The luxury products market in India is expanding its ambit from the conspicuous-consumption consumers of the early years to the truly affluent households that wish to stand apart from the crowd
Italian brand Roberto Cavalli plans to invade store shelves in India soon. It has partnered with Infinite Luxury to get a toehold in the luxury market in India. The brand’s extension Cafe Cavalli will also have an Indian avatar, to woo potential consumers one more way to soak up the brand.
Roberto Cavalli is fairly late in the emerging yet buzzing luxury goods market in India, where global behemoths Gucci, Cartier, Giorgio Armani, Burberry have already made their presence felt at high streets across India’s metros or in the lounges of five-star hotels. Luxury malls such as Palladium (Mumbai) and DLF Emporio (Delhi) have sprung up to make the most of the opportunity, while the launch of print glossies such as Vogue and Harper’s Bazaar has fanned the demand for luxury products. In 2010 (the latest available data) the domestic market for luxury goods was valued at $5.75 million, growing at 20 per cent a year and expected to touch $14.7 billion by 2015, says a 2010 study by industry body CII (Confederation of Indian Industry) and AT Kearney.
|OOMPH AND AWE
* While some say that the regulatory environment is not conducive for luxury goods in India, the market is growing at 20 per cent a year
* The slowdown in the luxury goods market in the West has made Brazil, Russia, India and China attractive destinations for luxury brands
* As Indian consumers are becoming aware, the topmost priority for luxury brands in India is to have the latest collection in the store
* While Mumbai and Delhi account for a major chunk of luxury brand sales, the tier 1 and tier 2 opportunity is also hard to ignore
That is only half the story. Many well-heeled Indians continue to shop abroad. Shopping abroad means a wider product range and of course the ‘foreign’ tag that comes along with it.
What makes the Indian market for luxury so promising? A slowdown in the luxury goods market in the West has made the BRIC (Brazil, Russia, India and China) an attractive destination for brands looking to expand their footprint. BRIC countries account for 18-22 per cent of the world’s luxury market today, and is expected to touch 36 per cent by 2015. In 2010-11, India had 62,000 ultra-wealthy households and this will catapult to 219,000 households by 2015, observes a report by Kotak Wealth Management and Crisil titled ‘Top of the Pyramid’.
With demand coming from film celebrities, young politicians, old moneyed families, to entrepreneurs, the demand for luxury products are showing no signs of letting up even when demand in other segments have slowed down or come to a standstill. “We actually gain market share in a recession,” quips Tikka Shatrujit Singh who represents French fashion house Louis Vuitton Malletier, commonly referred to as Louis Vuitton, in India. “As people cut down on frivolous spending, they want to spend on quality products which they can preserve,” he explains. In fact, “It is the start of the journey for us in India.” he says.
As a seasoned luxury brand expert Radha Chadha points out in her book, Cult of the Luxury Brand, India is graduating from the ‘start of the money stage’, wherein only an elite segment is shopping for luxury goods, to the ‘show off’ stage (where China is today), where people with new money are rushing to acquire luxury brands as symbols of wealth. “It’s not about aesthetics, style or fashion only, but about display of money and status.” So what is the key to selling to the luxe set? Luxury brands, across segments share a few secrets.
The Indian luxe consumer is extremely discerning and well informed. So, the topmost priority for brands must be to have the latest collection in the store, says Deepika Gehani, creative head (merchandising and marketing), Genesis Luxury. “We need to constantly assure our customers that the collection is on par with what is available worldwide,” says Gehani who oversees brands like Jimmy Choo, Bottega Veneta, Etro, Tumi, Canali and Paul Smith in India.
Sourcing the right collection is important, as the preferences of Indian consumers and the climatic conditions vary widely across the country. For example, the bulk of the Indian women who own luxury badges of handbags do not take it to work; instead they flaunt it at kitty parties. “This influences the size and shape of bags which are sourced. The colours are important too. Many who buy luxury bags want it to complement both Indian and Western attire,” explains Gehani.
A PERSONAL TOUCH
The right product mix is not enough to convince the Indian consumer. It is the ‘little extras’ that really make the difference. For example, at Jimmy Choo, customers who buy a shoe are offered a complimentary spa session. “This is a sort of freebie more common in India than in other parts of the world,” notes Gehani.
Concurs Darshan Mehta, president and CEO, Reliance Brands. “You can ‘plaster’ magazines with advertising, but in a highly service-driven culture like India, the shopping experience is key,” he says. In fact, Reliance Brands has a dedicated person who heads the “shopping experience team” that oversees the different brands like Paul & Shark, Ermenegildo Zegna and the recently launched Diesel Black Gold in its fold. “We believe in the nth level of detail in each store,” says Mehta, "from the way a store should smell to the flower arrangement. “It cannot be any flower, but should match the carpet for instance,” explains Mehta.
