DFS bags Mumbai airport luxe development contract

I'd previously written about how retail space at India's airports was a gold mine waiting to be excavated. Now, DNA says that DFS Group, a part of French luxury house LVMH, has been awarded the duty-free retail development contract for Mumbai International Airport Ltd (MIAL). So now, Indian travellers can buy some of the world's leading luxury brands at the airport on your way to Paris, London, Milan or Hong Kong. In fact, travellers at the international terminal have already been greeted by banners announcing the arrival of luxury retail, to be started by January 2008.

Earlier this year, MIAL had floated a global tender under which a joint venture of ITDC and Spanish firm Aldeasa was selected the duty-free operators with a bid amount of Rs 571 crore. But due to issues like a delay in forming the JV as also an attempt by ITDC/Aldeasa to renegotiate the terms of the contract, MIAL decided to terminate the contract and award it to DFS Group, the second highest bidder. Reportedly, the ITDC / Aldeasa combine felt that it had bid too high to make any significant business sense.

The new contract with DFS Group entails the payment of a minimum guarantee to MIAL of Rs 250 crore for three years over and above revenue sharing. Sources said duty-free activities in Mumbai airport accounted for revenues of Rs 45 crore last year.

Located in the international Terminal 2C, the new duty-free shopping area will be spread across 24,541 sq ft. Of this, 14,585 sq. ft will be at the departure level, 8395 sq ft at the arrival level and 1560 sq ft will be for storage.

An executive with MIAL told DNA Money: "The two main revenue-generating items for duty-free shops the world over are liquor and tobacco. We expect the same to be true of Mumbai. There will also be shops selling clothing, cosmetics, perfumes and electronic goods as also various other boutiques."

Duty-free shops are retail outlets that do not apply local or national taxes and duties and are usually found in international airports, sea ports or passenger ships. These shops work on the basis that most countries do not levy taxes on goods to be exported. Internationally, they form a source of significant profits for airport operators.

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On another note, LVMH seems to be pushing for India to become a hub for luxury product manufacturing. In fact, LVMH Global Head (Investor Funds) Daniel Piette is currently in New Delhi along with South Asia & Middle East head Ravi Thakran to initiate talks with the potential companies to invest in.

Says the Economic Times:

When contacted LVMH India group director Vispi Patel confirmed that Piette were here. He, however, chose to downplay the visit.

"They were here to meet different people," he said and declined that any decision on manufacturing unit has crystallised. "We are looking at India as a strong sourcing destination and that explains our interest in the market."

This comes close on the heels of the luxury giant's decision to launch a e500 million private equity (PE) fund in India, by March next year. The company would then begin its investment across different segments. These would include ready-to-wear apparel, watches, jewellery, home furnishing and also leisure. These investments would be mostly in mid-cap companies, Mr Patel added. "We would explore all the sectors that most PE players don't look at."

LVMH had launched two similar PE funds in Europe for investments in area of its core competence. And focused on mid-cap companies that offered expertise in those areas. "The focus would largely be the same for India as well. We would also look at investing in existing manufacturer who could offer expertise lets say, in leather," Mr Patel added.

Earlier this year, Louis Vuitton (LV) reportedly set up a 50:50 JV with South-based maker of high-end leather accessories, Hi Design, to manufacture leather accessories. The greenfield project is looking at setting up a leather manufacturing facility in Puducherry.

Source: Economic Times

Mahindras move to luxury retail

Telegraph India is reporting that the Rs 18,000 crore Mahindra group is entering the retail business, under the Mahindra Retail brand.

Raghunath Murti, executive vice-chairman of Mahindra Intertrade, said, "The group believes that this is the opportune time to extend its business to direct retailing, when the organised retail market is expanding in India."

Mahindra Retail is planning multiformat stores for luxury lifestyle products, mainly in soft goods. The stores will open within a year and the company will sell private labels and international brands.

Rothschild investing in Indian luxe retail

Llyod Grove of Portfolio.com recently did an interview with Lynn Forester de Rothschild, CEO of EL Rothschild, the holding company she owns with her third husband to manage investments in the Economist and various enterprises in India. Those include FieldFresh, a startup that will grow and export Indian fruits and vegetables for markets in Europe and Asia, and a soon-to-be-announced retail venture aimed at the exploding Indian middle class. Here's an excerpt from the interview:

L.G.: What else will you do with E.L. Rothschild?

