News on opening up of multi-brand retail segment to foreign chains is all over the place in today’s morning newspapers. Still, I would like to address a few important points over here for the benefit of our readers as to the fine print of FDI clearance in the sector cluttered by unorganized small kirana (mom and pop) shops.

It has finally happened – India will see the foreign supermarket retail giants such as Walmart, Carrefour, Tesco Plc and others shaking to the tune of aspiring Indian consumers. Today, the organized retail market in India is estimated to be worth around $28 billion; and is projected to grow by 10 times by 2020.

The Union cabinet on Thursday cleared FDI in the multi-brand retail sector to the extent of 51% stake for the foreign retailers. That’s not all – the government also went full throttle to allow 100% FDI in single-brand retail segment, from the prevailing 51% limit, to push niche luxury brands in making further commitments in growing market of India.

However, there are no free lunches – the entry pass for the Indian disco party for the multinationals firms comes with riders to resolve certain structural inefficiencies in the supply chain; and develop post-harvest and cold chain infrastructure.

Highlights of FDI in Multi-brand Retail

• Union cabinet clears 51% for multi-brand supermarkets.
• Minimum investment from foreign retailer is $100 mn.
• At least 50% of the total FDI must be invested in ‘back-end’ infrastructure.
• Minimum 30% of the local sourcing requirements from small industries.
• Retail outlets to come up in cities with more than 1 million population
• The govt will have the first right to procure agricultural produce.

The investment needed for entering the sector has been fixed at $100 million in towns with population of more than 10 lakh as earmarked by 2011 census; half of which they need to allocate towards building back-end infrastructure and better logistical support for the exploding Indian retail sector led by burgeoning middle class population and growing consumer spending.

Furthermore, the new guidelines may commit supermarkets run by foreign retailers to strict local sourcing requirements to the extent of 30% of manufactured or processed goods from small industries. Going by the 10 lakh population threshold to open supermarkets, 53 cities that accounts for over 42% of total urban population will be eligible to have internationally renowned retail outlets.

Lastly, the cent percent opening up of single-brand retail segment will foster growth in India’s infrastructure for luxury retail markets such as jewellery, fine dining, luxurious real-estate, global branded apparels, yachts, and swanky hotels amongst other niche segment offerings.

For a change, instead of ‘Made in India’; let’s say to them ‘Welcome to India’ !

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Burberry is an iconic luxury brand established in 1856. Its Tartan pattern is one of the most creative contributions to the world of fashion. It is the 98^th most valuable brand in the world and has Royal warrants from the Queen herself.

But some time ago the Burberry brand almost lost its value and this was due to factors outside its control. In the 1990’s Burberry became the favorite apparel of choice of the English soccer Hooligans who used to travel across Europe to support their teams. These hooligans had habit of instigating violence after the matches and often looting stores across Europe. These hooligans found out that if they dressed in Burberry attire they were less likely to be picked up by the police in continental Europe.

In the 2000’s the trend spread to other youngsters from the inner city neighborhoods in the UK who were also inspired by the Gangster rap movement from the US. Finally Burberry became the apparel of choice of the Chav movement. The Chavs were prone to violent crimes and also social disturbances especially at the pubs. For more on this, please read.

Soon most social establishments including pubs banned Burberry. And soon Burberry sales started flagging as most self- respecting customers started avoiding Burberry.

Now why did this happen? Burberry had been worn by Gentlemen like Ronald Amundsen, the first person to reach South Pole. Then why did this iconic brand become the favorite among soccer hooligans, gangster and the Chav.

Well, the main reason was introduction of a line of clothing that was targeted at the youth. Especially the main culprit was the Burberry variant of the baseball cap. This line of clothing attracted the youth especially the gangster rap and Chav movement. Secondly in order to become more mass market, Burberry had lost its identity as fashion apparel and not one intended for the masses.

Luckily the brand took some painful steps and they can be summarized as the following

– Revitalized the brand as a fashion brand. Signed up leading actresses and models in the UK including Kate Moss, Agyness Deyn and Jourdan Dunn. Recently they unveiled Emma Watson as the face of 2009.

– Discontinued their mass market line especially the caps that were creating most of the problem. The reduction of this line and their non-availability to the gangs led to decline in their popularity among this segment.

– Associated heavily with leading fashion publications like GQ, esquire and Vogue.

These are some of the prominent steps revitalized the brand. There was also a change in management and in 2008 Burberry showed an increase in revenue despite economic down turn affecting the global economy.