This degree of personalisation extends to every touch point. “We train our people to play to a customer’s vanity,” quips Mehta. “A software tracks the likes and dislikes of every customer, and we send reminders when there is a new collection. The store staff is encouraged to know their customers by name. Home visits are also common. If a customer wants a suit tailored, we just send our staff to his home for measurement,” says Mehta. Home visits in smaller cities like Surat, which has an affluent population of diamond merchants, is also common. Often, if a particular size is not available in a store when a customer wants it, we airlift the merchandise and ensure it is delivered in the next two-days to the customer’s home.”
At Dior, regular clients are appraised of the latest trends and launches because often they order for merchandise right after a collection is showcased, say, in Paris. “We have Lookbooks which are out a day after the show,” says Kalyani Chawla, vice-president (marketing and communications), Christian Dior.
It is important to have an emotional relationship with the customer, rather than a ‘transactional’ one, says Shital Mehta, chief operating officer (international brands and retail), Madura Fashion and Lifestyle, who oversees the luxury retail concept, The Collective. “It is the little extras, from a personal shopper, a dry-cleaning facility to extended store hours for our loyal customers that ultimately make the difference,” says Mehta. Mehta says the objective is not just to generate feedback but also to convert it into positive changes. “If a customer wants a particular product, we ensure our sourcing team buys it, even if it’s not part of the regular order.” About 70 per cent of store sales are from repeat customers, and it is the brand's customer relationship management activities that have cemented the bond.
The personal touch also extends to the goods sold. “Indians love customising,” exclaims Gehani. While customisation may not be present in all Tumi stores across the world, in India it is a must. “From monogramming initials to special colours on luggage to help identify it on a conveyor belt is something that Indian consumers expect,” notes Gehani. Louis Vuitton, too, allows consumers to engrave their initials on products, and also houses a special order section where consumers can request the company to tailor-make any travel related product. “We get orders like watch containers and even hookah cases,” says Singh.
Brand Paul & Shark allows customers to opt for made-to-order knitted garments. “This is being done for the first time in India,” boasts Mehta. Likewise, for its Diesel Black Gold brand, specialised alterations like reducing the sleeve size of jackets is available. “This is complex and costly, and often requires us to re-tailor the entire garment,” says Mehta. Dior’s Haute Couture clients have dresses customised from collections shown, a very special process which takes almost six months till the final garment is flown in a special coffin-like locked box to the client.
That said, luxury brands have stopped shy of adopting a 100 per cent made-for- India strategy. When it comes to luxury, Indians look for what is worn by their global peers. “The only change you will see is some regional specific inspirations like a Hermes sari or a Canali bandhgala suit,” shares a design expert.
Brands also look at other creative ways to reach out to the Indian consumer. Louis Vuitton does art shows, Jimmy Choo does coffee mornings inviting the swish set to its stores, whereas Canali organises cigar and whiskey appreciation sessions. “All our events are tailored bearing our target audience in mind,” notes Gehani. Take Paul & Shark, which is targeted at the young luxury buyer. During the recent football season, the brand organised for the matches to be shown live at the luxury malls of UB City (Bangalore) and DLF Emporio (Delhi). But all the arrangements are done in line with the global mandate. “For instance, for the Bottega Veneta brand, we are not allowed to do such events as the brand prefers to stay understated,” notes Gehani.
But merchants of luxury products agree there’s nothing that works better than the humble word of mouth. Navnit Group Director Jayendra Kachalia who sells luxury yachts in India (that are priced upwards of Rs 40 crore) would know. “When a consumer is spending that kind of money, he wants to know he is doing business with the right people, and recommendations from friends help,” says Kachalia. The Navnit Group which has been in the business of selling luxury (it is a dealer of Rolls Royce, Land Rover, BMW and Volvo brands) has built up its database with great care. “It helps cross-sell our products. After all, the social circle of all these luxury buyers is the same,” quips Kachalia.
But while demand is picking up, selling luxury is not as easy as it seems. High tax rates that tell on the final price, of course, can be a dampener. The import duties are high, some as high as 70 per cent for certain categories. Gehani of Genesis Luxury claims to absorb the impact of import duties for its brand to ensure the difference in the price tag for the same brand in India versus abroad is not more than 5-10 per cent. And this is important as the Indian consumer who buys luxury is also well travelled and aware of prices in Dubai London and Singapore.
