IN AN IDEAL WORLD, the Bulgari family would be raising a toast this year to celebrate the 140th anniversary of their iconic Italian fashion brand. Instead, it’s embroiled in a legal wrangle between two fourth-generation sisters, Veronica and Ilaria, over control of two trusts worth $130 million.

The Bulgaris, though, no longer own the brand — whose logo uses the classical Latin alphabet “V” instead “U” — having sold a 50.4% controlling stake in March 2011 in a $5.2 billion all-share deal, fetching the family a 3.6% stake in LVMH Moët Hennessy Louis Vuitton, the French luxury conglomerate built by Bernard Arnault. LVMH came into existence in 1987 following the merger of fashion house Louis Vuitton with Moët Hennessy. In the ensuing three decades, it emerged as the numero uno luxury house with 75 maisons (brands) as Arnault went on an acquisition spree by swooping up European luxury brands Bulgari, Dior, Sephora among a host of other notable labels.

Incidentally, 2011 was not just the year Bulgari changed hands; it also saw the brand exit India, ending a seven-year partnership with a group company of the Mehta family-run Mohit Diamonds. The departure was not permanent, though. By 2014, Bulgari re-entered the market, opening its first boutique in New Delhi’s DLF Emporio — a move made possible by India’s approval for single-brand retail ventures.

Bulgari’s re-entry is led by Jean-Christophe Babin, who took over as Bulgari CEO in 2013 after a successful stint at Tag Heuer, a watch brand owned by LVMH. Putting into context the reason for the exit, Babin tells Fortune India, “Actually, nothing went wrong; it was a slow progress… a kind of dual-speed development. On one hand, we had strong growth in multi-brand wholesale watches, where we are among the top 10 brands in India. In watches we have exceeded our objectives and still consider India as a market with further growth potential. But, our core business, jewellery, which we sell exclusively in boutiques, has been slower.”

The comeback is not without reason. Even though India is a smaller market, its robust growth rate of 33% makes it the fastest-growing Asian market and the second fastest in the world. Bulgari’s jewellery collection in India is largely in the €1,500 range and can go up to €1 million, designed to appeal to a wide consumer segment, right from young professionals eager to celebrate personal milestones to independent entrepreneurs. “We have already sold pieces worth millions of euros to Indian customers. So, there is a vibrant market out there,” says Babin.

According to Simon-Kucher, a global management consultancy firm, India is the third-largest Asian luxury market, ahead of countries such as Thailand, Vietnam, and even South Korea. Among the rising stars, India stands out; its luxury market could expand to $85-90 billion by 2030, according to Bain-Altagamma Luxury Goods Worldwide Market Study.

In the decade thus far, Bulgari has managed to put up just two boutiques — one in Delhi, and the other at the Jio World Plaza in Mumbai. “I can’t believe that in a country of 1.4 billion people, there isn’t a niche of clients who appreciate Bulgari’s style or, more generally, the western jewellery style, and would choose to buy only in their own country,” says Babin.

In the realm of high-end luxury, the go-to-market strategy in India requires a nuanced understanding of local preferences, spending habits, and the socio-economic landscape. Unlike Apple, which hit over $6.5 billion in sales in FY23 by capitalising on widespread tech adoption and growing middle-class affluence, luxury brands face a narrower market, comprising primarily the affluent elite. This demographic, while financially capable, has a penchant for watches, apparel, real estate, and jewellery, in that order, that differs from Western and Chinese consumers. In fact, according to Simon-Kucher, Indian consumers prioritise 60% of their luxury spending on cosmetics and jewellery compared to Chinese consumers who allocate 48% just for luxury watches and jewellery.

