What comes to mind when you think of luxury? Cars? Homes? Clothing?

In India, think pens.

As India’s luxury market grows, it is also diversifying. According to the Times of India, demand for luxury pens is growing very quickly.

Nikhil Ranjan, CEO, of William Penn, India’s only multi-brand retail store chain housing premium fine writing instruments said:

The luxury pen segment in India is growing and a good brand or a designer pen is a latest must have. Consumers falling into the 51 years and above age bracket buy the highest number of such pens.

Prices for luxury pens in India range from ($350) to Rs. 10 million ($220,000).

Comments made by Dominique Lesueur, export director at S.T Dupont, are sure to put other luxury brands and designers on notice that India is where the action is right now:

India is the second fastest developing economy in the world after China. Plus, it has a promising luxury pen market thanks to the growing consumer base with disposable income and a strong aspiration for luxury brands.

The growing consumer base with added disposable income has become the narrative against which Asia’s luxury rise has come to be what it is today. As other countries emerge from the recession and money begins to flow again, India is likely to have a leg-up in luxe.

New reports suggest that India’s luxury market is growing and maturing quickly. Earlier this week Forbes reported that the luxury boutique hospitality association, Relais & Chateaux, recently launched in India.

Relais & Chateaux president Jaume Tapies said:

We currently have 40 members in Asia and I’m confident that we can reach 100 in the next three years. We started looking at India in 2007 and enrolled our first member two years ago. We plan to add five more members in the next 18 months. My big surprise in coming to India was when I saw the deep understanding there is for what we stand for.

Mr Tapies’ findings about India are not surprising. I’ve written previously about luxury real estate in India taking off, and luxury automakers fighting for dominance in the Indian market.

What Mr Tapies’ findings do mean is that more major brands in the luxury industry are taking notice. What started as a small drip of interest at the end of 2009 has turned into more of a torrent.

Mr Tapies’ quote “I saw the deep understanding there is for what we stand for” is very interesting, too. Relais & Chateaux is for the discerning luxury customer. Considering the price point for their rooms, it’s clear their primary target market are Theta personalities. Much of India’s newly-wealthy class could be considered Thetas.

Thetas are concerned with truthfulness and denounce fakes. The screening process to become a member of Relais & Chateau is a long-term assessment to determine whether the hotel is “real” or “fake”:

We have a team of nine inspectors who visit the property incognito and submit a technical report to the board which makes the final call. Typically, the process takes a year. We have to be scrupulous as 1.5 million people trust Relais & Chataeux every year. Collectively, our properties do 750,000 room nights annually at an average room rate of 345 euros.

Relais & Chateaux is catering to those in India who, now with greater incomes, are becoming hyper-aware of how they are perceived by others, especially those they believe to be part of the social class that they wish to belong.

The people who stay at these hotels know the rigorous inspection process that member hotels undergo. Because this is such public information, it adds to the allure for an Indian Theta.

When they book a reservation to stay at a Relais & Chateaux hotel, they are likely to tell their friends and colleagues. They need people to know that they are able to afford to stay at such an exclusive hotel in their home country.

As more major luxury brands take notice of India’s heightened luxury profile, it could inspire neighbouring Asian countries to take notice and make some changes.

A new report is out on the state of India’s real estate industry. The findings show that demand for luxury homes is growing at a quick pace.

This is yet another example of luxe industry diversification in the face of faltering demand from the West. This pull-quote from the report sums it up well:

Medium and luxury housing segments are expected to witness significant growth in the coming years. It is expected that medium housing segment will record CAGR (compound annual growth rate) of around 25% while luxury housing will see CAGR of nearly 33% during our forecast period (2009-2013), against CAGR of just around 4% in affordable housing.

I wrote previously that the luxury industry is re-focusing away from western markets, to lesser well-known, and emerging economies.

India is considered a developing country with a more than 1 billion people and a growing GDP. As a result, the luxury industry will continue to grow and prosper.

Photo by mafic

Another doom and gloom story about the diamond industry, this time from Reuters. Its highlights (or more accurately lowlights):

• (Anecdotally) trade in Antwerp’s diamond district is down to a tenth of usual levels
• Several Israeli diamond houses have failed
• In India, the center of manufacturing, about 500,000 (out of around 800,000) workers have been laid off
• Top-end demand from the rich and super-rich, such as Russian oligarchs or Arab sheikhs, has dried up completely and only smaller gems for engagement rings are keeping the market alive

These are not encouraging observations. The article also touches on the amount of debt in the industry–it peaked in mid-2008 at $14-15 billion. The article implies that the industry has always relied on debt. This is incorrect–the diamond trade used to always be on cash or on short terms (up to 30 days). People started to use the banks heavily since the collapse in 1980–and now we can see what this reliance on debt has brought to the industry.