Though Burberry survived, the Revitalization was strongly dependent on the association of the brand with luxury. Luckily for Burberry the association was strong. A weaker brand would not have survived.

It was difficult for me to find a brand in India, which as come back strongly, so I had to take example of Burberry – Do you recall any Indian brand which has revitalized itself like this ?

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For a layman, the brilliant gleam of platinum, silver and white gold is hard to differentiate apart, just by the virtue of observation. But, with the gold prices soaring sky-high, for those who prefer something other than the traditional gold for jewellery purposes, these three metals can come to your rescue for the metallic silver gleam that they provide to the settings.

Platinum vs. Silver vs. White Gold

While silver is a highly ductile and malleable metal with a white metallic luster that can take high degree of polish, it also gets tarnished when it is exposed to air or water. Among metals, pure silver has the highest thermal conductivity and lowest contact resistance of any metal.

On the other hand, white gold is a blend of pure gold and other metal alloys, which overrides the yellow tone of gold to let the silver color emerge. The difference in color between yellow and white gold is determined by the metals used in the alloy mix.

Lastly, platinum is (usually) the most valuable of the three metals; and is said to be THIRTY times rarer than gold. While gold is perceived as a monetary asset, platinum is most well known as an industrial metal but still serves as economic store of value for more than a century now.

Platinum’s industrial ties and thinly-traded market makes it more susceptible to erratic moves led by recessionary slowdowns. Despite having store of value, this sharp contrast has left platinum prices to dust, when compared with the safe-haven characteristic of gold.

While an ounce of gold can be mined from three tons of ore, it is much tougher to produce platinum as it takes ten tons of ore going by the rarity of the white shiny metal. Platinum is also gaining its sheen amongst the jewellery consumers in India, due to its relatively moderate rise in prices.

Psychology towards Platinum in India

So, why is consumption demand for platinum low in India, despite the metal being rarer than gold by thirty times?

Since ancient times, Indians have valued precious metals like gold and silver, but not platinum. Why? Because platinum did not exist, exclusively, then. Rather, a more correct way would be to say that platinum did not boast of discovery / usage pattern, say, before three centuries from now. So, our ancestors had little choice to choose between precious metals then.

But, times have changed now, and they can buy platinum but still they aren’t too gung-ho on the prospects of the white metal. Why? Read on:

1) People follow past tradition/culture or back their forefather’s decision to buy gold during the times of crisis.

2) Platinum is similar in color to silver. Ordinary people can not differentiate between silver, platinum and white gold. That’s why, in India, white gold and platinum are not famous. People do not trust what they don’t know or are half informed about. But in case of gold, 90% of people can differentiate between gold and brass by its sheer weight and other widely known features.

3) Another explanation as to why people do not trust platinum is similar to that of evaluation dynamics in diamond. A majority of ordinary people can not differentiate diamonds from ordinary glass. There are many factors effecting diamonds like 3Cs (clarity, color, cut). It takes professionals to tell the difference. That’s why though people from ancient times knew diamonds are more valuable, they never bought them in times of crisis.

4) Platinum is usually perceived as an expensive and premium metal. But, during marriage occasions, even rich parents do not buy platinum jewellary, despite the metal having the characteristics of status symbol and considerate snob value.

5) The fact that platinum is on par with gold now itself is proof that people are buying gold in these times of crisis, and not platinum.

Platinum Prices vs Gold Prices

Today, gold prices are trading at a premium to platinum as macro insecurities have driven safe-haven investments in the yellow shiny metal. Further, if precious metal analysts are to be believed gold is likely to continue its momentum and outpace its cousin as fears over the global economic outlook keeps investors on edge.

                                                        [Image source]

The Gold-to-Platinum ratio – which measures how many gold ounces are needed to buy an ounce of platinum – has been sliding sharply from 1.24:1 at the start of the year to 0.98:1, now. Platinum is used as a catalyst in factories and automobiles (catalytic converters in cars) apart from its usage in electric, chemical and petroleum industries.

Some market pundits believe that emergence of China as global power hub has been a major savior for the industrial demand of platinum, amidst weakened economies of the West. On the supply side, the car manufacturing industry in Japan is trying to catch up with production more rapidly after earthquake this year, even as the US auto demand remains tepid knocked by dip in consumer demand.

Looking at the way the gold prices have surged sky-high, now outpacing platinum prices, the shine of the white metallic luster seems to be losing its allure. Whether or not gold is in bubble zone is a separate matter of debate; but many wise men have rated platinum prices as under-valued, with the prospects of third round of quantitative easing (QE3) looming large on the horizon.

