Cut price luxury

Are luxury brands in India cheaper than they are in other parts of the world? Gargi Gupta takes a look at the price-point strategy.

Kitsch, the multi-brand store that stocks international designer labels such as Lanvin, Stella McCartney, Alexander McQueen, Diane Von Furstenberg, has dropped prices by 5-10 per cent. With these cuts, buyers will now pay the same price or less than what they would pay in Dubai, or Bangkok, or even Europe, for that matter.

For TSG International, the company that runs Kitsch, the “price point strategy” was a voluntary move, says its director, Charu Sachdev. The Indian traveller, she found, was always comparing prices in India with those in stores abroad. Prices in India suffered from the comparison as a result of the high rates of taxation on international luxury brands here — a mix of import duty, countervailing duty and value-added tax that adds up to between 28 and 32 per cent on garments and accessories. Given how frequently and widely Indians travel these days, this price consciousness constituted a very real threat to local sale. For the same reason, there was no question of stocking an older line — Indian customers would know instantly. In fact, says Sachdev, price cuts and discounts have stopped driving the luxury market so that she has now cut her end-of-season sale from 30 to 20 days.

Raina Shakdher, partner, Maxxis Retail, the company that has brought in premium denim-wear brand 7 For All Mankind, agrees with this assessment. “Indian luxury customers are very global and savvy.” So, the brand is priced lower in India than anywhere in the world.

“If you take Europe, rather Milan, as the benchmark because that’s where the brands originate, prices in India vary between plus and minus 10 per cent,” says Abhay Gupta, executive director, Blues Clothing Company, the franchise partner for Versace, Corneliani and Cadini (Italian men’s wear brand) in India. But Gupta does not fear any of his business shifting away merely on the pricing. “That fear factor has gone away now with the luxury market becoming more settled. Our customers value the easy reach and our service, no questions asked exchange policy, free alternations.”

Sachdev says she managed to reduce prices without affecting her margins (which are between 30 and 40 per cent gross), by streamlining processes and logistics. "We worked with our banking partners, streamlined logistics and deliveries, and implemented Just in Time in our inventory management.” The company also focussed on a more commercial line and controlled its overheads. For instance, it brought in a franchise for its store in Mumbai, an important market for the luxury segment in India.

Business has grown, Sachdev reports, 150 per cent season on season, especially since end-2008 when Kitsch abandoned its earlier single brand-outlets for a multi-brand one. This has given her the volumes that have ensured her partners support her moves to grow their India business.