International luxury brands in India should open outlet malls to kickstart sales and ride out the slowdown.

In unstable times, the ephemeral value of a $1,000 handbag is hard to evaluate, yet repeated consumer studies suggest that people used to maintaining a luxury aesthetic will continue to do so; even if they need to tweak that aesthetic to fewer purchases at lower price points. If luxury brands newly opened in India want to lure in the customers, they’d do well to connect with the psyche of the wealthy Indian, for whom the idea of foreign trips and shopping are deeply entrenched, as is a judicious approach to non-essentials during uncertainty.

The size of the luxury market in India, evaluated by Technopak and the World Wealth Report is estimated to be over 500 million dollars, in emerging economies, second only to China. Indians have always enjoyed the idea of splurging on expensive brands; Cartier watches and Mont Blanc pens have completed over a decade in India. However, this segment has really only taken off after India’s first mall dedicated to high-end brands, Emporio, opened in Delhi last year with Dior, Cavalli, and Armani entering the market in partnership with Indian firms. Bad timing or bad luck, terror attacks and a fledging economy turned the mood of the shopper from flashy and optimistic to overtly cautious overnight, and the Emporio has looked spookily desolate ever since. Most Indian firms have no experience in the luxury segment and the deals worked out with the brands are heavily loaded against them. They’re stuck with huge inventories and are buckling under high rents and fixed costs. Etam, the French lingerie brand has pulled out of its partnership with the Future Group within a year, while Gas, which entered the market in a deal with Raymonds, has also fallen through.

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