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Luxury Brands Prefer Heritage Homes over Five-Star Hotels

Add comment   |  January 11, 2012

Heritage homes are fast becoming the favourite hunting grounds of luxury brands scouting for premium retailing space in India, where suitable high-end malls are too few and the sales potential at five-star hotels is still uncertain. When designer wear brand Kimaya Fashions searched for a store in Hyderabad, it settled on a 16,000-sq ft bungalow in the upscale Jubilee Hills, in a property with floor area nearly three times the size of its average outlets. French luxury brand Hermes also moved into a Victorian property in Mumbai’s Horniman Circle to retail its popular Birkin bags.

“It’s not necessarily out of choice,” says Pradeep Hirani, managing director of Kimaya Fashions, “This is the only way to expand presence in India because of the limited options.”

While luxury brands are aggressively looking to expand footprint, real estate developers have shied away from building high-end malls. So, instead of waiting for luxury infrastructure to develop, such companies are seeking out heritage properties.

Multi-brand store Kitsch run by TSG International, which retails brands such as Alexander McQueen, Moschino and Stella McCartney, touched operational break-even in less than six months when it opened a standalone outlet in Mumbai’s Kala Ghoda area. In contrast, its outlet at luxury mall DLF Emporio in New Delhi took over a year to do so.

Besides turning to heritage homes, luxury brands are also beginning to share space with brands that are a notch lower in prestige sweepstakes. Industry observers say this is a smart move because Indian consumers may buy luxury products in one category and premium in others. “It is not a question of where but how many stores a luxury brand opens that dilute its brand value,” says Amit Bagaria, chairman of retail planning consultancy Asipac Projects.

Genesis Luxury, which has partnered brands such as Jimmy Choo and Bottega Veneta, experimented by opening a store for Italian menswear Canali at Mumbai’s Palladium mall. “There were high risks of adjacencies,” says Deepika Gehani, creative head of Genesis Luxury, referring to neighbours such as DKNY and Zara, which are international brands but not classified as luxury.

Internationally luxury brands always retail alongside those of similar positioning,” says Gehani, but points out that the departure from strategy in India has worked. The Canali store at Palladium generated close to 100% higher sales within three months of launch than its outlet at JW Mariott in the same city.

In Chennai, too, Genesis Luxury opted for Express Avenue, a mall which has a mix of brands such as Levi Strauss and Biba as well as the superpremium brand Diesel. While it opened a standalone outlet for Burberry, it clubbed its other brands under a format called Luxxe Box.

Or take Tag Heuer, the world’s fourth-largest Swiss watch maker, which opened a 600-sq ft store in Bangalore’s Phoenix Market City mall next to the Spanish premium brand Mango.

“We need a flexible footprint to develop retail space,” says Manishi Sanwal, general manager at LVMH watch & jewellery, which owns TAG Heuer. Higher footfalls have meant sales of 15 watches per month against 10 watches a month in hotels.

Genesis Luxury’s Gehani says the brand retains its exclusivity by not partnering high street brands in the mall for marketing promotions. Since luxury high streets such as New York’s Fifth Avenue and Madison Avenue or London’s Bond Street are absent in India, most luxury brands chose to open their outlets in five-star hotels.

Real estate consulting firm Cushman & Wakefield says such hotels across cities such as Mumbai, Delhi and Bangalore account for as much as 80-90% of luxury retail space in the country. Footfalls have, however, been lower in hotels than in malls because most guests at hotels shop overseas and head for the restaurants and bars. Malls and standalone luxury outlets have been a comparatively bigger draw.

While a luxury mall seeks rentals of . 550-600 per sq ft, standalone outlets and malls with a mix of high street brands get offered up at half the cost. “Rentals are 10% of the sales of luxury brands globally and we are able to achieve that in India by experimenting with location,” says Priya Sachdev, creative director and COO of TSG International.

The cost of creating an ambience and generating footfalls per sq ft is however higher in a standalone property, says Hirani of Kimaya Fashions, which is planning to open a cafe, spa and art gallery at its Hyderabad outlet. The company will look at a similar model at its Habibullah Estate store, a heritage property in Lucknow. “It’s not just about retailing a product. We are actually selling an ego massage or a great experience,” says Hirani.

New Homes For Luxury Brands

Real estate is a huge challenge for luxury retail as the infrastructure is not as developed as China and other parts of the world

Most often five-star hotels have only two luxury brands but marketers say hotels need at least 12 brands to draw footfall

Rentals are 50% cheaper at standalone properties and mainstream malls as against 500-600 per sq ft in luxury malls

Luxury brands are also tying up with spa, café, restaurant and art galleries to create a luxury destination in standalone outlets

Assured footfalls lead to faster break even in standalone outlet Designer wear brand Kimaya Fashions recently opened a store in Hyderabad — a 16,000 sq ft bungalow in the upscale Jubilee Hills, in a property with floor area nearly three times the size of its average outlets French luxury brand Hermes moved into a Victorian property in Mumbai’s Horniman Circle to retail its popular Birkin bags

Multi M -brand store Kitsch run by TSG International, which retails r brands such as Alexander McQueen, Moschino and a Stella McCartney, touched break-even in less than six s months at its outlet in Mumbai’s Kala Ghoda area

Genesis Luxury opened a store for Italian menswear Canali at Mumbai’s Palladium mall. The Canali store at Palladium generated close to 100% higher sales within three months of launch than its outlet at JW Mariott Tag Heuer, the world’s fourth-largest Swiss watch maker, opened a 600-sq ft store in Bangalore’s Phoenix Market City mall. Higher footfalls have meant sales of 15 watches per month against 10 watches a month in hotels

Source: http://economictimes.indiatimes.com/news/news-by-industry/cons-products/fashion-/-cosmetics-/-jewellery/luxury-brands-like-kimaya-fashions-hermes-and-others-prefer-heritage-homes-over-five-star-hotels/articleshow/11442214.cms



    

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