beyondbrics

A quick stroll around Mumbai’s High Street Phoenix mall can be somewhat disconcerting for the average Mumbaiker. The eerily clean walkways are filled with the scent of expensive perfume. Shoppers can lust after Burberry trenches and Gucci bags displayed behind gleaming windows.

It’s not India as we know it, but it’s an increasingly successful slice of it. Longchamp, the French leather company, and Prada, the Italian fashion house, are the latest brands mulling entry into the south Asian nation as its luxury market grows.

According to the local press, Longchamp is planning to open its first store in India within the year and Prada is searching for local partners. Longchamp told beyondbrics it is “willing to explore distribution in India”. Prada declined to comment.

The interest in India comes after the Indian government’s controversial decision to liberalise foreign direct investment in retail this September. Since then the government has shown commitment to the reforms. The foreign investment board gave Ikea permission to open fully stocked stores in India and the lower house of parliament voting in favour of allowing foreign supermarket chains into the country.

Prada and Longchamp are also likely attracted by the expansion of the Indian market for luxury goods, which is expected to grow 22 per cent in value terms between 2012 and 2017, according to research from Euromonitor International.

But another report from the same market research company is less bullish about Prada’s decision to enter India. It finds that in the first nine months of 2012, Prada’s revenues rose 32 per cent in Europe but just 28 per cent in emerging Asia. Euromonitor’s analysts wrote:

Prada’s results show that the luxury goods growth story is not all about emerging markets. China has become critical to the bottom line of many international luxury goods retailers and manufacturers; hence the widespread industry jitters when key players started to flag softening sales. But, Western Europe continued to present pockets of opportunity, not least from sales fuelled by international tourists, including the Chinese.

Another big question is which local retail partners the two fashion houses will choose. They certainly aren’t short of tried and tested options. When TM Lewin decided to enter India earlier this month, the British shirtmaker paired up with Brand Marketing India, the company that also brought Calvin Klein and French Connection into the country. Reliance Brands has partnered with Superdry and Thomas Pink. And Genesis Colors does the marketing and distribution for Paul Smith and Jimmy Choo.

Clearly, there is an opportunity for Indian companies as much as for the incoming luxury houses.

Related reading:
India’s retail hurdles, FT video
Ikea in India: shopping and eating, beyondbrics
TM Lewin: India, our way, beyondbrics