Luxury at a Discount!

It’s a misnomer that Luxury Brands do not discount. Of course, they do. Just that they don’t do it so loudly and obviously as other premium and streetwear brands. Except for brands such as Louis Vuitton, Rolex, Mont Blanc, to name a few, most other premium brands promote discount sales, albeit succinctly. In most cases, they are not at their own stores but at cozy 5 Star Hotels, where the Brands hire banquet halls and quietly carry on with their business. Even then, they need to communicate what’s on offer and choose smartly created advertisements and place them on national dailies. The purpose of hosting these so called “Exhibition cum Sales” is to ward off the junta crowd, most of them being on-lookers. The moment the venue is a Star Hotel, window shoppers would think twice to drop over. It doesn’t look nice, quite obviously to take a public transport to such a venue. Secondly, shoppers still feel intrigued to browse and shop in star hotels, traditionally where luxury products are being sold world over, with India not being an exception.

The other genuine reason is also that we do not have high quality luxury retail spaces in India except for the DLF Emporio Mall in Delhi, the Palladium in Mumbai and the UB City in Bangalore. While there is a small hub by the name Bergamo in Chennai (at Khader Nawaz Khan Road), the RPG Group is coming up with a luxury destination in Kolkata. Apart from these, there are hardly any retail spaces that fit in to the luxury brands’ portfolio. And that’s precisely the reason such Brands choose 5 Star Hotels as venues.

Over the weekend, one such event was hosted at The Westin, Chennai. Prada shoes for Rs. 25,000, Fendi belts for Rs. 15,000, Gucci Wallets for Rs. 18,000 and much more. Yes, these are apparently discounted prices. At 11.30am, on the only day  of sale (being a Sunday), the room was full of discerning customers. Though there were hardly a few pieces in each line, most of them were being bought by those who had dropped in. Many of these brands are not available at Retail Stores in Chennai and shoppers have to travel either to Delhi or Mumbai or probably outside of India to get one for themselves. The smart sales team were even wooing visitors with catalogues, taking orders thereby fulfilling sales orders. The display of items was not as what one would expect in a Retail Store for such products, but perhaps suited well for the “Exhibition” theme.

I tried on the Prada loafers, size 11, but felt it was too tight. As is always the case, the prices were not mentioned on the items, be it wallets or shoes and many people who are price conscious would rather not dare ask for prices, unless they were sure to buy!

India needs varied Retail spaces. What we have now are either too large malls that cater to the middle class or star hotels that house Luxury Brands. We do not have suitable spaces for luxury brands. Malls chains like Phoenix Market City are cordoning off certain areas within the mall for luxury brands. Express Avenue, the only Mall of over a million square feet in the hart of Chennai has created a nice mix of brands. Its so secluded that regular shoppers don’t even pass by that side.

In the meanwhile, keep looking for advertisements in newspapers like the one above. You may be able to get a good deal on your favourite luxury brand in town!

No more EMIs for shopping

The Reserve Bank of India (RBI) has come very strongly against the ongoing practice of Retailers like Croma, The Mobile Store, Imagine, Univercell and many more in assosciation with product companies and Banks to offer interest free EMIs (Equated Monthly Instalments). Currently, Brands like Apple, Samsung and many others subsidise their products by passing on the margins to Banks in return for offerring interest free EMIs. Using a credit card, consumers can own their coveted piece of technology or household items by converting their purchases into convenient monthly payments instead of paying at one shot. Many people have bought their first iphone or other smartphones which offline and online retailers have been offering for quite a while. Believe me, it is indeed tempting. Instead of spending ₹45,000/- all together,  one could pay as low as ₹4,000 for 12 months without paying a penny as interest. Even though Consumers could have paid the full sum, they prefer to pay in instalments. The scheme has graduated many who were having feature phones and CRT Tvs to upgrade to a smartphone or an LCD/LED Tv respectively. 

So, where is the catch? Who bears the interest cost? 

Within the organized retail trade, debit/credit card penetration is quite low at about 15-35% at the max. Banks earn 1.25-2.50% commission on such transactions from Retailers. So, at a 12% interest rate on a transaction of ₹15,000, the bank could have earned ₹1,800 as interest. Instead, it gets only 2% on the transaction. The balance 10% is usually offset by the Brand which is promoting the scheme along with the Retailer. This is on top of the Retailer margin that the Brand pays the Retailer. Therefore, the real value of the product sold is much lower than what is perceived by the customer. The Brand usually doesn't disclose the discounted price of the product so as not to lose the value the customer would derive from the product. 

The scheme has been a massive hit especially among youngsters and first time income earners who are new into their jobs but would like to impress people around them with fine gadgets et al.

The Banks usually anticipate a credit roll over, which means the customer is unable to pay the EMI and therefore pays only the minimum due in a certain month and rolls over the EMI to the next month, on which the Bank earns 3% interest on the said amount. They make up the lost out interest here too. 

RBI is of the opinion that such schemes mislead customers about the impact of rolled over interests by Banks. The new Governor Mr. Raghuram Rajan probably also believes that these schemes promote unwarranted consumption thereby reducing monetary liquidity in the system. Among the slew of economic measures that have been taken since Sep. 13, this is a key one. Retailers are fuming. With the impending festivals eason coming in, Brands and Retailers expected a surge in sales. But this scheme has come as a dampener. Many middle class pople who aspired for their favourite consumer durable or furniture may have to put off their puchases or pay in full. 

NBFCs and private financiers have however been exempted. Bajaj Finserv which has an over 40% market share in Retail credit must be happy. But for availing the scheme provided by them, customers must furnish certain other details such as proof of income, proof of address, PAN Card, etc. So, there is still hope for Retailers and Customers. May the festival of lights bring hope to one and all and increase consumption. Consumption laeds to Growth. Retail prospers. 

Airport Retailers get an added advantage

The Reserve Bank of India (RBI) has recently announced that Non-Resident Indians (NRIs) are not allowed to carry Indian currency out of the country. Earlier, the limit was ₹10,000 to carry with them after clearing Customs and Immigration. This was basically some loose change to meet Food & Beverage expnses while in the Security hold area. While cafes and restaurants do accept prominent foreign currencies, even foreigners try to finish their Indian currencies while leaving the country.

What brings an opportunity is for Retailers to sell Indian souvenirs and interesting take aways which can be spent using the Indian currency.

Keeping this in mind, we had created a very large section called "The Spirit of India" at the Bangalore International Airport. Within this area was a designer boutique from ace designer Deepika Govind among others. One could buy scarves, stoles, jewellery, neck ties and many more before departing. There was also a bookstore which was operated by India's largest bookstore chain Crossword. The store had many interesting books that doicted Indian history, arts among others. I remember, the most sold book used to be "Kamasutra". Foreigners would take it as a souvenir and NRIs would take it as a gift for their friends who lived abroad.

The present rule is expected to be enforced with full force by RBI. If so, then this is a boon for Retailers to sell Indian products to those who are departing the country.