Here’s How Ralph Lauren Can Benefit From Its Foray Into India

Reports suggest that Ralph Lauren (NYSE:RL)  is in advanced negotiations with an Indian company, Aditya Birla Fashion and Retail, to launch its own franchise in the country. In an economy which is growing at more than 7% per year, the luxury market is witnessing tremendous growth. This market is estimated at $18.5 billion in 2016, up from $14.7 billion in 2015. With economic growth and higher purchasing power, experts estimate that the luxury market in India will blossom in the next two or three decades. This makes it an opportune time for high end brands such as Ralph Lauren to establish a retail presence in India to tap into this huge growth potential.

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Tapping The High Income Local Shoppers

According to a survey by Kotak Wealth Management, 59% of wealthy Indians purchase luxury apparel and accessories locally, instead of shopping for them while traveling.  This has encouraged several luxury brands to set shop in the region including Gucci and Louis Vuitton who currently dominate the luxury retail market in the country. These brands are tapping the small section of wealthy individuals in the country whose total net worth exceeds billions of dollars.  However, this consumer base is likely to widen in the coming years since the luxury retail market in India is still at a nascent stage and Ralph Lauren appears to be looking to tap into this growth potential. The base of ultra-high net worth households in India is likely to grow at a rate of 27% till 2017-2018.

As Ralph Lauren moves ahead with its turnaround plan, it is expecting a decline in revenues and store closures. Looking at emerging markets such as India where there is a growing consumer base of luxury shoppers can help the company chalk out a future growth plan. These consumers already shop for luxury brands while traveling, however the preference is shifting to local shopping as an increasing number of foreign brands build a store network in the region. We believe through a foray into India, Ralph Lauren can tap into a high potential market which should drive revenues for the company in the long term.

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