L.R.: We are also looking very seriously at the retail space in India, both in terms of front-end retail as well as Indian brands that we believe have opportunities. I think that'll be the next area where you'll see some announcements from us.

L.G.: When? Can we make some news?

L.R.: Not by the time you go to print. [Laughs.]

L.G.: Give me a hint. I know you're on the Estée Lauder board, and I know you're very interested in luxury goods in India. Would it have something to do with that?

L.R.: Well, we're looking at those. You know India has luxury in its DNA. All you've got to do is look at the maharajas and look at the Taj Mahal. There's no Hermès or Louis Vuitton that's going to tell India anything about luxury. Luxury is a very interesting, undeveloped piece of India. I don't think it will be a big piece for a long time, because of the income level, but I think it's interesting. We do think luxury when we think retail, but we also think more mainstream, aspirational brands and opportunities

L.G.: And the country obviously has an exploding middle class, so that could be a good market internally-or are you thinking for export as well?

L.R.: I am thinking more about the domestic markets, more about the growth of the domestic market, because 10 million people are entering the middle class every year in India. You know, there are more billionaires in India than anyplace else. Let me put it this way: Every day in India, the entire nation of Great Britain is on the train, one way or another. So the numbers are pretty colossal. Seventy million people in India can afford anything they want. It's a small percent, but that's a reasonable number.

L.G.: That's a pretty healthy market.

L.R.: Two hundred fifty million are middle-class, so you might not go for the Chanel glasses, but you sure could go for an Estée Lauder lipstick or a Starbucks coffee.

Pic courtesy: Portfolio.com

Marc Jacobs in India

According to Business Standard, Kenzo and Marc Jacobs will soon hit the shelves in India. That apart, Louis Vuitton Moët Hennessy (LVMH) is expected to roll out half a dozen luxury brands in India over the next one year to keep up with an increasing demand from elite consumers, including Berluti (shoes), haute couture brands Givenchy, Loewe, Celine and Pucci.

Ravi Thakran, group president, South Asia, told Business Standard, "LVMH has been in India for five years and now is the time to consolidate our presence in the country. The company will be launching at least 5-6 brands by the next year and will also expand the watch and jewellery division," said Thakran.

LVMH is also set to introduce Sephora, its beauty and cosmetics business, in India. The company has booked properties in Delhi, Bangalore and Mumbai, and will be launching five stores over a period of one year. Sephora is an interactive luxury beauty care concept that offers a range of skincare, make-up and fragrance products.

In a couple of months, the company is also set to announce tie-ups for a luxury retail venture in the country. He said, "We are in talks with some companies and details should be finalised in a couple of months."

Doing it for the boys

While India is still grappling with shortage of space for luxury retail, Hermès has gone ahead and opened its second store in New York, this time targetting the men on Wall Street. So while the people who live in the financial district of Manhattan do not have a major supermarket to shop in, they can easily slip into the new Hermès store across the New York stock exchange to get a $47,000 limited edition alligator briefcase or a $4,700 custom made leather dressage saddle. And article in the New York Times says:

The traditional arrangement of merchandise has been reconfigured to bring men’s clothes and accessories to the front of the store and to the attention of potential male shoppers. The silk twill scarves and signature handbags for women that are usually right inside the door have been edged aside by colorful rows of neckties.

"We sense a lot of potential with that clientele and we want to be able to serve them quickly with shirts, ties, suits and shoes," said Robert B Chavez, the president and chief executive of Hermès USA.

Hermès Wall Street is the first of several high-end retailers coming to the neighbourhood. They include Thomas Pink, which opened within the last month, as well as Tiffany & Company and the Italian menswear companies Canali and Brioni, which are scheduled to open in the next year.

Image courtesy: nytimes.com

Max Mara in India

Kimaya's Pradeep Hirani is reportedly in talks with nine European brands, three of whom will sign a deal for an Indian presence with him in August. The first of the brands is Max Mara, which will launch in India in September.

It will initially be retailed as part of Kimaya in Mumbai, Delhi and Bangalore, and then through stand-alone stores by February 2008. Said Hirani in an interview to DNA, "It's not too high-end, and not too low-end - it's bang in the middle."

More on the Hirani Group, the company is currently constructing a nine-storey luxury mall that will be ready by 2008. Apart from the fashion house Kimaya, the shopping tower will display collections of over a dozen high-end international labels.

"Everything will be available under one roof. There will be a range of couture, accessories and lifestyle products designed by Italian and French style gurus, among other international designers," Hirani said to the Economic Times.

