Lack of quality luxury space, environment and dearth of high street or super premium malls is a prime reason for restricted presence of luxury brands in India, thus there is a dire need for modernized and dedicated luxury retail areas in protected vicinities such as airports, according to a recent ASSOCHAM-KPMG joint study.
"Setting up stores in high streets affects luxury retailers' profitability due to sky-rocketing rental costs, moreover, high streets are very cluttered, crowded and are unsuitable due to the absence of exclusive ambience that luxury retail demands," according to a study on 'Challenges highlighted by luxury retailers in India,' jointly conducted by The Associated Chambers ...view middle of the document...
S. Rawat, secretary general of ASSOCHAM while releasing findings of the study.
"Luxury retailers need to plan out of the box marketing strategies and come up with products that are tailor-made to suit the whims and fancies of varied Indian customers," said Rawat. "Luxury is no longer a 'status symbol' but is now a lifestyle and the global brands need to fast evolve and learn ways to adapt within the local environment so that they can get accustomed to nuances of the market by understanding the cultural identity of Indian consumers."
Lack of policy support is another prominent challenge being faced by luxury brands in India, noted the ASSOCHAM-KPMG study. "Despite strong demand momentum, Indian luxury market has not been viewed as policies and regulations friendly for the luxury retailers," the report said. "Import duties (20-150 per cent) are relatively higher and this is considered as a key apprehension factor among the international players, who may resist them to frame aggressive growth plans for India," noted the study.
Clauses such as 100% foreign direct investment (FDI) in both single and multi-brand retail requires 30% of local sourcing, announced in the liberalized FDI policy in luxury retail in November 2013 could be difficult for the international luxury players to comply with.
"The duties are manifold ranging from customs' duty, counter veiling duty (CVD), special additional tax, education cess adding to the overall cost," said Rawat. Besides, luxury retail is also affected by the system of 'maximum retail price' as it applies to custom duties and to cascading 'after the custom' taxes, thereby heavily penalizing foreign brands pushing their overall entrance costs by up to 40%. Lack of trained staff is another well-acknowledged challenge facing Indian luxury retail industry which requires greater discretion and knowledge on the part of a salesperson, further highlighted the ASSOCHAM-KPMG study.
"Shortage of skilled labour for the industry is a major cause of concern as it is difficult to make the local...