'Luxury market will take some years to turn commercially viable'
Q&A: Mohan Murjani
The Murjani Group, which runs stores of fashion brands such as Tommy Hilfiger and Calvin Clein, and luxury brands such as Gucci and Jimmy Choo, was recently in the news for plans to sell off the latter. Raghavendra Kamath spoke to Chairman Mohan Murjani to understand the impact of the slowdown on the group.
What is the update on your plans to divest in Gucci? Are you looking to sell other brands?
We are doing it (selling off Gucci). We have decided to shift the focus to our premium brands (Tommy Hilfiger, Calvin Clein), which have been performing at exceptionally high levels. The luxury market will take three-five years before it turns commercially viable whereas the premium market is well-established in the country.
Can we expect something new from the Murjani product line this year?
We are working on a very unique concept that has been anticipated by Indians for long. We will disclose the concept at a later date.
What has been the impact of the slowdown on your business?
Our same-store sales have shown double-digit growth every month this year. The economic slowdown is an opportunity for good brands with better management to grow. Due to our pricing and strategy, we have done well at a time most premium brands have registered 50 per cent drop in same-store sales growth. Our premium brand, Tommy Hilfiger, has done extremely well because it is one of the well-established ones. The brand has been here for five years and has around 750 point of sales units. We will continue to focus on the premium category and not on luxury.
There were reports that you had put your expansion plans on hold.
Absolutely not.. .as I told you, in spite of the global downturn, we are growing at double-digits over last year. We are extremely pleased with the very positive response from consumers towards our brands, our great sales performance and gaining market share.
We continue to aggressively grow the number of points of sale. We will continue to focus on the premium category and bring a couple of premium brands to the country. Our expansion will continue to be funded privately.
How have you achieved double-digit growth when other lifestyle retailers are seeing a decline?
Murjani’s extensive global experience of almost 80 years. We provide the world’s leading brands, great products, an assortment of choice, value-priced products (cheaper in India than abroad), stores of international standards and well-trained staff to provide exceptional service, that is, the complete package.
What’s your strategy to beat the slowdown?
We are trying to stick to the absolute basics. This means according priority to the consumer. Those who were not offering the best prices earlier had to cut prices in the current scenario. We were always offering the best prices.
Mall rentals have fallen sharply in many cities. What’s your strategy for leasing stores?
In the premium category, we are ready to pay only 10 per cent of net sales as rent. Companies have not been able to negotiate even these rentals from malls or landlords. I am hopeful that rentals will continue to fall, to around 10 per cent. In the luxury category, we were paying as much as 33 per cent of sales as rent.
What problems do luxury retailers face in opening stores?
We have had very few malls in the country, so rentals are ridiculously high. In many places, retailers are coming together and getting 50 per cent lower rentals. Developers need to go for revenue sharing with retailers rather than charging them fixed rentals. Because, developers are making money and retailers are losing money.
Big international retailers are struggling to establish their foothold, while niche retailers such as Argos, Etam and others have pulled out from the Indian market. What is your take?
It is a normal process in a nascent market. Some brands will come and some may go. In a developing market, there are bound to be some hiccups.