Picture source: Tempature

Sheetal Mafatlal on Valentino

Some time ago, I interviewed Sheetal Mafatlal (of Mafatlal Luxury - the franchisee and distributors of Valentino India) on retail therapy for my newspaper and asked her about Valentino's plans for India. Reproduced below are relevant excerpts:

Why India
Valentino is the ideal luxury brand for the Indian market because it caters to all age segments and has something for everyone - from the older and traditional consumer to the hip young teenager. Also, its accessories are ideal for sarees, trousseaus and traditional wear, so it adapts very well to Indian sensibilities. Moreover, Valentino is priced the same in India as it is in Europe so that our Indian consumers don't feel the pinch.

On India's luxury potential
Unlike other emerging markets - like China, Russia, Dubai - India has consistently had its share of super wealthy customers. Western luxury brands aren’t new to India either. In their heyday, the maharajas were enthusiastic customers for Louis Vuitton trunks, Boucheron and Cartier jewels as well as Osler Chandeliers. What has changed radically is that there is a burgeoning middle class of 300 million people growing by 25 million each year.

In spite of the maharajas’ opulent purchases of old, India has had a tradition of fiscal conservatism, of saving rather than spending. Yet the combination of a GDP rising at 8 per cent per annum and one of the world’s youngest populations (more than 200 million people between the ages of 15 and 24) means spending power has shifted to those with a fever for fashion. Add to that the booming media in the world's largest democracy bringing brand awareness, plus the reduction of once punitive import taxes, and India is starting to look like a retail gold mine.

Currently, Valentino has only one store at the Shangri-la Hotel in New Delhi, but we're looking for the right location to open Valentino in Mumbai and thereafter in other metros.

Luxury on the fly

Here's an idea that India could well adopt as far as paucity of luxury retail space is concerned. An article in Womens Wear Daily talks about how accessories brands are tapping into travel retail (read shopping at the airport) for growth.

Airport retailers and brand executives said that even though they are weighed down by luggage, travelers are still willing to splurge on that extra bag, regardless of the price tag. And airport operators are zoning in.

For example, last November, British Airports Authority introduced its first concept area for fashion accessories, the World Duty Free Collection, in Gatwick North Airport in London.

The leather goods brands offered range from midlevel players such as Diesel and Tabitha to high-fashion labels including Chloé and Mulberry. "Roughly 80 percent of sales comes from leather goods, but sunglasses also drive a lot of business," said Beta Palizban, a luxury buyer for the area.

Travel retail specialist Martin Moodie, editor of The Moodie Report, commented, "More retailers are giving both standalone and generic space to the (leather goods) category, a trend that is sure to accelerate in the future."

Moodie points to the "stunning" new Narita 5th Avenue shopping mall in Tokyo Narita Airport as an example. As host to 32 shops including Gucci and Burberry, its leather goods area, he said, has dwarfed space formerly used by liquor vendors, a longtime staple of Japanese duty free. "Everywhere in travel retail, the transition from traditional to more fashion-driven categories is an important dynamic — nowhere more so than Asia," said Moodie.

While Indian airports have a lot left to be desired in terms of basic amenities, they do have the requisite retail space and Mumbai is soon to get its second international airport. I think luxury professionals here could sure pitch the idea and help not only in driving the growth in luxury retail but in better standards at Indian airports as well!

Source: Womens Wear Daily

Dior Couture gets Indian subsidiary

After Hermès, another high profile luxury brand is set to enter the country through the single brand retail route. Christian Dior Couture has just received clearance from the Foreign Investment Promotion Board (FIPB) to invest 51 per cent in an Indian company to retail goods under the Dior brand name.

Dior, which is owned by LVMH Moet Hennessey Louis Vuitton, had been operating through a franchisee deal in India uptil now. It will now operate through a subsidiary company and invest $2,70,500 to set up single brand outlets here.

When contacted, Kalyani Chawla, the brand ambassador and spokesperson of CDC in India, said, "The entire plan is still in a nascent stage. We are discussing issues, and will be able to make an announcement within the next few weeks."

Source: Moneycontrol.com

A cupboard full of beautiful clothes

Yet another publication is talking about the newest darling of the luxury goods industry. This time, it's the Economist that's raving about India's growing prosperity and propensity to spend the big bucks.

Like everyone else, the Economist too talks about the problems facing the luxury behemoths, but I find Luxury Marketing Council boss Devyani Raman's description of India's luxury market rather creative. Made me chuckle, really. But she does make a pertinent point about a very Indian 'value for money' trait.

