Luxury Market in India

A. V. Vedpuriswar

“Luxury brands are brands whose ratio of functional utility to price is low while that of intangible utility to price is high.”

luxury-market-in-india

With consumers for luxury goods more in numbers than adult population of several countries, luxury brands are setting up shops in India to tap the growing market.

: With its burgeoning High Net worth Individuals (HNI), Indian market for luxury goods is estimated to touch US$ 452 million in coming years making it the land of promise for global brands, says a survey on luxury goods and Indian consumers.

The survey, conducted by industry chambers FICCI and designed in consultation with leading advertising agency Ogilvy and Mather, was carried out among 80 HNIs across five cities of Chennai, Delhi, Jaipur, Kolkata and Mumbai.

On perception about luxury, 25 per cent of those surveyed rated exclusivity–something a few people can afford– as their definition of Luxury while an equal number felt it was indulgence in passion, hobbies and interests.

As much as 19 per cent of the surveyed felt, time to do what they want as their perception about luxury, the survey, released at the, revealed.

For the first-timers, purchasing automobile was considered their entry into the luxurious world and was endorsed by 27 per cent.

While “lifestyle luxury” of consumer durables was endorsed by 24 per cent as the first ever luxury product acquired.

Fashion labels and branded accessories as the first luxurious acquisition was stated by 17 per cent of those surveyed.

In accessories, the survey reveals that watches remain to be the most popular with 45 per cent votes followed by leather accessories 18 per cent and pens 17 per cent.

Luxury Market Statistics

The dazzling array of luxury goods available today is clearly catering to the growing number of Indians who are enjoying unprecedented level of affluence. Statistics show that in 2001-2002 there were 20,000 families in India with annual income of more than Rs 1 crore .By 2005 ,that number has increased to 53,000 families and by 2010 ,India will have an astounding 1,40,000 millionaires.

It is not just the big Indian cities like Delhi, Mumbai and Bangalore where the rich are located. A small town like Nagpur had nine millionaires in 1995-1996. By 2001, that figure increased to 425, with a growth rate of 91 percent. A high end luxury brand like Ermenegildo Zegna, whose customers include Bill Clinton, Pierce Brosnan, Shah Rukh Khan and Al Pacino, recently made a presentation in Ludhiana and Jalandhar.

In terms of population percentage, it may seen minuscule. The seriously rich and affluent represent just 1 per cent of the entire population, but with a base of one billion people, it still adds upto 10 million high end customers, a substantial number in any market.

They are what is being termed Global Indians, the ones who are traveling abroad at the drop of a barbour hat. They are acquisitive, brand conscious and, above all they want the best and they want it now. If they can buy in their city so much better. These brands include some of the world’s most celebrated: Fendi and Louis Vuitton, Canali and Bvulgari, Cartier and Hugo Boss, Dolce & Gabanna and every Swiss luxury watchmaker. Last year, Jaeger Le Coultre launched its grand Reverso watch priced at Rs 20.8 lakh.

Unlike a few years ago, when Indian consumers had to do their shopping in London, Paris and New York, the world’s most luxury merchants are realizing that they cannot ignore the Indian market. But if you compare to the western market India is still a niche market for luxury products, but it is one that is growing fast and producing aspiration life styles where, unlike the earlier decades of socialist populism, display of wealth and luxury are no longer a dirty word.

In today’s deluxe India, the children of your domestic staff are wearing Levi’s and lee. For the brand conscious and trendy, it has to be Swarovski encrusted Seven of all mankind jeans, specially made for the Indian market. In fact, if you have got the cash, there is no limit to the splash.

What has facilitated the entry of these brands is the lowering of duties in some cases and easier regulation for automobiles, inspiring luxury automakers to launch their vehicle in India or expand their existing range.

As for infrastructure, India’s congested urban centers and rent control has produced few shopping malls – so brands opened their first stores in five-star hotels. Carcelle scored a major coup when he convinced Biki Oberoi of the Oberoi Hotel in New Delhi to turn his office into the first Louis Vuitton shop.

While mall openings are proceeding rapidly – it is estimated that the country will have 300 new malls by 2010 – few of the original ones have had what it takes to attract luxury brands.

Emporio, from India’s construction giant DLF, set to open in March 2008 outside New Delhi and is the first to include a separate building devoted to luxury brands and a special space for watches. Emporio has attracted 130 brands, including 70 international names: Vuitton, Dior, Fendi, Armani, Dolce & Gabbana, Cartier, Versace, Hugo Boss, Escada, Tod’s, Paul Smith and the watch brands Piguet, Chopard and IWC.

Now, DLF has announced plans to develop Emporio malls in Southern Mumbai, Hyderabad and Chennai.

On the other side of the country in Bangalore, the UB City Mall, also is set to open next year. The project is on 10 acres, with five medium- and five high-rise towers and is the project of Vijay Malia, chairman of the United Breweries group and Kingfisher airlines.

But not everyone is jumping into India’s new malls. Hermès will open its first store in India next year at the Oberoi Hotel. “We see India as a completely atypical country because we consider their textiles and the way they produce as a model for us. India has its own artisans,” says Patrick Thomas, chief executive of Hermès.

Timelessness takes years, even decades to develop. Such a brand must have come to stand for something in the eyes of the world. A star brand has to remain current and fashionable. It needs sex appeal and has to be modern. It has to be so new that people would want to buy it. A star brand has to keep growing. Growth is a clear signal that the brand has consumer appeal. Last but not the least, a star brand has to be profitable. Profitability depends on both the price and the costs incurred. So even in case of star brands, operational excellence is important. That means sourcing of raw materials, manufacturing and distribution must be efficient.