“Club of Knowledge Hunters”

Global luxury brands feel realty heat

Posted by retailigence on November 23, 2008

They are typically regarded as recession proof but luxury brands are now treading the cautious path. Soaring rentals, high initial investments and an unfavourable economy are not making things easy for this nascent industry. Industry sources even said that while some players were pulling out of luxury malls, others were getting more choosy about locations after the global economic meltdown. Neha Dagar, head, marketing of sterling silverware brand Ravissant says that they are more guarded this time round about their expansion plans. “We are becoming very choosy. We have four stores in Mumbai and three in Delhi. We might look at avenues down South in the near future. It’s only logical that in the current recession , brands will be more careful and will instead focus on conserving resources.”

Global luxe brands are now looking at new avenues for lower rentals, revising internal cost structures and efficiency operations. Pinakiranjan Mishra, Partner and Leader, Retail and Consumer Products Practice, Ernst & Young, agrees that though luxury brands are usually not impacted by a downturn by definition, this time there seems to be an impact globally.

But while established luxury brands may still be able to tide over the current downturn, the newer brands may not be as lucky. Indigenous jewellery brand Amaris Regalia has cut down on promotional costs and ad budgets. “The recession is affecting our expansion plans to an extent. Hence keeping our long-term vision in mind, we are altering short term strategies and using cheaper, effective alternatives,” says Manoj Khanna, CEO, Amaris Regalia.

Established players on the contrary say that though a dip in sales has been seen, the impact could only be gauged in the times to come. “Our plans have not been affected in any way. Yes, there has been a slight dip in sales of 10-15 % as compared to one’s expectations . It’s still early days yet to assess the impact,” says Sanjay Kapoor, MD, Genesis Luxury, distributors and marketers of brands like Canali, Kenzo, Just Cavali and Aigner in India.

Louis Vuitton Moet Henessey (LVMH) Watch and Jewellery India MD Manishi Sanwal too agrees that though they have not faced any problems in their overall business plans or made any dramatic changes to their strategy, they are being far more active and vigilant now.

What is adding to the woes of the brands are the sky high rents quoted in malls and five-star hotels. Global real estate consultancy Jones Lang LaSalle Meghraj’s findings suggest that the cost of real estate globally is typically 8-10 % or at the maximum 15% of the total cost incurred in running a store. However, in India the rates quoted are as high as $25 per sq ft, thus pushing the percentage of real estate cost to as high as 40% in some cases.

“While luxury brands can typically afford to pay higher rents because of the pricing of their products and also business turnover, they are not achieving such results in India. India is still an immature luxury retail market that is more geared towards practical goods rather than a complete brand mix portfolio.

Therefore, their performance in India is below the international benchmark,” says Shubhranshu Pani, MD, Retail, Jones Lang LaSalle Meghraj (JLLM). But whether insulated from the slowdown or not, luxury brands are still choosing to be careful and adopt a cautious stance instead.

Offbeat is the flavour of the luxury season!

Luxury brands are unveiling unique promotional initiatives to appease customers . Call it a result of the recession or simply cutting an edge by way of unconventional strategies, luxury makers are making sure that clients are fascinated by an offbeat shopping experience. So while Dunhill has enlivened its shopping extravaganza with tarot card readings all through November, luxury cosmetic brand Estee Lauder did extensive research and launched colour shades specifically suited for the Indian market.

Italian luxury goods company Tod’s will showcase the fine art of shoemaking in Mumbai by an Italian artisan to educate Indian luxe buyers and Italian brand Valentino has a special service — Valentino, ‘By Appointment ,’ for its well-heeled clientele. Magic, Luck and Tarot is the central theme of the promotion at Dunhill where one customer will go on to win an elegant ensemble, either casual or formal, of their choice. So why a Tarot theme? “A lot of people believe in tarot and fortune. Hence we thought this would work well with them.

It was a way of getting them excited and it has been received rather well by our clients,” says Anjani Kasliwal , general manager, Luxury Brands, Brandhouse Retail, distributors of the brand in India. Anjani however does say that the promotion hasn’t been planned to perk up sales. “We did not decide to do this to boost sales. Sales have always been good.

We just did this to facilitate more interaction with our buyers,” she adds. In another unique initiative, luxury cosmetics brand Estee Lauder recently launched six additional shades of Double Wear liquid and powder foundation developed specifically for Indian skin tones and a colour collection called ‘Jewels of Summer.’ “I have always been inspired by the beauty and style of Indian women.

The ‘Jewels of Summer’ colour collection reflects the pinks, berries and metallics that look so beautiful on Indian women. I also wanted to incorporate our Signature golden fluted lipstick into the collection because of the shared heritage of gold between Estée Lauder and Indian style,” says Aerin Lauder, senior VP and creative director, Estée Lauder.

Besides this, the brand offers lipstick giveaways to customers who visit the store on the opening day.
Going a step further, Italian luxury brand Valentino’s special luxury service , Valentino ‘By Appointment,’ offers VIP clients the indulgence to experience luxury shopping in the privacy of their home.

The team at Valentino puts together a small exclusive collection to suit the individual taste of the client. “Whether to add to their own collection or if they are interested in buying a memorable gift for someone special they can enjoy it all in the comfort of their own home. It’s an unrivalled shopping experience for our esteemed buyer,” says Sheetal Mafatlal, president , Mafatlal Luxury, franchisee and distributor of Italian luxe brand Valentino in India. But besides unique promotions and services, there are also interesting educational initiaves lined up in November by Italian luxe brand Tod’s . An event organised by the brand in Mumbai will help customers understand the quality and the meticulous processes of making a Tod’s shoe.

In an interactive session, the Italian master craftsmen will engage customers and even ask them to try their hand at stitching the shoe! Now, that surely will make buyers appreciate the 100 steps involved in building a Tod’s shoe. Offbeat initiatives may be the focus. However the central strategy is just one: to woo the Indian luxe buyer.

Sources:- Economic Times


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