Last October the Luxury Marketing Council, an international organisation of 675 luxury-goods firms, opened its India chapter. Its boss, Devyani Raman, described India's luxury-goods market as "a cupboard full of beautiful clothes with a new outfit arriving every day — it could start to look messy without the right care."

This, she said, included everything from teaching shop assistants appropriate manners to instilling in the Indian public a proper understanding of the concept of luxury. "How do you educate them," she asked, "about the difference between a designer bag that costs $400 and a much cheaper leather bag that functions perfectly well?"

How indeed.

Zegna cautious about India

Even as Ermenegildo Zegna, the luxury Italian suitmaker, is getting ready to open doors to the largest luxury store yet in Mumbai, group president Paulo Zegna is warning other companies that India is not everything it has been made out to be.

He should know. After all, Zegna was one of the first few luxury companies to make a foray into the Indian market in 1999. It withdrew a few years later as there was no suitable mall or shopping complex to provide the right ambience to market the brand. India's chronic lack of space for luxury retail and government hurdles are some of the biggest problems for luxury companies.

"There are tens of new shopping malls planned but none to my knowledge are of the standard needed for international brands," Mr Zegna told the Financial Times at the new store at Mumbai's five-star Taj Mahal Palace and Tower hotel.

India has one of Asia's least developed retail sectors, with organised corporate retailing accounting for a mere 3 per cent of estimated total retail sales of about $200bn, according to KPMG, the consultancy.

It took two years for the company to set up the new store, a process that involved finding a local partner, seeking regulatory approvals, and then trying to find a suitable location. In India foreign retailers selling under a single brand name, such as Zegna, are allowed to own 51 per cent of a retail joint venture. Those selling more than one brand are not permitted.

Mr Zegna says that beyond the regulatory processes, the biggest difficulty for retailers was real estate. In Mumbai, the only suitable locations for luxury brands were the city's five-star hotels. In New Delhi, DLF, a major retailer, is building a luxury retailing complex, Emporio, but some analysts believe even this might not be up to the standards of luxury shopping malls in east Asia, from which Zegna derives much of its sales.

"In my view, luxury, high-end malls are going to be few and far between," says Ranjan Biswas, a partner at Ernst & Young, the professional services firm. "If you look at the present category of malls in India, they are aimed mostly at the middle and upper middle classes because these are the groups that will have the highest purchasing power."

He said he believed proper, purpose-built high-end malls of international standards were about five years away.

Well, nobody said it was going to be easy, but someone's gotta do it, right?

Fashionistas rejoice

Mint is reporting that Hermès is finally coming to India. The Paris based luxury group has applied to India's Foreign Investment Promotion Board (FIPB), the government agency that regulates foreign investments in the country, for permission to sell Hermès products through retail and wholesale outlets.

The company has formed an alliance with Khanna Specialty Retail and Distributors Pvt Ltd, a firm promoted by Ashok Khanna, the entrepreneur behind the Rishikesh-based luxury spa, Ananda.

Hermès will hold a 51% stake in the venture and Khanna Specialty Retail the rest, according to a person close to the development who did not wish to be named. Indian laws currently allow 51% foreign investment in single-brand retailing.

Hermès is the latest in the long line of luxury brands including Louis Vuitton, Chanel, Valentino and Ermenegildo Zegna that have been lured to India by the promise of a large and growing market.

Hermès is currently scouting for space in New Delhi and has talked to East India Hotels, which runs the Oberoi chain of five-star hotels, about renting space in the company's New Delhi hotel.

'Wadia' way to go!

Yet another Indian company is foraying into the luxury retail sector. On Tuesday, Ness Wadia spoke to NDTV Profit about about how his company Bombay Dyeing is planning to establish a luxury high street in Worli (Mumbai) and is also in talks with leading luxury companies for a franchisee arrangement.

While he is not willing to divulge details yet, Wadia does admit that the expansion plans are already underway. He also says that they're planning to invest heavily in infrastructure to facilitate luxury retail. As we're only too well aware, one of the biggest problems for Western luxury brands is the paucity of high-end retail space, so this is definitely good news.

Haute neighbourhoods

It's not just Paris, Milan, New York, etc. Pretty soon, you could actually have upscale neighbourhoods being added to that list at the bottom of luxury shopping bags or mastheads.

