| In downtown Mumbai, not far from the Bombay Stock Exchange where millionaires are made each day, is a new destination where they can spend some of that wealth. Galeries Lafayette is set to open next month, with over 250 international brands, many of them — Balmain, Marni, Jil Sanders and Maison Margiela — coming to India for the first time.
I was young and dazzled when I first visited the French department chain’s flagship Paris store a score and more years ago. Its breathtaking glass dome and gobsmacking array of luxury goods is still a vivid memory. The Mumbai franchise, housed in two heritage buildings, is much smaller at about a 10th of the size, and is still a work in progress. It’s taken eight years to get here, Nicolas Houzé, executive chairman of Galeries Lafayette Group, said to me during a store visit this week. We wanted to be sure that India is ready for this kind of luxury format, said Ashish Dikshit, managing director of Aditya Birla Fashion and Retail Limited (ABFRL). The India franchise partner has invested over 2 billion rupees (not counting real estate lease costs) to set up and stock this 90,000 square feet store.  Galeries Lafayette in downtown Mumbai. Photographer: Kedar Sonigra/Bloomberg This interview has been condensed and edited for clarity. Is franchising the best expansion tool or would Galeries Lafayette have preferred an equity partnership, which India’s rules don’t permit? Nicolas Houzé: It’s the way we are doing expansion around the world and is for us the best way of doing the business. We think with Birla we found a great partner. We started discussions eight years ago and look forward to the store opening in a few weeks. What’s the growth potential for India’s luxury retail market versus other regions you are present in, like China and the Middle East? NH: India is really fast-growing. And it’s exciting to be here at the beginning of this luxury boom in the country as the landscape is not so crowded. We think that that’s the best way of starting a new venture. Why did it take eight years? Ashish Dikshit: Galeries Lafayette wanted to be sure that India is ready for it and we wanted to be sure that we are ready for this kind of luxury format. It’s a department store eight times or 10 times the size of what you would see in other luxury department stores in this country. We’ve been sort of cooking this side of the business over the last 15 years through the Collective, which was our first entry then. We have seen the rise of luxury slowly and certainly. Getting the right real estate is very important and where we are sitting today is an iconic, over-100-year-old building, exactly like the history of the two families in this venture. How big is the luxury retail market in India and what portion of ABFRL’s revenue does it constitute? Your past financial performance suggests the fastest growing segments are ethnic and wedding wear. And this store has everything but that. AD: Multiple sets of figures get quoted for the overall luxury goods market — it’s a very, very large market, split across multiple categories. As retailers, we are trying to bring it together in one place but fashion itself is one part, luxury is now more expanded into services, experiences and many other forms. Coming to our portfolio — luxury is about 8% to 10% of our business. And we see it through two lenses. One is the great Indian artisanal-crafts-led luxury which is represented by some of the best designer names that we partner in this country. The other is what globally travelled, rich Indian consumers experience outside India. And there is a desire to experience that in India as well. So what you see here is that version of luxury — not just in brands, but even retail ambiance, service experience. That is really the attempt. With over 250 international brands in the store, how does that compare with other international stores? As brand owner do you see more Indianization over time? NH: In fact, we are the house of brands. It’s important to find all kinds of brands from international, local to French. Usually, each supplies a third in our stores. Indian brands have a place within it already and perhaps we will also bring those brands in Paris to our flagship store. I’m sure that they will find customers in France. How do you view the competitive landscape? Just in Mumbai, the Ambani-owned Jio World Plaza in Bandra houses several high-end luxury brands. So does the Palladium Mall in central Mumbai. AD: I don’t think these are direct competitors. They are malls which house few brands. We have 250 brands. There, the experience is fragmented by and offered by individual brands. Here, it is a unified experience, where we control every aspect of it through service, personalization, assortment. Globally, department stores and malls have very different expectations from consumers. I don’t think they compete with each other as much as they complement each other. When do you hope to start recovering your investment? AD: Like all large retail investments, it takes five to six years for you to start getting payback. This could be a little longer or shorter depending on how the luxury market pans out over the next couple of years. But really speaking, destination stores like this have to have a much longer-term view from the investor side. NH: | 
