It’s been a high speed gravy train for luxury brands in Asia over the last 20 years or so with major props going to the newly affluent in China for driving most of that boom. Unfortunately, China has become more of a riddle than a turkey shoot as some luxury brands continue to see success while other shutter their Mainland operations all together. Not all the news is bleak. In fact, Asia is still a flagship market for many popular luxury brands but one region shines as a true luxury hot spot going into 2016: India.
We wanted more details so we turned to our good friend Abhay Gupta, the man in the know when it comes to anything luxury in India. He fills us in and shares his unique perspective on the business climate in India:
TheTopTier: Thank you for taking the time to share your thoughts Abhay. The Indian luxury market has been in the news over the last few weeks and the news paints a positive picture. Can you give us a quick summary of the situation on the ground?
Abhay Gupta: Thank you Doron – you are very kind. Yes the luxury market in India appears to once again pick up the growth trajectory and continue its pace at a annualized growth of average 15 ~18 % PA. I have been fortunate enough to witness this personally over the last decade : from almost about 2 b USD in 2006 to projected 18+ b USD in 2016 !
- Challenges are being addressed, regulatory cholesterol is being trimmed, real estate environment (mall projects) that had been stalled are gearing up to speed up completion, talent is available (through our school www.lcbs.edu.in) ; the country is being positioned well and there is a general buoyancy in the air.
- International brands are once again reaching out to us (www.luxuryconnect.in) as advisors to work on entry strategies – partner search – location – which city – how much – when – where – how etc.
- New sectors are opening up much beyond the traditional sectors of fashion – travel – automobiles – jewellery etc, which continue to grow. For example art – both Christies and Sotheby’s have set up base in India and started to conduct hugely successful auctions.
- Newer categories are joining in : time share on private jets and yachts ; space travel holidays are appointing booking agents ; adventure tourism is turning from ‘camping’ to ‘glamping’.
- Newer audience getting into luxury consumption – assisted by the democratisation phenomena : Gap ; Zara ; HnM – all brands bridge to luxury to a new audience tasting ‘International Fast fashion’ for the first time as a stepping stone to pure luxury brands. Automobile brands selling more entry level cars (A class by Mercedes – A3 by Audi – X3 by BMW) – luxury fashion brands selling more entry level accessories or cosmetics & fragrances as compared to their core product are all a confirmation of this trend.
- All in all, momentum in the evolutionary path has picked up pace – new and fresh definitions and beginnings are being witnessed.
Abhay Gupta
TTT: In your recent article covering the top luxury trends in India, you mentioned regulatory influences as a trend. Is that more of a challenge for luxury brands or can companies use regulatory framework to their advantage?
AG: Regulatory issues which acted as a road block are being attended to by the Government of India. This is a favourable trend where in luxury brands can now easily invest in the market. Earlier extremely restrictive sourcing conditions are being considered on a ‘case to case’ basis. For example, due to such relaxations, in the short span of time since I wrote the last article, Apple has announced opening its own stores in India. Is proof enough that the environment is getting friendlier and conducive.
TTT: What is the most critical issue or challenge facing luxury brands in India?
AG: Really depends on the entry strategy they adopt. For example, if they wish to come in via the franchise mode, then customs duty + freight is a component which is still quite heavy. Cost of real estate is another challenge besides the fact that there are several types of customers – far spread out and scattered all over this vast nation. Reaching out to them and educating about your brand is a expense which will help pay off in the long run. Majority of the consumers may not be award of your brand and its value systems – Indian’s will be open to experiment once they are convinced of the heritage and the functional value proposition they bring to the table.
TTT: Number 2 on your list suggest that stepping out of larger metro cities is an important trend. We personally talked about the ‘actual centre of luxury in India’ and Mumbai is the first that comes to mind. Why would Delhi be a better centre for luxury in India and is there a real advantage for marketing to smaller communities?
AG: For more reasons than one, Delhi is a better suited entry point for any luxury brand than Mumbai. I could list a few as :
- Delhi is power & political capital of India. Is the seat of power – all powerful economic, global, diplomatic decisions are taken here.
- Delhi is also home to most politicians ; bureaucrats ; top industrialists ; MNC’s ; Embassies and expats groups ; HENRY population etc which are direct customers for luxury brands.
- Delhi is an important commercial centre in South Asia and third largest metropolitan area in India after Mumbai and Kolkata. Being part of a growing NCR (National capital region) it is surrounded by industry and upcoming new sectors of IT ; E-commerce etc.
- The society in general is more inclined towards ‘show off’ culture versus minimalistic simplicity – hence is more conducive towards logo driven brands.
- The climate is more receptive, although at extremes during peak summer and peak winter. Has more green area, wider roads, stadiums and proximity to north India which has some of the most prosperous populace in India. They all frequent Delhi for their shopping needs. This also is able to serve the smaller metro cities around Delhi NCR where, as per my point ‘step outside the metros’ (my earlier article), a good sizable section of the luxury audience resides.
- Is on the golden triangle of Delhi – Jaipur – Agra : hence is almost on all tourist maps for global tourists looking at ‘Incredible India’.
- Delhi has the highest per-capita income in the country, at around 2.5 times the national average, and the second highest GDP in terms of purchasing power parity.
- Delhi is the biggest consumption centre in India for a variety of goods and has the highest concentration of “rich” households (24 percent). This makes the city an ideal destination for the retail investor trying to enter India.
- New Delhi’s Connaught Place is currently ranked as the fifth most expensive office market in 2013.
- Delhi’s Khan market has been ranked in the ‘top ten most expensive retail destinations in the world’.
- Delhi has the only pure play luxury mall in India – Emporio. Started in 2008, emporio houses the best luxury brands in India with a waiting list which is a mile long. Emporio 2 is round the corner and will be ready for possessions soon.
- The formula track – world safari – adventure parks – all have come up in Delhi NCR.
- Furthermore, Delhi is home to over half of the 3,000+ foreign businesses that are operating within India. The World Bank ranks New Delhi sixth out of seventeen Indian cities for “ease of doing business” with infrastructural constraints being amongst the lowest in India. The city ranks the highest for “starting a business.”
TTT: Please update us on Luxury Connect and any recent initiatives or successes that you can share?
AG: Luxury Connect (www.luxuryconnect.in) as a organization is a advisory oriented set up which focuses on a 360 degree support approach. We assist international brands to set up shop in India or locate a partner or also help find the right solution tailor made for them. On the other hand, a lot of Indian products need assistance in their global march where we are able to come in and assist in international placement or growth strategies. We also have a constant query list from new investors wanting to associate with a luxury brand or service. Hence we are able to make a good fit as per need.
Our vertical of training and skill development is now a full-fledged B school, (www.lcbs.edu.in) clearly positioned as India’s first and only Luxury b School. Our ethos and USP is to develop managers who can service a luxury brand across emerging markets. It is prudent to note here that with the kind of diversified & varied customer bases that a huge market like India offers, a standard global strategy may not fit in. This is what we ensure that our students are able to innovate, develop and deliver as against a manager who is capable of simply following standard set guidelines of a brand.
TTT: Thank you so much Abhay for sharing your thoughts on the dynamic Indian marketplace. We look forward to seeing more of your analysis and thoughts on luxury.
By Doron Levy Courtesy TheTopTier Digital Media