Bergen County in New Jersey, which is in the top 1 per cent of US counties for household income (and where over a third of the households have income exceeding $1,00,000), is fast becoming a haute neighbourhood to house luxury brands like Tiffany & Co., Hermes, Burberry, Louis Vuitton and Salvatore Ferragamo.

Brands that used to limit their retail presence to international shopping capitals have now discovered the affluent suburbs. Malls are seeking the tony merchants because the luxury end of retail has held up better than other parts of the industry.



"I think the luxury goods people realise finally that it's not just Manhattan," said James Hughes, dean of the Edward J Bloustein School of Planning and Public Policy at Rutgers University. "There's a tremendous spread of wealth that they're missing in the suburbs."

Mall owners are eager to lure luxury retailers to their suburban properties because stores that sell $45,000 handbags or $10,000 diamond rings can dramatically boost a shopping center's sales per square foot and also attract other retailers. The luxury segment is hot with worldwide sales up about 6 percent last year, while former mall darlings such as Gap are struggling.

Hmmm... I can almost see it now... New York, Paris, Milan, Khan Market, South Mumbai...!

Source: The Herald

Louis Vuitton holds sway

I'd previously written about how LVMH is aggressively turning into one of the most influential luxury goods companies in India. Now, LVMH has become enough of a mass presence here to call the shots in negotiations over real estate and advertising space. The company has bagged some of the best retail spots in new, high-end shopping malls in Mumbai and Delhi, edging out rival companies to lesser corners.

"When they arrive with their brands, they push everyone else out," says Christian Blanckaert, Hermès' executive vice-president, who visited New Delhi in March to scope out locations for the brand's first stores in India.



In India, the rush for good space is key to cementing a presence in one of the world’s hottest emerging luxury goods markets, and competition is fierce for the few new retail locations that are suitable. At the Emporio shopping mall in New Delhi, LVMH has hogged two of the best locations by reserving boutique space for Louis Vuitton and Dior, and it is considering opening shops for other brands, including Fendi and Celine. The shopping centre is scheduled to open by the end of 2007.

With the September launch of Vogue India, LVMH will have more opportunities to tap synergies. Alex Kuruvilla, the managing director for Condé Nast India, which publishes Vogue, says LVMH will be buying bulk ad space for its brands — at discounted rates. "LVMH is in a better position than other small, individual brands," says HSBC luxury goods analyst Antoine Belge.

Source: Mint

Exclusive luxury malls for India

Sure, India is being touted as the next hot growth market in the luxury world, but not everyone is jumping for joy. Reason? One of the biggest hurdles for luxury goods companies here is the lack of upmarket retail space. Add to that high rental cost, and India is looking not-so-rosy after all.

However, that situation may soon change with the launch of several high-profile retail projects across the country. While the DLF Group has already announced the launch of it's luxury project Emporio in Delhi and Mumbai by the end of 2007, the Gitanjali Group is also pumping Rs 100 crore to set up exclusive luxury malls in other locations as well. Apart from offering exclusive retail space to luxury brands, these malls will also be equipped with world class digital exhibition and conference facilities.

Such joy!

Source: Indiaretailbiz.com

Kenzo to debut in India

Moet Hennessy-Louis Vuitton (LVMH) is aggressively pursuing its agenda of becoming the first and most successful luxury company in the not-so-favourable Indian market. For while the potential for luxury here is huge, a host of hurdles have prevented others from entering where LVMH has already tread.

Currently, LVMH is in advanced negotiations with Genesis Colours (does the label Satya Paul ring a bell?) to bring it's luxury apparel and perfume brand Kenzo to India. Interestingly, the brand is expected to make its foray under a franchising arrangement and not foreign direct investment (government norms permit only 51% FDI in single-brand retail).

Sources at Genesis Colours confirm the talks with LVMH, saying, "Real estate is the main stumbling block right now. We want to begin rolling out large format stores out of Mumbai and New Delhi, but it is turning out to be too expensive."

Retail expansion
Meanwhile, LVMH (India) is also looking at expanding the luxury retail environment here, says group director Ravi Thakran. "We are very serious about enlarging this environment to luxury malls. DFS is our international retail concept under which we take entire malls and have done so in Hong Kong and Singapore. The sizes of these malls range from 1-2.5 lakh square feet and have 30-50 boutiques and separate floors for perfume, jewellery and watches," says Thakran.

Apparently, DLF, Reliance Retail, Reliance Anil Dhirubhai Ambani Group and the Future group are in talks with LVMH for partnership in the DFS concept.

Source: rediff.com