Splurge today, save later! Luxury is on the rise in India and the market has responded in kind.
Micro-vacations, high-end cosmetics, perfumes, personal care products, clothes, automobiles, weddings, retail, art and collectibles, streetwear, sneakers, you name it, a luxury version of that category now exists in India, each catering to the increasing number of aspiring Indians who are spending more than ever.
Fuelled by access to the internet and international trends, aspiring Indians want experiences that make their lives better. The fact that Indians are splurging more on luxury is a clear sign of their maturing taste and demand for the finer things in life. Beyond the need to ‘keep up with the Joneses’, the rising splurge trend seems to be driven by the desire for newer and more bespoke experiences that only a few can afford.
Bolstered by rising disposable incomes, the middle class, and the upper middle class - who are cash rich and time poor - are now the darlings of the luxury industry, with several brands launching affordable luxury products aimed at specifically at first time luxury consumers.
Luxury automobile brands like Lamborghini produce products like keychains and t-shirts so that people can afford their entry-level accessories. Similarly, Ferrari is popular for their caps and jackets. The regular offerings of traded down luxury products like eyewear, fragrances, beauty care, ties and scarves, and small leather goods, are a large volume contributor that find favour with the primarily middle-class audience and a scale up has been successfully noticed to other categories by most brands.
According to a recent report by McKinsey Fashionscope, more than 300 international brands are planning to open stores in India by 2020, a clear indication towards the strong belief in the potential of the Indian luxury market.
The size of the global luxury market is estimated to be around $2 trillion, and the luxury market in India is estimated to grow to $30 billion by early 2019, according to Indian trade association ASSOCHAM. This amounts to approximately 1.5 percent of the total market size.
Amitabh Kant, chief executive of governmental think tank NITI Aayog, stated at the Mint Luxury conference in 2016 that the luxury market in India has the potential to grow from $18.5 billion in 2016 to $50 billion by 2020 and to $180 billion by 2025. So far, Kant’s analysis has proven to be on track for the Indian luxury industry.
With the luxury industry showing signs of slowing down in other developing markets like Brazil, Russia and China, India’s steady growth, political stability, better ‘ease of doing business’ ratings, economic reforms aimed at improving GDP, and strong leadership in the global sense has given confidence to global businesses and brands alike to expand their footprint.
Nappa Dori. Photo: Courtesy.
At the same time, Indian customers are demanding and price conscious even at that level, and expect nothing but the best and maximum bang for the buck. They are ready to spend but they need the right luxury mixed well with the right details and taste to create that amazing experience. There are numerous examples of Indian luxury brands who have made this possible such as Good Earth, Nicobar and Nappa Dori. They have set new standards in luxury retail across India with their beautiful handcrafted products and are doing really well in the Indian market.
The luxury market is exploding in India driven by various factors. Simultaneously, the market is changing immensely pushing brands to create better strategies to attract potential customers. What’s driving this trend?
Exclusivity in Experiences
It’s no longer about bling and show, rather it’s more about novel experiences that are exclusive, new and ones that connect emotionally at a personal level. When brands are able to offer such experiences, money is never a barrier. LVMH is the most forward-thinking company on this subject as they completed an acquisition of luxury hotel operator Belmond – taking the view that experiential luxury will become a highly significant category in time.
Collaborations and ‘Product Drops’
Several brands collaborate to create new products or exclusive collections that are limited production runs which make the luxury goods highly collectible and raise their value. Omega’s Olympic Collection Rio 2016 is one such example of a limited edition product. Commemorating the Rio 2016 Olympics, the roughly $4000 dollar watch is a true collectible for Olympics, Brazil and Omega fans. According to trade inside sources, the model was an instant hit. Since 1932,Omega have been the official timekeepers of the games and so the fans were naturally excited at its launch.
Expansion of the luxury market
Increasing opulence and availability of premium real estate in tier II and tier III cities is leading to a sharp rise in the expansion of luxury brands in India. Growth in luxury spending in India is 30 times more in tier 2 cities as compared to tier 1 cities, according to the American Express Luxury Spend Analysis 2018 report, representing an opportunity for luxury brands to capitalise on. Several luxury automobile, fashion, and retail brands have opened stores in such cities driving in-store footfall in their premium stores for the first time luxury consumer.
Micro-vacations rather than annual breaks
Instead of long annual breaks, micro-vacations are the new trend wherein the affluent consumers are now willing to splurge on locations and experiences. International or domestic, the travel needs of consumers are changing drastically and few opt for the regular run of the mill concepts rather choosing to explore newer avenues and undiscovered locales. It's the latest millennial trend. These short getaways are basically like taking long weekends in lieu of extended vacation time. Camping holidays have now taken a luxurious turn with ‘glamping sites’ across the states of Rajasthan and Madhya Pradesh while adventure breaks and heritage walks are a regular feature across the scenic geographic spread of India. The older world charm is being explored by nature and heritage walks into the narrow bye lanes of erstwhile regal parts of Delhi and other cities.
The merger of technology and retail
The merging of physical and digital retails quietly invading the global retail practices. Cashier-less stores, faster checkouts, ease in payments are all areas where technology is enabling a better retail experience. Decathlon’s recently launched store in Bengaluru has introduced a ‘phygital experience’- an innovative mix of physical retail and digital touch points. The store creates an immersive user experience specifically designed to engage and add value for customers at every step of the way while choosing their favorite sports gear.
Fuelled by the global mobility of the affluent Indian, having experienced different cultures and trends, the demand for similar or even a better experience from the same brands in India is on the rise. Pushing the luxury sector to scale further, improve services, and offer a better holistic experience. As the middle-class India grows in size and capacity, first-time luxury customers and millennial would be key for success in the new world and brands who have been strategising a better experience for their customers will win in the short and long term.
India has one of the biggest democratic systems in the world and is a secular country. In such conditions it becomes really difficult to pinpoint one strategy that would lead to success. The best way is to study the region where the brand wishes to establish themselves. Applying one strategy to all the markets in India may not work. The answer is to go 'Glocal'. In-depth study is required to understand the varying needs and demands of a particular sub market.
Having a knowledgeable local partner is suggested, the choice of which should not be just restricted to his financial strengths but also ability to service the market by remaining true to the brand DNA. Many brands have faced disturbances leading to failure due to the mind-set mismatch of the commercially oriented local franchisee versus the European concepts of brand management first.
Customisation and detailing are required at all levels of communication, customer services, cultural understanding as well as choice of product offerings. India has a vastly spread and fragmented high net worth community, so having a dependence on pure high net worth individuals as an audience may not be a good strategy. The product mix too needs to balance across the socio-economic limitations of a various geographies that the brand wishes to tap.