India: the New Destination for Global Luxury Brands

By: Nesima Aberra

Designers have always been inspired by India’s rich history of fashion with bright Bollywood colors, exotic saris, elegant embroidery and stunning jewelry. Chanel, for example, launched its 2012 Paris-Bombay Collection in December of 2011 and Hermès put out a limited-edition line of saris, drawing the world’s attention to the glamor and glitz of India.

Now with the announcement earlier this month that the Indian government will allow 100% foreign direct investments by single-brand retail owners, India may soon become the crown jewel of the fashion world with foreign companies acquiring full ownership of their stores and gradually setting up shop to cater to the country’s brand-conscious, wealthy citizenry.

“The average, young consumer is absolutely more globally focused in the current Indian climate,” says Sabrina Siddiqui, editor-in-chief of Divanee, a South Asian news and entertainment website.

“This is a country that has experienced tremendous economic growth in the last decade–and although the financial crises in both the United States and Europe directly impacts India from an investment standpoint, global name-brands have cemented a place in the subcontinent that is not so easily shaken”

Indeed, India is quite attractive as the world’s second-fastest growing economy with a rate of nine percent growth in 2011, so it’s no wonder, global brands want to jump in and reach the burgeoning middle class. The World Bank reports foreign direct investment in India in 2009-2010 was worth $24.16 Billion and $19.4 billion in 2010-2011, but foreign investors predict it to reach $35 billion in 2011-2012. Areas of highest FDI in India were typically IT and technology, but now with the allowance of FDI in more sectors like retail, the country is sure to see a shift in consumer focus. Previously, Indians have been purchasing luxury goods abroad.

Siddiqui explains that there is a culture of ‘status’ in India, which makes some people believe they should have certain luxury items and brands, “so any company that does its homework, especially luxury good makers, would be aware of that mentality and a window to cater to it.”

“Christian Louboutin opening up a flagship store in India is a classic example of that. The more consumers can afford such luxuries, the more room for similar brands to infiltrate,” she says. Hermès is another popular new store in the country.

Some companies Siddiqui would like to see available in India include IKEA for its “affordable, contemporary chic” factor and Zara, because it is known for tailoring its styles to location.

Bandana Tewari, fashion features director of Vogue India, says in an interview with The Business of Fashion, that for global brands, “just a bit of tailoring for the Indian aesthetic goes a long way for them to establish themselves in the hearts of the Indian consumer.”

She also mentions the significance of understanding India’s spending power and rituals as there are certain times when luxury spending isn’t welcome, but other times like weddings and festivals are prime times for offering high-end, designer items.

The liberalization of India’s FDI laws could do a lot to grow the country’s status in the international luxury market, which it currently makes up only one to two percent. Global luxury brands could go from just churning out Indian-inspired apparel to actually having them be Indian-produced, a telltale sign of globalization and fashion crossing paths.

“There are many local brand names that have a strong following and always will,” says Siddiqui, “but the appeal of luxury goods from ‘the West’ is undeniable.”