“Global luxury brand owners who have set up shops in India to tap the growing affluent class seem to have gone wrong in estimating the break-even point,” said Mohan Murjani, chairman, Murjani Group.
Speaking at a conclave on luxury retail in the national capital, he said that luxury brand owners went wrong in their estimate of returns.
“While brand owners estimate that they would clock USD 1,000 worth of sales per square feet, in reality, they could only manage about USD 500. The brand owners kept USD 100 as markdown (discounts) while they had to shell out as much as USD 125, which brought down the net margin from an estimated USD 400 to USD 125,” he said.
He further went on saying that there is an imbalance in partnerships between franchisors and franchisees. “Agreements should be equally beneficial or at the least fairly beneficial.”
He said foreign fashion and luxury brands are charging more in India because of the high duties on luxury items. “The rapidly growing high-end retail market in India is expected to increase from around USD 3.5 billion in 2008 to USD 30 billion by 2015,” he concluded.
