Luxury brands a tough sell in wealthier India

By Rina Chandran

MUMBAI (Reuters) - On a recent evening at a luxury Mumbai hotel, shoppers tried on sequined sandals and handmade moccasins at Joy Shoes, an Indian family business that has sold out of its only shop for nearly 70 years.

Around the corner, a Moschino store with stylish displays of apparel and accessories off the Milan runways stood empty.

Starting at 3,500 rupees (47 pounds) for a pair of men's shoes, Joy is not cheap. But the key to its enduring popularity, says Munna Javery, the third-generation owner, is knowing what customers want and maintaining relationships with them over the years.

These are just two of the already considerable challenges facing global luxury retailers in India.

Despite its growing number of millionaires, India lags emerging market peers China and Brazil because of a lack of quality retail space, high import duties on luxury goods, a cap on ownership in local units, excessive red tape and piracy.

India had 123,000 millionaires in 2007 and showed the fastest pace of expansion, a Merrill Lynch/Capgemini report said, but that was the smallest number in the "BRIC" emerging markets quartet, with China already having more than triple that number of super-rich. BRIC comprises Brazil, China, India and Russia.

Luxury goods in India also make up the smallest proportion of the overall retail market, just 0.4 percent, according to a Bain & Co report, compared to 2.7 percent of China's retail market.

"For luxury in India, the path is bumpy and long," said Mohan Murjani, chairman of the Murjani Group which launched Gloria Vanderbilt jeans and Tommy Hilfiger globally, and partners such brands as Gucci, Calvin Klein and Jimmy Choo in India.