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Nevin John, Business Today\n<\/i><\/p>\n
Nevin John, Business Today
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New Delhi, 25 September\n2016 <\/i><\/p>\n
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When\nmall developer Phoenix Mills Co set up the Palladium Mall in 2010, the\nintention clearly was to position it as a luxury mall. With high-end\nbrands such as Gucci, Tag Heuer, Michael Kors and The Collective\nsetting up stores, the Palladium Mall promised to be the destination\nfor high-end luxury shopping in Mumbai. However, luxury brands today\nprobably occupy just a fraction of the retail space spread over 400,000\nsq. ft. In fact, the financial capital of the country is yet to see a\nluxury mall. The country has just two luxury malls – DLF Emporio in\nDelhi and The Collection (UB City) in Bangalore.
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How long will it take for India to create a luxury\nhigh-street like Madison Avenue and Fifth Avenue in New York? It is\ndefinitely a distant dream at the moment. Arvind Singhal, Chairman of\nmanagement consulting firm Technopak, says that India doesn’t have the\nculture of luxury brands on high streets because of safety and security\nissues. That’s the reason why most luxury brands in India are housed in\nthe shopping arcades of five-star hotels. The monthly rent of these\noutlets would be Rs 600 to Rs 1,000 per sq. ft, say industry sources.
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With Indians increasingly travelling abroad, their\nawareness about luxury brands is on the rise. So, luxury shopping\nlogically should happen at least in the metros. This means that luxury\nmalls as a concept should work. So, why does India have just two luxury\nmalls? “The luxury consumers are frequent overseas flyers and they\nreally don’t care about buying here,” points out Rajneesh Mahajan,\nExecutive Director, Inorbit Malls. Indians do indulge in luxury\nshopping, but it’s mostly overseas as it’s 30-40 per cent cheaper,\nlargely because the import duties on luxury items are very high.
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Moreover, luxury shopping in India until recently\nwas fuelled by black money. Sales were affected after the government\nstarted monitoring expensive transactions, says Singhal of Technopak.\nIn fact, a bulk of the luxury shoppers, according to a senior luxury\nbranding consultant, prefers shopping for luxury brands in the comfort\nof their homes in order to avoid paying taxes.
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However, considering the country’s projected GDP\ngrowth and rise in disposable incomes, mall developers are hopeful that\nthe luxury market will also evolve. Retail industry consultants say\nthat the Mukesh Ambani-controlled Reliance Industries plans to enter\nthe luxury mall space either in Mumbai or Delhi. There were also\nreports that Mumbai-based Oberoi Realty and Maker Group were looking to\nbuild luxury malls in the city. But there is no clarity on when these\nwill happen, if ever.
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With growth of legitimate wealth in the country,\nSinghal of Technopak is optimistic about a robust luxury mall culture\nin the country. Still, setting up luxury malls isn’t going to be easy\nin an emerging economy like India. The cost of construction of a luxury\nmall is almost three times more than a regular mall, and while the\nreturns are also higher, the fact remains that most Indians prefer\ndoing luxury shopping abroad. It takes three to five years to build a\nluxury mall and the average cost for overall development (excluding the\nland cost) in Mumbai and Delhi is in the range of Rs 7,000-9,000 per\nsq. ft, compared with Rs 4,000-5,000 a sq. ft for a normal mall, say\nreal estate developers. The rental for a luxury mall ranges from Rs 500\nto Rs 1,500 a sq. ft per month, while regular malls charge much lower.
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Devangshu Dutta,\nCEO of Third Eyesight, says that developers have to ensure a holistic\nexperience for customers at luxury malls. “The collections should be\nthe latest and the service should be ultra-premium. Pricing should be\ncompetitive, considering the higher import duty on luxury products.”\nThe difficulty is in finding real estate at an ultra-posh locality for\nbuilding the mall, he adds.
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Today, most luxury stores in a mall like Palladium\nin Mumbai often look deserted. Clearly, given the challenges,\ndevelopers will definitely think twice before launching luxury\nmalls. <\/p>\n