Anjali Gaekwar, India country manager at Christian Louboutin, we are told, has just returned from a successful trunk show in Hyderabad, where the brand’s designer redlacquered soles are as much a rage as the latest Erdem jacquard cape. And in Mumbai’s Palladium, Canali’s deep blue nawab suits are flying off the racks this Diwali, even before the wedding season fully kicks in.
If sentiment drives shopping, it faced yet another setback. Just when the whole industry was adapting to a new normal — coming off a long period of trough after disruptions like demonetisation and doubling of duties — the welter of negative macro headwinds and news flows is bound to impact any positive vibes or buoyancy creeping back in the market.
The go-go years of 2006-08 gave way to heightened regulatory scanner since early 2016 with interventions like PAN cards for high value transactions of over Rs 2 lakh or caps on cash purchase or even doubling of customs duty to up to 25 per cent depending on categories thereby spooking several shoppers. There was even an additional 1 per cent tax on luxury spending that was levied but eventually scrapped a year later in 2017. GST, though a booner in the long run , has had its share of teething problems before stabilising between slabs of 5-18 per cent after the initial of 28 per cent.
Less than nine months after the PAN card rule was introduced, in November 2016, Narendra Modi-led government demonetised banknotes. That evening, many flocked to jewellery stores and ritzy malls to convert their soon-to-be worthless cash into gold, bags and vouchers. Anecdotal evidence suggests many high-end retail outlets especially in the national capital region stayed open late that day; some even post midnight, that led to a sudden spike in sales for select categories like luxury jewellery and watches in the month of November. But even those who managed to weather the initial storm because of quick interventions like selling gift vouchers were caught off guard.
Till then,Louis Vuitton had seen a bump up in its profit after tax of over Rs 8 crore as compared to the Rs 5 crore in 2016 for Louis Vuitton India Retail, according to Registrar of Companies data. Similarly, Hermes India Retail’s profit went up to Rs 13 crore in 2017 over its Rs 8 crore in 2016, added its ROC data. “But soon it was paranoia all over,” recalls an industry executive. “Like a guillotine to the neck, it disrupted the business model,” says Dinaz Madhukar, executive vice-president of DLF luxury retail and hospitality vertical. “The policy changes came too quickly and the scale was huge. Consumers didn’t know what to expect and there was that anxiety about whether they should spend or not.”
Overall, the tax incidence remained more or less the same post GST. Earlier imports attracted an additional countervailing duty of 12 per cent and Special Additional duty of 4 per cent in addition to the basic duty.
From poorly thought-out retail return policies to patronising the local shopper, many labels have suffered due to their arrogance. “Luxury sales in India are determined by the brands ability to understand the complexities of the Indian market, their agility to innovate and tweak strategies to provide affluent consumers unique and bespoke brand experiences,” says Gayatri Ruia, director business development at Palladium.