Where did the brand romance go?

Where did the brand romance go?

Trend Tracking

Where did the brand romance go?

Illustration: Ashwin haldipur

Is the dream ride over for luxury brands? Is it time for them to pack bags already?

Bottega Veneta and Jimmy Choo are changing hands from the Murjanis to Genesis Colors and Springfield; Gucci is making a slow exit and all the 12 stand-alone stores of GAS, a premium lifestyle brand from Italy, have been shuttered in the past few months. The Big Brands Mega Carnival in Mumbai recently offered almost 80 per cent off on international brands like Roberto Cavalli, Givenchy, Davidoff, Chopard, Calvin Klein to name a few. Some describe it as “marketing strategy”, others call it “stock clearing” and yet others speculate bad sales. Even brands who have decided to stay are going in for a major re-haul.

According to industry analysts, the luxury market in India is estimated at around Rs 6,000 crore and is growing at the rate of 35 per cent every year. Then where did the luxury retail dream spring a leak?  Is that an inflated figure to keep investors and marketers happy, or have we got the message upside down? Bangalore has been hyped as ‘the’ luxury destination, especially with the coming of The Collection (UB City), which is now almost a year old. But are the cash registers ringing?

Small segment, big dreams

Uzma Irfan, Director, Corporate Communication, Prestige Group, says: “Luxury is still in its nascent stages because only 5 per cent of the population is currently exposed to such brands and knows about them. Yet these are the very same people who prefer to go abroad and shop. According to this minuscule group it’s more prestigious to pick up a bag from New York, London or Milan than India. I think these brands haven’t put in enough and are quitting too soon.”

‘Educate the customer’

She explains: “The international brands themselves have done little to reach out to a large potential customer base beyond this select audience. According to most brands, they are only here to sell to people who know about them and shy away from any form of mass advertising or expansion. These brands don’t look beyond a select group of buyers. Now why is that the first Audi Q7, costing above Rs 45 lakh, made its first sale in Hyderabad? Audi India has expanded beyond the traditional ‘luxury’ markets and is exploring cities like Ludhiana, Pune, Chandigarh, Hyderabad. Maybe here is an example that we need to look at and learn. The Collection (UB City) has been trying to educate the brands to reach out to potential clients and facilitating mass events within the area to drive in foot falls and ensure visibility. A lot of them came in with the expectations of fitting into a readymade segment that already had buyers. Everyone came in with the same hope and were fighting for the same pie. When that didn’t work, some of them quit without checking the possibility of expanding the customer base to an audience that did have the purchasing power but were ignorant about the brands. The brands need to realise that any new market requires a lot of effort in education and they need to find time to invest in the same.”

Varuni Mohan, Brand Consultant, Salvatore Ferragamo, says, “The luxury retail market is at its infancy in India. I believe primarily this is caused by exaggerated expectations from the Indian consumer —not in terms of spending power, which they do have — but more in terms of their knowledge of brands, styles, etc. Very few brands have invested in educating the market. The recession made it more challenging to market luxury, but we are meeting targets.”

Shoppers are savvy

She also agrees that the brands have not worked on educating their potential client base on the nuances of their individual brands. “They should stop acting as if they are doing a favour to the Indian consumer by being here. People who can afford luxury brands travel abroad frequently, and unless you can woo them successfully, they will shop abroad. Here is where details like globally similar pricing, service and incentives come into play. This is a very people-driven business. Your relationship with the customers is of paramount importance. The luxury industry in India has very few people who are actually qualified to market luxury fashion. A generic MBA or hospitality experience is not enough. You need to be passionate about it. It has been done before in India and it can be done. For example, labels like Tarun Tahiliani and Rohit Bal have consolidated their labels by marketing their product to the right demographic,” she adds.

Slow and steady bags the sale

Charu Sachdev, CEO, TSG International Marketing Pvt Ltd, who has been credited with bringing several luxury and upmarket brands into the country, has a different opinion. “The luxury market in India is still going strong and there is a lot of potential. Otherwise, we wouldn’t be in this business. Brands who come into India need to realise this is not China where you can take up 30 points of sale and expect them to start making a profit immediately. Unlike China or Singapore, where real estate is seeing heavy investments, we are stumped for good developers. Hence brands need to be patient and go slow and steady,” she says.

 The company has successfully launched nine international brands in the country since its inception and, though Marc Jacobs was launched about a year ago, they are looking at expansion plans for each brand. They are also toying with the idea of a multi brand concept in different cities, which seems like a sensible idea in times when most brands are rethinking strategies.

Partner problems

 “It is difficult to tell if the existing brands’ failure was a problem of the brand or that of their partners. Seiko watches have 100 per cent subsidiaries so that we can present the brand properly. This way you can implement long-term strategy without worrying about partner’s profitability,” says Tetsuji Ishimaru, Managing Director, Seiko Watch India Pvt Ltd. “This makes sense if you want to invest in educating the audience and spend time in cultivating a consumer database,” he adds.

 Analysing the trend, Rashmi Vallabhajosyula of marketing firm Altius Consulting, says: “I think we are reading too much into this situation. This is just a marketing decision. World over, many luxury brands are doing poorly and have no flush money to spare for investments in developing markets. The education of a particular audience to develop consumers is time consuming and requires money. When sales are poor you need to evaluate your investments. Some companies have decided to draw out from the developing countries and concentrate on consolidating their presence in their home markets.  Moreover, the Indian partners must be having second thoughts about investing in these brands and waiting to see how they perform in their home markets. The mood is very cautious.”

But Rashmi also sees this as an opportunity. “This is a fantastic opportunity for our homegrown luxury brands to come into their own and occupy the vacant mind and wallet space left behind by the exiting brands. The money in the market is definitely there. They just need to figure out how to reach that database with the correct mix of pricing and placement,” she says.

 In a price-sensitive market steep tags don’t up the brand appeal. A lot of customers still feel that the tags are just dollar conversions. If one has to spend, then why not shop in a city like London, Milan, Paris or even Singapore which has a higher brand value associated with it rather than any city in India?

 As shoppers across all segments tightened their belts and traded downwards in brand loyalty due to the meltdown, luxury retail took a beating worldwide, particularly in nascent markets such as India. Swap parties and wardrobe exchange meets have already gained popularity in the west and are now gaining ground in India too. As we are well into what marketers describe as ‘the’ shopping season, most luxury brands are gearing up to face their toughest litmus test ever.