Why did different rules apply to walmart and luxury goods?
Answers
AT THE end of the 19th century, India's maharajahs discovered a Parisian designer called Louis Vuitton and flooded his small factory with orders for custom-made Rolls-Royce interiors, leather picnic hampers and modish polo-club bags. But after independence, when India's princes lost much of their wealth, the orders dried up. Then in 2002 LVMH, the world's largest luxury-goods group, made a triumphant return to India, opening a boutique in Delhi and another in Mumbai in 2004. Its target was the new breed of maharajah produced by India's liberalised economy: flush, flash, and growing in number.
Other purveyors of opulence followed, from Chanel to Bulgari. In recent months a multitude of swanky brands have announced plans to set up shop in India, including Dolce & Gabbana, Hermès, Jimmy Choo and Gucci. And Indian women will soon be invited to spend over $100 on bras made by La Perla, an Italian lingerie firm. Only a tiny fraction, of course, will do so. But it is India's future prospects that have excited the luxury behemoths.
India has fewer than 100,000 dollar millionaires among its one billion-plus population, according to American Express, a financial-services firm. It predicts that this number will grow by 12.8% a year for the next three years. The longer-term ascendance of India's middle class, meanwhile, has been charted by the McKinsey Global Institute, which predicts that average incomes will have tripled by 2025, lifting nearly 300m Indians out of poverty and causing the middle class to grow more than tenfold, to 583m.
Demand for all kinds of consumer products is about to surge, in short. And although restrictions on foreign investment prevent retail giants such as Wal-Mart and Tesco from entering India directly, different rules apply to companies that sell their own products under a single brand, as luxury-goods firms tend to. Since January 2006 they have been allowed to take up to 51% in Indian joint ventures. India is also an attractive market for luxury goods because, unlike China, it does not have a flourishing counterfeit industry. Credit is becoming more easily available. And later this year Vogue, a fashion magazine, will launch an Indian edition.
Barriers to growth remain, however. High import duties make luxury goods expensive. Rich Indians tend to travel widely and may simply buy elsewhere. Finding suitable retail space is also proving a headache. So far most designer boutiques are situated in five star hotels.
But things are changing. Later this year Emporio, a new luxury-goods mall, will open in a prosperous neighbourhood in the south of Delhi. It is likely to be the first of many. Even so, India could remain a difficult market to crack. 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?”
Print edition | Business
May 31st 2007 | delhi
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There are different rules for retail firms and those that sell their product.
Explanation:
- Foreign investment constraints bar retail giants like Wal-Mart and Tesco from entering India directly, specific laws apply to companies who distribute their items under a common brand, like luxury goods firms appear to do.
- It depends solely on requests. We would be experiencing an overwhelming need for consumer goods of all kinds. The strict adherence to foreign investment, however, specifically prohibits many multinational operators, such as Tesco, Wal-Mart, and so on from entering our country.
- This is because such firms are subject to several regulations regarding the sale of their goods under a single brand name, which is comparable to luxury-type good companies. India is regarded as the most lucrative luxury goods sector after all.
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