A slowing of the European and American economies, coupled with the lure of increasing purchasing power in small town India, has propelled proprietors in the ultra luxury fashion segment to eye tier-II and tier-III cities as the next big market.
According to couture designer Tarun Tahiliani, exports have dipped by 25 per cent in the past three months and are expected to do so by another 10 per cent. “The (exports) situation will only get worse. The new markets will inevitably be smaller cities. There are 30 cities in India with a population of over a million. They are throwing up a lot of wealth, which creates opportunities for luxury,” he said.
Tahiliani has a store in Delhi’s DLF Emporio luxury mall. He said he was looking at a store in Hyderabad. The sentiment was replicated by Neeta Lulla, couture designer, who exports on a business-to-business model. “In the upmarket luxury segment, exports have seen a dip of 10-18 per cent. This is primarily due to an overall depression in the sentiment of the global economy, along with the restriction on export of cotton products,” she said.
According to Lulla, however, the luxury segment in India appears recession-proof, given especially that people continue to invest in special occasions. “Luxury in the Indian market is closely tied to weddings and other special occasions, so while a recession will have some impact, the segment largely remains unaffected. Expansion in smaller cities will take the franchisee route through the ultra luxury segment and diffusion lines,” she said.
The ultra luxury fashion segment in India is pegged at Rs 1,500 crore annually, while the premium segment is pegged at Rs 4,000 crore. According to retail consultancy A T Kearney, the domestic fashion luxury market is growing at a compounded annual rate of about 25 per cent.
Rising incomes, brand affinity
Leading players in the segment include Rohit Bal, Manish Malhotra, Tarun Tahiliani, Neeta Lulla, Ritu Kumar, Satya Paul and Sabyasachi. According to Satya Paul, a company that is something of a pioneer in corporatising fashion in India, the small town Indian market is lucrative because of the increasing brand consciousness that characterises most households with burgeoning incomes.
"The market in India is definitely on its way to getting even more organised as we go along. More and more Indian households are getting brand-conscious and indulgent. To that end, they are willing to spend big bucks", said Jyoti Narula, managing director of Satya Paul.
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Companies like Swarovski, vendors to luxury segment designers, say the reason for expanding into smaller cities include the growing wealth in these regions, along with their relative immunity to a slowdown.
“Designers themselves are discovering India. The target consumer base is growing as well. There is a 20 per cent growth in millionaires in India, and these are not restricted to Delhi and Mumbai. This would make inevitable a movement into the country,” said Sanjay Sharma, director, Swarovski India Pvt Ltd.
Swarovski works with designers like Bal, Malhotra and Tahiliani, supplying crystals for couture.
Sharma told Business Standard that while exports from the Indian luxury designer wear took a major hit in 2008, the bridal segment remained largely unaffected.
“The domestic business was not affected last recession, while the global sentiment took a hit for the worst. This is attributable to the fact that luxury wear in India is linked to occasions like weddings, and weddings appear to be recession-proof,” he said.
In fact, according to estimates by Sharad Mehra, vice president, retail consultancy, Technopak, the bridal segment accounts for almost 90 per cent of the ultra luxury segment’s fashion sales in India. “Though the couture industry grew at 40 per cent last year (mainly due to very good international orders), there are concerns about sustainability. Growth in the industry will come primarily from the growing wedding segment in India, where Tier-II and III cities present an opportunity in terms of volumes,” he said.
In an effort to get into markets lower down, many designers are also ramping up their prêt (ready-to-wear or standardised clothing, as opposed to made-to-measure ones) collections, besides dropping price points.
“The retail industry is getting more organised and is growing at 10-15 per cent and most designers are either launching or ramping up prêt collections. We launched Tahiliani’s collection this year and will do the same with Sabyasachi next year,” said Atul Chand, CEO, Wills Lifestyle.
Chand said while there was a definite problem of exports associated with the international situation, a main reason for designers wanting to launch prêt lines was to penetrate a growing market.
Wills Lifestyle has associations with eight designers and a presence across 40 cities, with 75 stores. The company, which plays in the premium segment, is planning to launch another 15 stores by the end of the financial year.