The real future perspectives of India’s luxury market
For over a decade, the so-called ”BRIC” countries have been the centre point of attention for investors worldwide regardless of industry, the sheer size of each country being the first and still most important motivational factor. What many have failed to recognize, especially in the past 3 years, is the fact that size of pupulation might be the only common denominator.
After the a booming 2010, Brazil’s economy has been showing since mid 2011 important signs of a slow down, while Russia, although recovered from the 2008 crisis, will never regain the growth rates of 2006-2007. Battling inflation, corruption and a never ending political turmoil, India’s economy has been failing to deliver, in many industries scaring away international investors rather than attracting them. With ebbing exports, China has been showing since the beginning of this year the first signs of a significant slow down.
Luxury is yet another industry which marks a huge differentiation between the BRIC countries. Russian wealthy consumers are characterized by a maturity which is yet to be achieved by Chinese luxury consumers. Opening tens of stores across the entire country in China is yet to prove long term feasibility, especially in the case of an imminent economic slow down. Already, lower prices attract a continously growing number of wealthy Chinese to buy abroad, for instance, in nearby South Korea.
And the list of paradoxes in the BRIC countries only seems to be getting longer… Brazil, which probably boasts the ideal infrastructire of luxury retail real estate among all BRIC countries, thanks to its dedicated luxury malls throughout the country, is battling high import duties which make luxury branded goods at least 20% more expensive in Brazil than in the US and even 10% more expensive than in neighbouring Argentina. This has become a determining factor for an increasing number of Brazilians to shop abroad, whether in a nearby country, the U.S. or in Europe.
As for India, the sheer size of the country remains the single most important criteria and motivation for luxury brands to consider it a priority luxury market. Despite the numerous luxury conferences taking place regularly in India in the past years, few international luxury brands and local retailers have an in depth understanding of the real potential of the Indian luxury market or the specific strategic business approach which needs to be implemented in order to maximize the potential of the Indian luxury market. Instead of company profile presentations by ”celebrity executives” of major international luxury brands luxury events taking place in India should focus on answering key questions such as:
- why did Bulgari and Tod’s shut down their stores in Mumbai (a Tod’s store remains in New Delhi, however, even that one is rumoured to be closing soon)
- is the booming premium real estate residential market a true indicator of the growth of India’s luxury market as a whole, among all luxury sectors?
- what is the best marketing communications strategy for an international luxury brand in jewellery, given India’s immense heritage and tradition in jewellery?
- what can be done to curb the growing sales of counterfeited luxury branded products into India?, especially from Thailand (Gucci and Louis Vuitton are the top most counterfeited sold brands in India)
- can India be a market for understated luxury brands, especially in fashion and accesories? (for long, the perception of major emerging market consumers was that they prefer heavily ”logo-ed” products, in flashy colours and east to recognize styles - but this has been dramatically changing in the past 3 years, especially for the young wealthy Indian consumers aged 25-30)
Indeed, India is a huge market and it does boast a fast growing number of millionaires, however, the luxury consumer profile is very different from the Chinese, Russian or Brazilian consumer. Many international luxury brands which have been opening mono-brand stores in India in the past 10 years have done very little, if nothing, to address the specifics of the market and this has almost driven them into an impatient mood. Opening luxury stores, mostly within hotel shopping galleries has certainly erroded the image of luxury retail in India, for wealthy Indian consumers who rightfully take Dubai or London as a term of comparison.
Advertising in print magazines, mostly the international ad campaigns and developing once every three years a small capsule collection dedicated or ”inspired” by India is being almost ignored by wealthy Indian consumers who continue to buy abroad. The lack of a luxury shopping experience and a the lack of brands creating a luxury lifestyle engagement with consumers are also two very important deterrants in the current state of the Indian luxury market.
Indian consumers need to be enticed to develop a luxury lifestyle, to embrace a whole set of luxury goods and services, from driving a top luxury car, wearing a couture gown, drinking a vintage French champagne, wearing a luxury Swiss watch, flying Business or First Class, to going to a luxury hairdresser, SPA or premium medical clinic as well as a gourmet restaurant. The interconnectivity between luxury product brands and luxury services brands is vital and this can only be achieved by extensive research and direct marketing.
There is no doubt that pricing is another important issue which holds back the Indian luxury market but even more importantly the selection of products. Wealthy Indians who travel abroad have grown tired to see local stores feature a quarter of the collection they can find in Dubai and London. With the passing of the FDI (foreign direct investment) legsilation in December last year, international luxury brands can no longer use this ”excuse” for their under-representation in India. Working through a local partner, whether franchisee, JV or distributor does have many advantages expecially in terms of red tape and logistics but luxury brands can no longer expect local retailers to make up for most of the investment in their expansion.
I cannot help but wonder…is a market the size of Turkey, a much bigger luxury market than India for some of the top international luxury brands such as Ralph Lauren, Prada, Max Mara or Chanel, to the extent that they still ignore the Indian market? (Ralph Lauren, Prada and Max Mara have no mono-brand store presence in India and Chanel has one small mono-brand boutique within a hotel in India).
Unless concerted action is taken by major luxury brands, especially the large groups, India’s luxury market will be a large circle with all players running in it. India can only succeed if brands such as Chanel, Prada, Dior would stage locally exhibitions and lavish fashion shows, the same way they have been doing regularly in China and Russia for the past 5 years.
Oliver Petcu in Mumbai