Pssst, did you hear? The Indian luxury market is not shaping up to all it had been expected to.
Versace, Corneliani and Guess are potentially planning to part ways with their Indian partners. They are amongst an increasing number of brands that have struggled to settle down in India. Versace and Corneliani have decided to split with their Delhi-based partner Blues Clothing Company and are going to scout for a new local partner. Guess is expected to look for a new partner after its long-time partner, Planet Retail decided to restructure its business.
The Indian government's policy of high import duties seems to be the culprit in this case. Some experts have speculated that these moves are because most Indians still prefer buying luxury products from abroad, because the high import duty makes them costlier in India.
Experts feel that luxury retail in India will experience a boom but, it is going to take a few years for the market to develop. And though most international brands prefer to have a local partner for the complex Indian market, often, the partner does not invest enough to scale up the brand.
According to consumer goods and retail consultancy Third Eyesight, about one-third of the more than 150 international fashion brands launched in India over the past seven years have either changed partners or exited the market and around 26 brands have changed partners, while 23-26 exited the market with at least half of those later returning either as a wholly-owned subsidiary or with a new partner.
The 100% FDI now permitted for single-brand retail and the strong potential growth in India (vis-Ã -vis the stagnation in Europe) is certainly a strong attraction for the brands considering India as a destination. The fast growing Indian economy, backed by a thriving middle class and Indian consumers' rising aspirations and growing exposure to western products adds to the sales potential in the country.
The maharaja dons a lot of finery, but perhaps some other day..