? Emphasises Puri, “It is important to create an atmosphere for a luxury retailer in which s/he can attract footfalls and convert those to revenue. This entails a finely-tuned combination of promotion, ambience, catchment-specific discounts and schemes, the right merchandise, a fail-proof supply chain and well-trained staff. Only when such a formula exists will luxury retail work in a mall.” Hundekari feels there is a need to have a mix of luxury and other non-luxury products because they have the ability to attract a larger catchment of buyers. And that’s because, he contends, mall economics work better for mall owners when s/he is able to offer a wider basket of products. Luxury-exclusive malls, on that count, stand in the danger of not seeing enough consumers walk in. Moreover, the prospect of strolling into a luxury mall, Hundekari asserts, can often be intimidating for many. This apparent disconnect can be gauged from the minuscule number of prospective customers at shops at UB City than the throngs seen at the restaurants in the complex. But then, one can counter-argue that the complex was meant to be a one-stop luxury destination, not just for shopping. There are other reasons why buyers are not too many. Even with the arrival of big names like Louis Vuitton, Jimmy Choo, Zegna, Burberry and Salvatore Fer-
ragamo, many still prefer to make their big money purchases overseas. This is due to the constricted range of products being offered in India, and better bargains abroad. Understanding the need to create limited edition ranges, luxury retailers are launching special product lines. For instance, Bottega Veneta came out with “Knot India” clutches for its local customers. Explains Tarang Arora, designer & head of international operations with Amrapali, “As a result of high taxation on luxury products, very often one finds similar products outside the country at cheaper prices. The luxury consumer who can afford to travel overseas, would then prefer to shop abroad rather than in the domestic market (as the product is then more unique and in many cases cheaper).” The scene may not be dismal altogether, but still then, where does hope lie? Hundekari thinks the fact that luxury brands are now available beyond UB City is itself a good sign. And then, there is Bangalore as a lucrative destination. Says Roasie Ahluwalia, general manager (corporate affairs) for Genesis Luxury, “Bangalore is a fast developing hub for international luxury brands due to a large number of high-salaried Indian and expat professionals residing in the city who are well-travelled and hence brand aware. They have the propensity to indulge in these brands.” Bangalore is different from Delhi/NCR and Mumbai in that the need to consume luxury products is less, which in turn leads to retailers providing limited choices and variety in terms of product offering, which in turn again contributes to reduced consumption. Arora delves into the reasons, “While a lot of Bangalore’s luxury-driven consumption is led, to an extent, by what is being consumed by the trendsetters of Delhi and Mumbai, the market is more conservative in terms of its choices, whether in terms of cutting edge fashion, or other luxury and lifestyle goods. This is because the South Indian consumer is less flamboyant than the North Indian consumer. Moreover and indirectly, the city’s 11:30 pm curfew also plays a part in this.” There you are — you
At UB City
At The Collective
Bottega Veneta, Burberry, Canali, Corneliani, Diesel, Estee Lauder, Jimmy Choo, Kimaya, -Lalique, Lottusse, Louis Vuitton, M&W, Mont Blanc, Omega, Paul Smith, Rado, Rolex, Tag Heuer, Thann, Versace
Armani, Canterbury, Duchamp, Fred Perry, Hackett, Hugo, Simon Carter
knew it. The point that Puri makes is that luxury retailers need to create the appropriate infrastructure for luxury retail in most cases, since it simply does not exist in the very locations that make most sense for luxury retail. He talks of the format of luxury retail being compromised, as a result of which rather limited opportunities being available for retailers to do meaningful business in such locations. The overall atmosphere that they would ideally wish to embellish their stores with can simply not be created. The customer does not get the feel and ambience of luxury shopping, even if s/he has access to brands. He explains, “Although new mall developments in the city started later as compared to Mumbai and Delhi, the pace of growth registered in terms of supply in the last few years is quite aggressive. Most new malls have been able to establish themselves quite well and have been successful in attracting consistent footfalls. The young, upwardly mobile consumer base of Bangalore has been patronising the city’s prime shopping areas such as Brigade Road, MG Road, Commercial Street, Vittal Mallya Road and 100 Feet Road Indira Nagar market. In turn, these streets have ramped up their retail offerings, both in terms of density and the variety of national and international brands. “Luxury retailing implies high profile, strategic locations near high income catchments. If we take the example of Mumbai, nothing less than locations such as Breach Candy, Colaba or Linking Road really make much sense for luxury retail. It is an unfortunate fact that in these very locations, there is really no existing or future scope for organised retail play. In most cases, we are talking about small residential buildings or old tenanted commercial buildings where luxury retail is being created.” And for the moment, the market is waiting for the clouds of uncertainty to disperse. @write2kill / email@example.com @supriyaghorpade / firstname.lastname@example.org
There are still a lot of affluent people around who are unaware about luxury brands —Neelesh Hundekari partner AT Kearney
AT A GLANCE ● The luxury market in India is pegged to grow at
25 per cent in 2013 till 2015 and likely to touch USD 15 billion from the current level of USD 8 billion ● Number of high net worth individuals (HNWI) in
India: 125,000 ● Number of ultra HNWI: 7,700 ● In 2012, the Indian luxury market was estimated
to be 0.5% of the global market. ● The luxury sector in India can be broadly split
into the following verticals: (1) Products: Apparel and accessories, pens, home décor, watches, wines & spirits, jewellery (2) Services: Spas, concierge service, travel & tourism, fine dining & hotels (3) Assets: Yachts, fine art, automobiles & real estate
Anuj Puri Chairman & country head, Jones Lang LaSalle India
ver the past decade, Bangalore has experienced rapid growth and international recognition in the field of IT and software development. The city’s demographic profile has changed significantly due to the large migration of people into Bangalore following the IT boom in various parts of the country, cutting across different income groups and cultural backgrounds. This has added to the multicultural flavour of Bangalore, and been one of the main drivers of the latest trends and lifestyles in this cosmopolitan city. The city also attracts people from all over the world due to its excellent schools and universities. All these factors have contributed to a retail orientation that is distinctly different from that of Mumbai and Delhi. Luxury retail in Bangalore hinges on rising the disposable income levels, which is why there has been a significant influx of lifestyle and luxury malls in various micro-markets of the city. The Prime CBD consists of MG Road, Brigade Road and by-lanes directly around these two roads. With the spiralling costs of real estate on MG Road and unavailability of good quality premium space, the CBD extended towards the North and South of MG Road. It has the city’s most premium quality office space and retail outlets. Usage on Brigade Road is primarily retail and commands higher rental and capital values.
Published on Feb 20, 2013
It has been close to five years since luxury brands made their way to Bangalore, looking at its wealth and youth. The luxury market here is...