Further, the CPM group has released a long-term outlook for the platinum group metals to reach, and retain, historical highs for the next decade on the back of robust investment demand from the automotive industries especially from China and supply concerns on account of wage increases and shortage of skilled labor in South Africa, a major source of raw platinum ore.

According to Platinum 2011, the platinum market in 2010 showed a very small surplus of just 20,000 ounces. Global supplies of the white gleam rose by just 35000 ounces in 2010 to 6.06m ounces; and the industrial demand for the metal jumped 48pc to 1.69m ounces. The growth of new consumer-driven technologies and applications such as LED backlit TVs is expected to result in accelerated demand for the platinum group metals.

So, is it time for Platinum to make a come back in front of the Gold?

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If the recent foray of premium luxury brands into Indian retail sector is any guide, then the average Indian, after shunning foreign luxury brands for decades and sticking loyally to home-grown products, is finally warming up to luxury brands.

The luxury market has picked up quite a pace; according to A.T. Kearney, the global management consulting firm, it is expected to reach about $14.72 billion by 2015 end and then double to $30 billion by 2015. Although high end or midrange luxury items often come with an extremely hefty price tag, one can not ignore its master craftsmanship or its assured quality.

Lured by the India’s growth rate of 8%- 9%, international luxury brands of repute are flocking to India, to be a part of the Great Indian Growth Story. Starting from last year, the second half of it saw the entry of L’Occitane, the French cosmetics and fragrance company, into Indian spa industry in partnership with Devi Spa, Udaipur. This premier cosmetics company which started its operations in New Delhi last year now plans to expand its base by opening stores at upcoming towns and cities across the country. Touted as an affordable luxury brand, L’Occitane is affordable luxury indeed.

Giving this brand stiff competition will be another French cosmetic giant L’Oreal, which already has its own fan base among Indian women, and other home-grown ayurvedic brands like Shahnaz Husain, Blossom Kocchar, to name a few.

Not to be outdone by the French, the Italians are here, with the exotic Italian home furnishings brand Ipe Cavalli (not to be confused with the Italian fashion designer Roberto Cavalli), famous for manufacturing breathtakingly beautiful high-end furniture, announcing its foray into the décor segment. The first store will be launched in partnership with International Furniture brands (IFBrands), a retail chain for luxury home products. Out of the five Ipe Cavalli brands – Visionnaire, Streadlined, Contemporary Classics, Antica Tapezzeria Ducale, and CasaNova – the first collection to come to India will be Visionnaire.

Another Italian furniture brand which will bring world class furniture to India is Giorgetti. While Ipe Cavalli specializes in mainly baroque style of furnishing, Giorgetti is the ultimate contemporary design furniture. The brand recently opened its first standalone showroom in Mumbai.

For automobile enthusiasts, things have probably never looked this good. Ferrari, the iconic Italian sports car maker, is all set to grace the Indian automotive sector in April, this year. The company has reportedly tied up with Shreyans Motors to distribute its high-end luxury cars at showrooms in Mumbai and New Delhi.

The Ferrari models available at the showrooms will be Ferrari California, 458 Italia, the 599 GTB and the 612 Scaglietti models along with the brand merchandise.

Close on the heels of the Italians, come the Swedes, with the supercar Koenigsegg Agera, the newest offering from the Koenigsegg stable, set to make a grand debut on Indian roads some time next month.  Even Mercedes Benz, a long-time player in Indian luxury car segment, has sought to re-launch the Maybach. Priced at a mind-boggling INR51 million, this is one car you can not afford unless, of course, your name happens to be on the Forbes List of 40 Richest Indians.

In spite of the recent spurt of growth, luxury market in India is still in a nascent stage and a decade or more will pass before luxury brands are fully accepted by the generally frugal Indians.

Moreover, finding a proper foothold in the Indian retail space, already saturated with modestly-priced, indigenous products, can prove to be a Herculean task for these premium product companies.

Will India indulge? What do you say?

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You gotta be kidding me! Expansion in the time of economic slowdown and that too the luxury retail segment. India is not considered to be the consumer of overly expensive and exclusive luxury niche. We, the common man (aam admi) brigade pride ourselves in buying the cheapest durable product that is.

It’s time to wake up and give it a re-thought. Indian Consumer has changed and so has their mindset. Ok, not to generalise it but yes, there has been a drastic change in how the Indian Consumer behaviour has gone through a radical makeover. The focus has shifted from Price to Quality to a large extent.

