Smooth entry

New Delhi, April 1: Foreign luxury brands are looking forward to duty cuts by India, which will help them gain bigger presence in the markets here.

It works out cheaper for rich Indians to buy their Gucci shoes, Gautier jackets, Cartier watches and Vertu mobiles when they travel abroad instead of buying them at home because of high import duties here. As a result, the few shops in India that store high-end products have limited sales.

Vittorio Missoni, chairman of Missoni S.P.A., an Italian fashion chain, said: “The import duty in India is 45 per cent, which is quite high.”

Commerce minister Kamal Nath has said India may review the duty imposts on luxury brands.

The location of a luxury brand outlet more or less determines its success. Globally, luxury brands are sold on select streets.

“Unfortunately in India there are not too many options for setting up stores,” said Mohan Murjani, chairman of the Murjani group, which sells brands such as Gloria Vanderbilt and Tommy Hilfiger.

Luxury brand managers say it is very important to provide a total experience to the class of customers they cater to, which is difficult to replicate in most city malls in India.

Missoni said, “Compared with other countries, there are a few places in India where we can set up shops. An absence of multi-brand stores is another major constraint.”

“We are going to open one or two stores in the next couple of years,” he added.

India’s market for luxury goods is estimated to be about $3.5 billion. Analysts believe this figure can go up to $30 billion by 2015, backed by rising incomes and changing lifestyles and aspirations.

The 2007 Asia Pacific Wealth Report, prepared by Merrill Lynch and Capgemini, says India has recorded the world’s second fastest growth in the number of high net worth individuals, at a staggering 20.5 per cent. The report estimates India’s population of dollar millionaires at about 100,000.

Brioni, which is into men’s clothing and power suits, is also planning to enter India.

Andrea Perrone, CEO of Brioni, said: “Retail is a big challenge in India. We are entering a new market.”

The Italian brand has figured in the Bond movies and is the favourite of European aristocrats and wealthy American businessmen, including real estate mogul Donald Trump.

Brioni is planning three stores in three years in India. Perrone also feels finding the right kind of real estate is a big challenge. Brioni is open to opening flagship stores at expensive locales as well as at five star hotels.

Mall developers such as Aerens Goldsouk are planning to develop high-end malls with specific zones dedicated to luxury brands, jewellery and designer wear.

Ashish Gupta, vice-chairman and joint managing director of Goldsouk, said: “We have started building malls with specialised zones dedicated to different sectors. One such mall is ready in Ludhiana. Similar malls are coming up in Kochi, Chennai and Gurgaon.”

These malls are spread over a million square feet, of which a 1-2 lakh square feet will be dedicated to luxury brands.

“The rentals or lease amount for the luxury brand zone need not be higher than the other zones. Prices will be decided according to the market dynamics of demand and supply,” Gupta added.