Key takeaways:
- Reliance Brands Limited is India’s largest retailer of luxury goods, with a portfolio that includes the distribution licenses of brands like Burberry and Ferragamo.
- The company keeps costs low by dividing the attention of experienced executives across several brands.
- Shoppers’ tastes vary widely across India. The biggest mistake brands can make is to think of the country as a single entity, says Reliance Brands chief executive Darshan Mehta.
MUMBAI— After two false starts, Tiffany & Co. is preparing to enter India for the third time, starting with the opening of a flagship in Delhi later this year, followed by Mumbai in late 2020. The country surpassed the US to become the world’s second-largest fine jewellery market last year, with sales of $62 billion, according to Euromonitor International estimates.
For its third effort, Tiffany is partnering with Reliance Brands Limited (RBL), India’s largest retailer of luxury goods and a subsidiary of Reliance Retail, the sixth fastest-growing retail company in the world. As the licensee of luxury brands like Burberry and Ferragamo, RBL has benefitted from India’s new affluence.
Reliance’s retail assets, which include 10,415 bricks-and-mortar stores, did $18.13 billion in sales for fiscal 2019, an 89 per cent year-on-year increase. RBL’s importance to the wider Reliance Group is likely to keep growing as the conglomerate pivots away from energy and B2B services. Over the past two years, RBL has also acquired control of Genesis, its LVMH-backed Indian rival.
“It’s no longer only a certain segment of society that can afford luxury,” says Darshan Mehta, president and chief executive of RBL.
However, it may not be plain sailing ahead. Consumer confidence has dipped in recent months as the country’s growth rates slowed to a five-year low. In July, the International Monetary Fund cut its outlook for India’s growth this year to 7 per cent, down 500 basis points from the start of the year.
Still, India remains a promising untapped market for brands from Alexander McQueen to Valentino. “These negative developments are short-term hiccups,” says Anindya Ghose, a business professor at New York University who studies Indian retail. “I can see the battle lines being drawn between Amazon, Walmart and Reliance.”
RBL is hyper-focused on ensuring that brands can thrive in the long-term. It avoids splashy debuts in favour of containing costs and takes a data-driven approach to the market. While Reliance Brands is highly acquisitive, Mehta didn’t hesitate to shut down labels like BCBGMaxAzria and Juicy Couture when they didn’t work out.
Luxury brands that fail in India tend to have a very high-cost base, he says. That’s why RBL has consolidated logistics, supply chain, finance, accounts and HR management into a single group-wide platform used by all brands. Rather than appoint high-salaried CEOs to run each brand, one senior executive handles up to five brands. The executive then manages a team of more junior executives dedicated to each label.
While such efficiencies are common at mass retailers, they are unusual for luxury brands. “Luxury consumers are looking for experiences, so your focus should not be on costs,” says Kiran Pedada, a marketing professor at Indian Business School, adding that a dedicated brand leader can help manage the individual preferences of India’s diverse consumer base.
However, the model has worked well for RBL so far. The company argues that this approach gives brands higher quality staff than they can individually afford.
The biggest mistake that brands make, says Mehta, is to talk about India in the singular. Instead, he refers to “multiple Indias”, with different shopper profiles in each city. While the wealthiest Indians are global citizens with international tastes, diverse styles are needed to appeal to everyone else.
“You need [just about] 2,500 to 3,000 customers per city to build a very successful brand in luxury,” says Mehta.
For example, consumers in Delhi prefer to display brand logos prominently, whereas Mumbai residents are more discreet. After RBL-operated Canali stopped selling a plush velvet Nehru jacket, it received numerous replenishment requests from Delhi shoppers and just one from Mumbai, Mehta says.
Navigating geographical diversity was a challenge RBL faced when it launched the minimalist Japanese brand Muji as a premium label in 2016. Indians are famously attracted to brands with splashy colours, and Mehta was told that Indians wouldn’t warm up to the monochromatic label. So Reliance scaled back operations — there had initially been plans to open two Muji stores a year — and took a slower path to growth, targeting a smaller segment of the country’s shoppers. Shared Research estimates that Muji’s parent registered Indian operating revenue of about $4.5 million in 2019, up from about $1.2 million in 2017.
Indian retail has changed radically in the past decade. Customers previously only had access to independent traders, and shopping meant having to ask someone standing at a counter for permission to look at goods. But malls like Palladium have democratised consumption by mixing stores across price points. Most of these stores are configured according to an open-plan layout, giving customers easy access to goods. (The number of shopping malls in India has increased from just nine in 2002 to 308 in 2017, according to real-estate consultancy JLL.)
While most luxury brands still sell in dedicated boutiques, RBL’s Ahmedabad-located The White Crow multi-brand store has been an early success. Building on the recent advent of mall culture, which Mehta calls a key driver for luxury sales, it attracts a very different customer profile from RBL’s other stores.
The White Crow, which comes with a food retail component, is almost a department store by itself. Ninety per cent of White Crow’s shoppers aren't local to Ahmedabad — making it a destination spot — and its core consumer is aspirational affluent rather than old money.
Mimicking the variety of options in a mall, fresh merchandise is added to the White Crow every four weeks to cater to rapidly changing tastes; most luxury boutiques only change inventory every season. It also carries goods across a wide price range: a customer can try on a $1,000 Ferragamo shoe before turning their attention to a $40 Superdry item. “The other reality of today is that there is no head-to-toe brand dressing,” Mehta says.
While most high-end boutiques conduct business in English, White Crow sales staff speak multiple regional languages to help clients feel at ease. Such has been its commercial success that RBL plans to launch other White Crow stores in Chandigarh, Hyderabad and Lucknow, with 20 further cities identified as potential markets.
“If people feel they are not profiled or looked down upon, they’ll come back,” Mehta says.
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