Wednesday, 24 July 2013

Weaker rupee a luxury companies can't afford, to push up prices

Marketers of most luxury products, from watches and bags to clothing and shoes, plan to increase their prices by 10-15% or change their product mix in favour of more affordable options due to the falling rupee.

Stung by the weakening rupee, which has fallen almost 10% against the US dollar since the start May, many revered brands including Judith Leiber, Dolce & Gabbana and Alexander McQueen, are reworking their India strategy.

"With the currency fluctuations through imports being so high over the last few months, we plan to revise the pricing of Judith Leiber in India," says Varsha Ahuja, brand manager for American luxury handbag brand Judith Leiber. Its Indian partner Marigold Group plans to increase prices by 10% for the first time in four years.

But price increase is something many luxury brands want to avoid because a 10-15% increase in prices could translate into lakhs of rupees in the case of some products and push them beyond the reach of several aspiring middle-class consumers. Many revered brands have already resorted to measures such as reducing import volumes or sourcing premium fashion wear from Asian countries.

Kitsch, a multi-brand format that sells expensive labels such as Dolce & Gabbana, Stella McCartney and Alexander McQueen, is being forced to cut down the number of stock keeping units it imports in order to stick to its annual buying budgets.

Instead of charging more from the customers, the company will ensure that for the next season it orders items that are easy to sell in India, says Priya Sachdev, creative director of TSG International Marketing that operates Kitsch. "We will have to cut down our order size going ahead. That's the best way to keep costs under control," she says.

In volatile times like these it makes sense to pick up items like the little black dresses and bags which promise faster off take, Sachdev says.

Besides the inventory, a falling rupee has pushed up cost of opening stores also because most luxury and premium brands import furniture, interior items and fixtures. A new store costs 5,000 to 15,000 per square foot, industry officials say.

"Most products and services that facilitate sales like furniture, window props and international travel have also become costly because of the currency fluctuation besides the merchandise," says Prem Dewan, retail head at OSL Luxury Collections, which sells Corneliani brand in India. Insiders say the way forward is to look at local sourcing of furniture and other fittings.

India's luxury market is expected to reach $14.73 billion, or 87,870 crore by 2015 from an estimated $8.21 billion this year.
http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/weaker-rupee-a-luxury-companies-cant-afford-to-push-up-prices/articleshow/21287489.cms

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