NEW GROWTH CENTRES Conservative Towns Turn Luxe Hot Spots

Striking shift in income distribution turns small cities into big markets for luxury items

 Traditionally conservative markets like Surat, Chennai and Kolkata are warming up to luxury, opening a wealth of opportunity for brands such as Louis Vuitton, Armani and Burberry beyond Delhi and Mumbai. 

In the next six months, people in Surat—home to some of India's richest entrepreneurs in the diamond and textiles trade-—will see the entry of half a dozen international labels that include Armani, Burberry, Tumi and Crabtree & Evelyn. 
Some 1,500 km away down south, on the eastern cost, curious shoppers in Chennai are checking out the first Louis Vuitton store opened a fortnight ago. "Chennai is a great market, full of possibilities and perspectives," Geoffroy van Raemdonck, Louis Vuitton's south Europe president, says from Milan. Two new luxury hotels in Chennai are offering space to luxury brands keen to go deeper into the country even as Louis Vuitton has identified its next stop—Kolkata, where businessman Sanjiv Goenka is readying a 7-lakh sq ft mall that has already leased out about 50,000 square feet of space to luxury brands such as Bottega Veneta, Bally, Burberry, Rolex, Porsche Design and Jimmy Choo. 
Surat, Chennai and Kolkata have traditionally been conservative markets, with only a few rich buyers spending on the luxury labels. But now these cities are among the emerging hot destinations for luxury as premium global brands seek to reach out to pockets of affluence beyond the big metros. 
"There is a nascent market waiting to explode. We think the time has come," says Sanjay Kapoor, managing director of Genesis Luxury, which markets brands such as Armani, Burberry and Canali in India. 
Genesis has taken up space for half a dozen stores at a luxury mall in Surat being built by Virtuous Retail, a retail real estate asset platform sponsored by the Xander Group Inc. It is also looking for space in Chandigarh, Ludhiana and Jaipur because several people from these towns frequent its stores in Delhi and Mumbai. Clearly, the rich in small towns have more money and desire than ever to spend on high life, and they seem indifferent to the slowdown in economic growth and overall consumer spending. Three years ago, NCAER's Rajesh Shukla and Future Capital's Roopa Purushothaman had said a report titled Next Urban Frontier, that boomtowns like Surat, Jaipur, Lucknow, Nagpur, Bhopal, Coimbatore and Kanpur have seen the most striking shift in income distribution. 
"That trend is established now," says Shukla. "The number of high-income households in boomtowns is growing at around 20% a year, against 13.7% in the mega cities…(and) boomtown households on average spend 12.7% more than mega cities on clothing," he says. 
Anupam Yog, marketing director of Virtuous Retail, says Surat is one of the top ten markets on the company's radar and has massive consumption potential. He says 73% of the five million population in Surat is below 35 years of age, and 32% of the households there have an annual income of more than . 3 lakh. 
Virtuous Retail has also tied up with Indian fashion designer Rohit Bal to open shops within 'VR Surat' mall. 
Chennai, meanwhile, is fast becoming a popular luxury destination. "Chennai is becoming big in terms of consumers' spending on luxury and lifestyle," says Rajmohan Krishnan, executive vice president (wealth management) for north and south, Kotak Mahindra Bank. "People have new money and also the new generation of business entrepreneurs, who want to splurge, has come up." Krishnan says increasing connect between north and south of India too is impacting spending habits of people in the south. 
A new luxury hotel in the city, The Leela Palace, has earmarked around 8,000 square feet of retail space for luxury brands. "We are looking at luxury retail brands, with a focus on jewellery and watches," says Amruda Nair, head of asset management, The Leela Palaces, Hotels and Resorts. 
ITC Grand Chola too is offering space to luxury retailers in Chennai as the city does not yet have a super luxury mall. 
In Kolkata, Sanjiv Goenka's mall that will be operational early next year. "The mall will not only get shoppers from within the city but from the entire eastern region. We also expect an influx from Bangladesh," says Pankaj Renjhen, managing director, retail services, at property consultant Jones Lang La-Salle, which is marketing the property. Gucci too is exploring having presence in Kolkata. 
Then there are other places. 
Louis Vuitton's chief representative in Asia, Tikka Shatrujit Singh, says that besides Kolkata the French fashion giant is considering places like Hyderabad, Noida and Gurgaon to open shops. High-end crystal products maker Swarovski opened boutiques in Ahmedabad and Pune last year. "This year we are opening in Ludhiana and Chandigarh and also looking at Kochi and Jaipur," Sukanya Dutta Roy, managing director (consumer goods business) at Swarovski India, says. 
Luxury hotels too are reporting higher business from domestic travellers.