22nd November 2011
The ultimate challenge for the luxury sector is to ensure that India's super wealthy no longer feel the urge to travel abroad to more established luxury capitals to melt their credit cards. Dominic Twyford tells India Shop.
Indian society is diverse; the polar extremes of those that have and those that go without are at times brutally stark. India’s diversity is accentuated by the country’s billion-plus population; this size and scale creates statistics that are difficult to comprehend unless you live in India.
In 2005, the World Bank estimated that despite an improving economy 41.6% of India’s population live on US$ 1.25 or less per day, but by contrast recent Merrill Lynch figures show that India’s growth rate for millionaires rose to an astonishing 20.8%, in comparison to a world average of 8.3%.
The socioeconomic range makes positioning brands difficult, but unlike countries with smaller populations, even the most niche target audience is likely to be sizeable.
Assuming the World Bank were and are still correct, India has over 400 million citizens living in poverty, while at the other end of the scale, (Merrill Lynch) 153,000 high net worth individuals have assets of 4.5 crore rupees or more
While statistics can be skewed depending on definition, there is one undeniable fact: while there are big opportunities for brands at the bottom of the pyramid, there is huge untapped potential at the top due to India’s growing population of high net worth individuals.
A growing market, but what is the opportunity?
Although India’s luxury market is nascent due to its growth being linked to recent turbo charged economic development, India has a love affair with luxury. Jewelry, elaborate weddings and the finest domestically manufactured fabrics are culturally ingrained. It is also well documented that in 1928, Cartier created the Patiala necklace for Maharaja Bhupinder Singh, at its time one of the world’s most expensive pieces of jewelry containing 2900 diamonds. Louis Vuitton has also sold its products to Indian royalty for decades.
Moving to modern day, while still relatively small India’s luxury market was valued at US$ 4.8 billion in 2009 by AT Kearney. The same study optimistically suggests that it will be valued at US$ 14.7 billion by 2015. The accuracy of this prediction is open to debate, figures from Bain & Co conclude that market growth will be slower, 5-10% between now and 2013, comparing unfavourably to 25-30% in China. But, whatever the statistics and however they are interpreted, the truth is India is an increasingly wealthy country with an appetite for luxury brands and a new desire to show off conspicuous wealth.
Luxury cars, the ultimate status symbol
India’s luxury automotive sector illustrates how increased wealth has created opportunities within the retail sector. The Society of Indian Automobile Manufacturers reveals that luxury car sales increased from around 7,500 units in 2009-10 to over 15,000 units in 2010-11. Sales are not solely restricted to India’s metros; in 2010, a group of wealthy business men from the city of Aurangabad bulk bought 115 Mercedes Benz cars in what is widely believed to be the largest bulk purchase in history. Elsewhere, Ludhiana in Punjab has been nicknamed “Benz City”, with supposedly the majority of Mercedes Benz sales coming from the City.
Not surprisingly, the world’s leading luxury auto marques are accelerating in to India, contributing to the often bizarre site of high performance sports cars weaving their way around potholes, cows and rickshaws.
Ferrari, Maserati, Bugatti, Aston Martin and Porsche are all establishing networks as they each aim to tap in to a growing market during a worldwide recession, interestingly recent reports suggest that Rolls Royce are looking to develop their presence over the next five years, paying particular attention to Tier 2 cities. While unit sales are low, each are betting on the emerging Indian economy and the long-term potential of luxury in India.
BMW and Ferrari have tapped in to the Indian consumers desire to explicitly parade their wealth. The delivery area of BMW’s three-story showroom in Gurgaon includes a vast mirrored wall allowing the new owner to pose behind the wheel of their newly acquired vehicle before driving out. Ferrari’s recently opened New Delhi showroom meets the expectation of the customer and reflects the prestige of the brand. The dealership environment combines minimalist, high-spec design with the opulence of a red carpet throughout the space.
Taking a wider view of luxury retail, India is developing its own direction. Unlike the UK ‘s Bond Street and US’ with Fifth Avenue, India’s luxury market has developed within malls rather than at high street locations. Luxury malls are a relatively recent evolution; previously, exclusive hotels and major airports provided the only access to luxury brands.
Luxury malls – as long as you are prepared to overlook the potholed approach as you arrive in your Bentley – provide the opportunity to manage the entire experience, creating seamless shopping experiences from entrance to exit, but is this opportunity being met?
DLF’s Emporio located in New Delhi is heralded as India’s first luxury mall and is positioned as ‘India’s finest luxury destination’. The mall offers four floors of premium international and domestic brands, restaurants, cafés and bars. The design style is slightly obvious and similar to an international 5-star hotel, but with little competition it appeals to the city’s nouveau-riche.
While it may aspire to be the finest luxury destination in India, does Emporio really represent a world-class luxury experience? Probably not Mall staff are willing, and in some cases employee working within individual stores are closer to brand ambassadors than just sales staff, as proved by a salesman in Paul Smith who easily and concisely explained to me how Paul Smith grew up in my native Nottingham. Despite this, the visitor doesn’t get a sense that they are shopping in the lap of luxury. It lacks a sense of real exclusivity.
A foothold, but what next?
On the plus side, despite the constraints of FDI bureaucracy, luxury brands have a foothold in India. But, despite the country’s historical connection with luxury, and a growing population of wealthy Indians with the means to splurge on the most exclusive brands, India’s luxury sector lacks identity.
The ultimate challenge for the sector is to ensure that India’s super wealthy no longer feel the urge to travel abroad to more established luxury capitals to melt their credit cards. In order to achieve this, luxury retail must offer something different, something uniquely Indian and attuned to the Indian consumer and cultural environment. From product range and styling, through to branding and the retail environment, the sector needs to display global luxury credentials with an Indian accent.
Only then will Delhi or Mumbai have the kudos of London, New York, Paris or Milan.
Dominic Twyford is a Client Director for FITCH in Delhi, FITCH is a global design consultancy with studio’s in Mumbai and Delhi that specialises in creating and developing retail brands.
This article originally appeared in the November-December 2011 issue of “India Shop,” www.indiashop.com, a bi-monthly sister publication of the “Images Retail” magazine www.indiaretailing.com published in India.