The Indian Reserve Bank recently set up a task force to look into “distress arising on account of problems faced by diamond industry.” While there is still demand for goods from the diamond industry, nobody really know what exactly the demand is. In addition, once workers leave the diamond industry, they will not come back so easily, especially if they find work elsewhere. I believe that growing the industry again after the downturn will be problematic. Since India controls about 60% of the market, a serious reduction in production there will have a great effect on the producing companies: they’ll soon suffer from cash flow issues.

My colleague Randy believes that it’s good that the Indian industry is at least acting. He says:

One sure way to correct is to cut off the new inputs of polish into the pipeline. It is painful, but necessary. Attitude change is also a necessary step–I now see this as a major impediment at the retail end. The jeweler is still arrogantly treating the supplier like a banker with free interest. This is driving me crazy, and the shift is coming around the bend: I’m starting to hear cries from jewellers of not being able to get their hands on merchandise.  My wish would be that all suppliers would pull back and only release goods to people who are truly credit worthy.

I agree with Randy’s assessment–the jewellers’ attitude is what concerns me most. This is not arrogance though; rather, it’s a problem of responsibility. Since jewellers were educated by their suppliers that they do not have to take any responsibility for their actions (as long as they pay at the end of the day), they would not like to have to start acting responsibly now. This is actually the reason for the current economic crisis, when actors did not have to take any responsibility for their actions. We had lenders who did not check the risk, risk controllers who never met the borrower and the entire industry that hid behind regulations and rules. Lack of responsibility leads always to unethical behaviour.

TIME Style & Design has just come out with an in-depth report on affluent consumer tastes from around the world. The print edition (unfortunately not available online) delves into the appetites of European shoppers—the Spaniards, Italians, French, British, and Germans—who now are considered some of the wealthiest consumers in the world thanks to a strong euro.

Did you know that Italians own more brands than any of their counterparts and outspend them on watches and jewellery? Or that Spain has the highest percentage of “uber lux” consumers, those with high incomes and luxury-market activity?

It is fascinating to juxtapose the tastes and psychologies of EU neighbours, but TIME adds some more food for thought in its online exploration of luxury in the top emerging economies of China, India, and Russia. What does luxury mean to these three countries who for the first time in decades are finding the economic freedom to afford such indulgences?

For China, who accounts for 12% of global luxury sales, luxury is in demand. Designer watches (66% of affluent consumers bought a watch of an average $2,253 in the last 6 months) are high status symbols, as well as skin-care products. The Chinese consumer will spend up to $280 on a skin-care product, which is almost 3 times as popular as make-up.

In India, the luxury market could grow as much as 25% in the next 3 years. Menswear brands top the most well-known luxury list, which is no surprise as many women still wear saris. Interestingly, local brands, such as Park Avenue, Allen Solly, and Reid & Taylor, also rank high, but considering previous high import taxes, it’s no surprise foreign brands aren’t more prominent yet.

And for Russians, with a heightened sense of brand awareness, flaunting one’s economic status is what luxury is all about. While Russians crave luxury fragrances, it’s jewellery that really whets the appetite: Bulgari, Cartier and Tiffany & Co. top the list of most widely owned brands.

It appears as if there are ripe markets to break into and hungry consumers to feed—something luxury retails are well-ready to capitalize on.

Brioni, Rolls-Royce and Stella McCartney are among the luxury brands pondering or already operating stores in India, where spending on luxury goods is expected to grow from $4 billion this year to $30 billion by 2015. India now has 54 dollar billionaires, gaining 19 in the past year. Of course these and other luxury companies are seizing a growing opportunity, but should the major disparity of wealth in India (three quarters of Indians survive on 50 cents a day) give us pause? As we’ve seen before on Janus Thinking, acting in a socially responsible manner can help luxury companies grow their markets. Those companies going in to India would be wise to understand the full impact of their entry.

[Photo by Ooodit]

The increasing purchasing power of a certain class of consumer in the developing world has enticed many Western luxury brands to set up shop there, particularly in the fast-developing economies of China and India. This phenomenon has led to sales in Asia surpassing the West and increased concentration of marketing activity outside these brands’ traditional markets.

But what will happen when these emerging markets develop to the point when their local brands press to compete for a share of the luxury market, both at home or abroad? And what if these same brands become rich enough and global enough to seek buy-out opportunities of established Western luxury brands? In other words, will the forces of globalisation be allowed to flow in both directions?

In an article in the Financial Times from 11 January, the authors argue that:

companies from the developing world fight against entrenched perceptions when they attempt to buy high-end western names.

They point to recent examples of the Indian hotel group Taj indicating interest in acquiring Orient Express Hotels, Trains & Cruises and Tata Motors bidding for the Jaguar and Land Rover brands.

As luxury products are often associated with their provenance, the next wave of acquisitions will test emerging market-based multinationals’ ability to finesse their way through luxury brand retailing.