Kachalia explains even in selling luxury cars and yachts, financing is of great help. “A large chunk of our customers prefer financing options, and we use our internal resources to provide that,” says Kachalia. Players whine that the regulatory environment is not very conducive. While the government might have allowed 100 per cent foreign direct investment in single-brand retail, for luxury goods makers 30 per cent of the sourcing has to be from the cottage industry. "For a brand that is built on the promise of high levels of quality, how do we manage this,” asks Singh of LVMH.
The lack of quality retail outlets is the other bugbear luxury goods retailers. “We only have three-four malls in the country dedicated to luxury,” rues Singh. This restricts distribution, limiting the exposure of Indians to the brand. “Louis Vuitton has 36 stores in China in 16 cities; in India we have only four stores across three cities,” he adds.
Louis Vuitton has chosen hotels and malls as a launch pad for its stores. Unlike fellow luxury brand Hermes which has explored the high street option in Mumbai, Louis Vuitton and Versace want to stick to big hotels till the surrounding infrastructure improves. “In high street locations in India, you have to deal with parking issues and conditions like noise and dust which eats into the total luxury experience,” points out Abhay Gupta, executive director, Blues Clothing Company.
Mehta of Reliance Brands feels hotels as retail location is not a long-term solution. “While the conversion rates might be slightly higher, the footfalls are as low as seven to eight people a day,” says Mehta. Luxury malls are the future of high-end retail and will lead to the democratisation of luxury, he says. It is in a mall, where a bridge-to-luxury brand like Zara and premium luxury brand Burberry share the same space. “Consumers who shop at Zara for instance just come in to browse, but these are our customers of tomorrow,” he explains.
The support from mall developers also provide an impetus to sales, which is obviously missing in hotels. For example, DLF Emporio hosts private events to increase footfalls, which could include art shows to a sit down dinner for socialites. “In fact, Vogue’s Fashion Night Out is held every year on the mall’s premises,” says Sudeep Chhabra, an independent luxury consultant and ex-head (marketing), DLF Emporio. For companies that sell luxury yachts, the infrastructure challenge is of a different nature. “We still need the marinas and jetties that provide proper facilities for boarding, parking and restaurants and activities around the area,” says Kachalia.
THE MARKET IS HERE
While Mumbai and Delhi account for a major chunk of luxury brand sales, the tier 1 and tier 2 opportunity is hard to ignore. The management at Collective is exploring stores beyond Mumbai, Delhi and Bangalore. This year, the retail venture will enter Pune and Chandigarh, and Hyderabad and Chennai are also on the cards. “There are a lot of high net-worth individuals in the smaller cities,” notes Mehta.
To overcome the constraint of finding the right location, some depend on their brand pull to bring in customers from smaller cities. Others like Zegna reach out to consumers through trunk shows. “In cities like Kolkata, Ahmedabad, which cannot support the overhead costs of a 365 day store, we have trunk shows four times a year for our customers,” says Mehta.
With physical distribution still a challenge, is online luxury retail a possibility? In mature markets of the West, there are exclusive portals like Net-a-Porter, Jetsetter or luxury deals site like Amazon Habit. Even, US-based department stores like Neiman Marcus and Nordstrom have full-fledged sites dedicated to luxury. In India, the online story is still a while away. “In India, the touch and feel element is still important,” says Singh of Louis Vuitton. Not to say that the online channel does not have potential. “Brands like Zegna have just launched their e-commerce portal in the West and India too will follow the trend in no time,” believes Mehta.
Lx-world.com founder Ruchira Bose who is one of the first to enter luxury e-commerce in India seems to agree. “Indian consumers will move beyond the touch and feel element, when it comes to luxury purchase decisions. Recently, we sold six pairs of Dolce & Gabbana shoes online and the brand does not even have a retail presence in India,” she exclaims. Bose is trying to build a community for luxury aficionados on her website through sections like Lx Club and Lx Exchange. “Lx Club will be for a Rolex watch collector, for instance, who is looking for a place to meet people with similar interests. Lx Exchange will allow people to exchange pre-owned luxury products.”
Till luxury e-tailing takes off, the retail environment will be key. But for that, you need trained staff who can educate consumers. Finding the right talent in luxury retail continues to be a worry. Remember, working in the retail shop floor in India is not as ‘respectable’ compared to other countries, points out an industry spokesperson who wishes to stay anonymous. “Luxury brands require vigour to sell; you have to be passionate about the brand to be able to turn customers into advocates,” says the spokesperson.