Blame it to the surging salaries and the young MNC executive pulling huge salaries dominating the dominating the average consumer,or the advent of huge multi-nationals planting their seeds in India. Yes, India has become a great market for the luxury segment.

It is a general perception that FMCG sector is the only sector that thrives well in tough times. In fact, FMCG giants like Hindustan Unilever have been consistently registering double digit growth.

But, then the luxury segment is an underdog when it comes to Indian Markets. They do not get enough coverage but they go on registering double digit growths without any hula boo. Proof you say?

Figure this,

The epitome of luxury segment Ala Collector’s Items has picked up hugely in the otherwise uncharted territories of Indian Markets, and double digit growth is what they are delivering.

The brands like Lladro, Swarovski have had a pan India presence for quite sometime. And expanding they are in the midst of a slowdown. Lladro has opened its largest retail store at the swish UB City in Bangalore and is on the lookout for more.

What makes an an expensive brand like Lladro click in these times??

"In these difficult times, we believe buying a Lladro product makes you feel good", says Rosa Lladro,President,Lladro

How’s that for an answer. I sure can’t understand how buying a Lladro product can make one happy when the latest from their stable, The Queen Of Nile figurine costs Rs.1 crore.

Now, Lladro is not the only luxury brand making waves in India. Swaroski, the crystal maker is making giant strides too with plans to expand their presence from 17 exclusive stores to more new stores across the metros.

Here are some interesting set of facts from one of three most profitable luxury market leaders in India:

	Lladro	Swarovski	art d’inox
Product	Exclusive Porcelain Figurines	Crystal	Home Lifestyle
Presence	18 exclusive stores	17 exclusive stores	29 exclusive stores
Expansion	More stores in Metros,Expanding product range	4 new stores in six months	4 new showrooms in tier-1 cities
Growth in the last fiscal	75 percent	25 percent	Double Digit Growth

Data Source: BT

If these mind boggling figures are anything to go by, I am sure as hell that India is nowhere near to Recession. It is only a case of the money not spread evenly :)

This got me thinking. What makes this segment click irrespective of the economic conditions at hand. Few might argue that their target consumer has fat pockets, but then isn’t every corporate honcho in India going haywire with the economic slowdown.

Also, are there any lessons to be learnt from the Luxury Market Business Model. If a business with a very niche target market can consider expanding in these though time, I am sure other businesses can atleast take a leaf from them to stay afloat.

Interestingly, I figured I had an answer to this when I started reading Winning By Jack Welch. But ,I will keep that for another time. I am sure the readers will have a lots of inputs to contribute.

And then, if at all we do arrive at any positives from the discussion, then we can have a sequel to this post titled "Lessons To Learn From Luxury Markets" :) What say?

[Today’s post has been sent by an anonymous blogger, who is working in the field of Finance and Stock Markets. You can post your thoughts and questions and he will be more than happy to answer them.]

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Chartered : hired for the exclusive temporary use of a group of travelers; “a chartered plane”; “the chartered buses arrived on time”

I tried looking for the meaning of ‘Chartered” using define:chartered in Google and that is what I got. The definition mentions about a plane and a bus. No mention of a train. I bet Lalu Prasad Yadav did not check the definition for Chartered.

Ever since Mr. Yadav became the railway minister, Indian Railways never ceased to surprise with its innovations.

Few innovations which are worth mentioning :

1. Automatic upgrade of a sleeper class waiting ticket to to a empty 2nd AC chair car. It is something more of a common sense economics. It is like “why didn’t I think about it” stuff.
2. Introduction of a 9th berth in a coupe. This causes a little discomfort to few passengers. This was done on a trial basis and we don’t have any news if this will be done across the board.
3. Luxury trip from Kolkata to Goa which costs 35000 rupees and takes 11 days.

The latest innovation from Indian Railways is a chartered train. Chartered flight is something which we already know. Chartered Train by IRCTC will tailor the package based on the clients. It will take care of all the hassles of holiday traveling, food choices and sightseeing.

The package will come at a cost though. The service will be started in popular routes like Ahmedabad to Goa, Mumbai to Vaishnodevi and Mumbai to Tirupati. IRCTC is trying to woo corporate customers who might be interested in an off-site on one of these chartered trains.

Very good initiative to boost tourism and railway revenues at the same time. Sounds like fun. Would you go on one of these chartered trains? (source)

*Image source : Train Chartering

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