Retailers seek cut in rentals at luxury mall in Delhi

June 17, 2009

Citing poor business, the franchisees of some brands at DLF Emporio, the luxury mall in Delhi, have sought sharp cuts in rents. So far, DLF, the mall owner, has not budged. Among the major brands, Versace, the Italian luxury brand, which now pays a monthly rent of Rs 1,000 per sq ft of space at Emporio, has asked DLF to halve the rent, reports Financial Chronicle.

“Our request has been with DLF for a long time. The developer has been delaying the matter,” quoted Dinesh Sehgal, managing director of Blues Clothing Company, Versace’s Indian franchisee in the report.

Several other brands too are believed to have asked for cuts but no one is willing to come on record. Mum is the word from Christian Dior, Canali, Cavalli, Burberry, when asked if they too had asked for a rent cut. Kalyani Chawla, vice-president for marketing & communications for Christian Dior, only said, “I cannot comment on this…Sorry.” Even DLF excused itself, its spokesperson, Sanjey Roy, declining comment.

There are a handful of brands that are willing to live with the high rents, Louis Vuitton being one Tikka Shatrujit Singh, advisor to the Louis Vuitton chairman, said, “We share a cordial relationship with DLF and have not approached it for a rent reduction.”

Sehgal justified Versace’s demand on the ground that sales were down and brand shops at Emporio needed “some leverage” now. Once sales picked up, the shops would not mind paying the “high rents” now charged, Sehgal argued. “In this situation no one wants to cave in.”

Many brands at Emporio are forced to sell goods at huge discounts just to keep the business going and cash flowing. At Giorgio Armani and Emporio Armani, the discount offer is 40 per cent in an unusually prolonged ‘sale’, though they won’t call it that.

Indian designers are faring still worse. They too complain of high rents. “No doubt there is a premium on Emporio, since there is no other place like this. But the rents need to be reduced by 30 to 40 per cent,” said the manager at the J J Vallaya store.

The designer’s store is on the largely unoccupied fourth floor of the mall. So the footfalls there are fewer. For this reason DLF accepted 30 per cent less rent from the store till last month.

This arrangement is valid until the floor fills up and gets more visitors. Similar is the story of other Indian designers with stores at Emporio, though none of them want to comment.

Emporio began with a mountain of expectations, and brands, Indian and foreign, gave an arm and a leg to get in there. The downturn has put paid to their dream.

Santosh Desai, MD and CEO of Future Brands, which is in the mass market, believes that a majority of Indians cannot even think of luxury brands, much less buy them.

Desai reasoned that any luxury brand relied on the buildup of the consumer’s strong desire to own it. “The buildup takes a lot of time. For a large majority of Indians, the desire and envy factor associated with a brand are lacking,” said Desai.