In China, Bulgari has 20 boutiques and in India, after 10 years, a two-store story says it all. Babin explains, “To be really profitable, you need a critical mass because let’s not forget that besides the stores, which have direct costs and revenues, you need a structure.” This structure includes roles such as PR and marketing personnel, supply chain coordination, and after-sales service. Babin also notes the financial complexities specific to India, such as import duties and luxury taxes, which necessitate specialised financial expertise. For instance, the permission for 100% FDI in single-brand retail and 51% in multi-brand retail for luxury brands comes with mandatory 30% local sourcing criteria. “In the short term, this isn’t an issue, but in the next five years, it could become a problem. While we understand the Indian government aims to protect its industry, they shouldn’t fear Western luxury too much because we are too small compared to Indian luxury brands, and the overall luxury market in India is growing well,” says Babin.

For instance, the existence of local watch brands in India has not hindered the growth of Western brands, demonstrating the market’s capacity to support a diverse brand ecosystem. “Clients are multifaceted; they don’t go for one style or one brand only,” Babin explains, highlighting the varied preferences of consumers who might choose a local brand for cost-effective options or opt for renowned names like Cartier, Bulgari, or Tiffany for investment pieces likely to appreciate at international auctions,” says Babin.

Babin thinks if there is one BRIC country that can become as big as China, it is India. “It’s unstoppable, driven by economic development and education, and with India already being No. 5 worldwide in GDP, it is very likely to be in the top three in the next five years.” But success also depends on partnerships with local entities, notably landlords, who play a key role in market dynamics.

For instance, in cities like Rome or Tokyo, it’s more effective to position flagship stores in high-traffic shopping areas such as Ginza (Tokyo) or Via Condotti (Rome), London’s Bond Street or New York’s Fifth Avenue. But given the limited availability of high streets in India, most luxury brands tend to ensconce their brands in hotels. Babin points out that customers who visit hotels come to savour a good meal and stay, and not to shop for luxury goods. “To believe luxury brands will thrive in upscale luxury hotel chains is delusional,” he adds.

According to a report by real estate consultant CBRE and PHD Chamber of Commerce and Industry, leasing by luxury brands stood at 0.6 million square feet in 2023, a 170% YoY growth. While high streets constituted 45% share in luxury retail leasing in 2023, stores in malls were a close second at 40% with standalone stores making up for the remainder 15%.

Compounding the problem in India is the scarcity of luxury malls, which is also reflected in the lower share of vacancy rates. As per JLL, vacancy rates are hovering between 2-7% in luxury malls compared to 13-35% in average malls across prime metros, including Mumbai and Bengaluru. “I find it surprising that in a country where the operating costs of retail are relatively low, you can’t make money by selling goods at global prices. It seems like an impossible equation,” argues Babin. This is because, aside from potentially high-cost materials for flooring for common areas, the internal design costs of luxury boutiques are covered by brands themselves. “Given that 90% of the space (showrooms) in malls is built out by brands through their own P&L, I don’t see why developers are hesitant to build luxury malls,” says Babin.

For now, even as traditional real estate developers are playing it by the ear with luxury malls, the entry of established conglomerates such as Tatas, Reliance and the Birlas will help luxury brands leverage these retail assets instead of building out their own exclusive outlets. Partnering with local giants will help luxury brands quickly gain a foothold.

But the journey will be an arduous one.

Bulgari not only faces the challenge of a discerning consumer base in India but also has to contend with a robust private investment market wherein, for instance, a survey projects that by 2025, nearly 30% of the estimated $100 billion in start-up funding will come from wealthy Indians. And that’s not surprising considering that India is still experiencing the first-hand effects of the wealth creation cycle. The Bain study, too, acknowledges that while new markets such as India, Southeast Asia and Africa hold significant potential, there will never be “another China” in terms of growth contribution to the industry.

But Babin is willing to walk the talk. “We will be patient because we’re reasonably profitable. In a company’s portfolio, you need cash cow markets, maturing markets, and future big markets. The few future big markets must really have great potential, and we accept losses there because the other categories compensate for these losses, which is an advantage of being part of a large, global company.” Reflecting on the unique challenges and potential of India, Babin could well heed the insight of Singapore’s founding father, Lee Kuan Yew, who once remarked, “India is a nation of unfulfilled greatness. Its potential has lain fallow, underused... There will be the U.S., there will be China, and the Indians are going to be themselves; they’re not going to be everybody’s lackey.”

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