Mumbai Terrorist Attacks are a Blow to India’s Retail Industry

November 28, 2008	(Be the first to rate this story!)  Loading ...
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The attacks in Mumbai struck at the core of the fledgling luxury-goods industry in India, threatening to dampen the vibrant growth of one of the sector’s key developing markets. Mumbai’s Taj Mahal Palace hotel, the epicenter of the attacks, is the most coveted retail address for luxury goods firms that are tapping into India’s growing numbers of wealthy individuals. European brands Louis Vuitton, Bulgari and Fendi all have boutiques in the hotel, which was the target of various explosions, hostage-taking and a fire. The Oberoi Trident Hotel, which was also hit, houses luxury brands including Salvatore Ferragamo. Some of Ferragamo’s employees were being held hostage, the Italian fashion house said.

Any prospective slowdown in the promising Indian market would come at a bad time for the industry. Luxury goods companies have been relying on new markets such as India, Russia and China to counter sluggish growth in Europe and the U.S., where the global financial crisis has drained appetites for expensive goods. Most experts don’t anticipate a long-term impact from this week’s attacks. And the Indian market is still small in terms of how much it contributes to overall sales at most companies. “Even if [the Indian market] comes down, it’s not significant,” says Neelesh Hundekari, principal at AT Kearney Inc., a management consulting firm in Mumbai. Still, India is important symbolically for many luxury-goods brands, so companies may become more cautious about investing there if the fear of further terrorist attacks intensifies.

Moreover, even before this week’s terrorist attacks, India’s high-end spenders were showing some early signs of vulnerability to the global financial crisis. Indian high-end retailers — which are generally lower-priced than big European names — have been offering new products at lower prices. October sales at Ensemble, a retailer for top Indian fashion designers, fell 20% year-on-year, said Tina Tahiliani-Parikh, Ensemble’s executive director.

European labels said yesterday that they remain committed to the Indian market. Mr. Hundekari, who advises Louis Vuitton in India, said that as new mall space is built across the country, exclusive hotels such as the Taj Mahal and the Oberoi will become less important retail addresses for high-end brands. Last night, as enforcement officials worked to secure the Taj Mahal hotel, its boutiques remained closed. Louis Vuitton said all of its employees were safe, and Bulgari, whose store is operated by a local franchise partner, was trying to establish the safety of its employees. The Fendi store had been closed for renovation and is scheduled to reopen within the coming weeks. Tikka Shatrujit Singh, an adviser to Louis Vuitton in India, said he hoped the fashion house’s boutique would reopen within days. India, he added, “is a market for the future and we want to reinforce our position.”

News Published Under:   Retail Market in India |

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