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India’s Love for Luxury

Isaac Mostovicz writes that that luxury retailers must better understand Indian consumers in order to succeed...

A recent article published on the National’s business website has shown that luxury brands are eager to target Indian consumers. With a large population and a number of increasingly middle-class households on disposable incomes, it seems set to be the next destination marketplace for high-end labels. Louis Vuitton, Chanel, and Hermès amongst others have already invested in their global infrastructure to take advantage of this opportunity with varying levels of success.

Some retailers are finding the market trickier than others when it comes to selling to Indian consumers, perhaps due to a lack of investment in researching their target market’s tastes and opinions. Indian shoppers have different interpretations to their  European counterparts when it comes to purchasing luxury goods – for example, retailers that have designed targeted products with niche “Indian” appeal have flourished, as some retailers have found out.

Hermès in particular has tapped into this trend and, having recently launched its third store in India in Mumbai, has launched a line of limited edition saris in traditional orange colours. Launched with success, it’s clear that local insight and research are key in this marketplace.

Another issue that luxury retailers have struggled with is that the Indian luxury marketplace is still relatively immature. Some shoppers, despite significant levels of disposable income, don’t differentiate between “luxury” and “non-luxury” brands. There is also the issue of infrastructure. Where traditionally luxury goods would have been purchased through and stocked by boutiques in five star hotels, retailers have found a lack of shopping centres and malls has posed a problem.

Lastly, local partners are key. India rules that only 51% foreign investment is permitted in single-brand retail, and none in multi-brand retail, meaning that retailers must partner with a local body in order to expand in that marketplace.

Given that luxury retailers must better understand Indian consumers in order to succeed, such local partnerships can perhaps also offer greater insight into this wholly worthwhile market.

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India’s space challenge drives new trends in luxury shopping

Isaac Mostovicz writes that luxury brands in India are turning to home delivery options to reach their clients...

India is one of the four largest emerging economies (in addition to Brazil, China and Russia) and is expected to surpass China to be the world’s most populated country in the coming decade. With its count of High Net-Worth Individuals more than doubling in the past year (according to the World Wealth Report recently released by Capgemini and Merrill Lynch Wealth Management), there is certainly plenty of potential consumers for a variety of products and services.

Luxury brands are relatively well established in India; its first two luxury malls opened in 2008 – DLF Emporio in Delhi and UB City in Bangalore. Although welcomed by luxury retailers at the time, allowing them to expand out of the five-star hotels where they had traditionally confined themselves, in recent months the lack of appropriate retail space for luxury brands has become an issue. This is further compounded by soaring rental prices on what is available, meaning rents are far beyond what brands are willing to pay.

According to a report by international real estate consulting firm Cushman and Wakefield, rentals in the country’s high streets have gone up considerably – by as much as 15 per cent in some of the markets.

This appears to be driving a trend among luxury brands in India, with many switching to home delivery services for their high-end clients, in some cases even arranging personal fashion shows for their select few. Brands such as Gucci, Jean Paul Gaultier, Jimmy Choo are going out of their way to send a range of items for display at the client’s home.

Such a service may suit Lambda personality types who seek freedom in where and how they shop, but for Thetas who prefer context and consensus, the service may not be so appealing given it lacks engagement with like-minded shoppers and the all encompassing brand experience usually achieved through visiting a store.

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An unconventional luxury trend in India

Isaac Mostovicz writes that a growing high-ticket pen industry is yet another indicator that luxury in Asia and growing and diversifying rapidly....

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.

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Luxury in India takes centre stage

Isaac Mostovicz writes that India's dominance in Asia's luxury market is beginning to attract major players in global luxury...

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.

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Luxury real estate surges in India

Isaac Mostovicz writes that because of India's growing population and GDP, the local luxury industry will grow alongside it...

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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.

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Debt in the Downturn Dries up Demand for Diamonds

Isaac Mostovicz writes that the diamond industry has been brought to its knees by over-burdening itself with debt...

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.

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Indian Production and Jewellers’ Responsibility

Isaac Mostovicz writes that growing the diamond industry again after the downturn will be problematic because workers will be lost to the industry once they leave...

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.

[…] – Indian “companies and jewelers responsibility.” […]

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The luxury market in India on the rise

Isaac Mostovicz writes...

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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]

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