Taking a re-look at the Indian luxury industry at the end of 2012, we recount the findings and discussions from the recently held India Luxury Summit 2012
By: Soumya Jain
Posted on: December 29, 2012
Taking a re-look at the Indian luxury industry at the end of 2012, we recount the findings and discussions from the recently held India Luxury Summit 2012.
As 2012 comes to an end, it is imperative that we look at the challenges and opportunities that India’s luxury industry faced this year. Yes, the debate has happened many-a-times, but it is still needed to constantly search for and create solutions for a better, organized industry.
The India Luxury Summit 2012, organized by ASSOCHAM and Yes Bank, aimed to do just that by initiating a dialogue between industry’s stakeholders. In another initiative, the ‘India Luxury Top Management Survey 2012’ was also conducted and released by ASSOCHAM and Yes Bank. About 300 global luxury business leaders, heads and influencers from France, India, Italy and UK were surveyed during August-November 2012. LuxuryFacts was the Online Media Partner of the event and participated in substantiating the report too.
To highlight some key findings, 95% of the CEOs in the global luxury industry opine that lack of adequate infrastructure is the key barrier confronting the growth of luxury industry in India. Inordinate high duties, varying tax structures, bureaucratic delays, red-tapism, exchange rate volatility, and imposition of caveats, political and regulatory landscape are other significant challenges being faced by the luxury industry.
The Indian market for high-end products and services is estimated at over 8 billion (bn) dollars and is currently growing at annual rate of about 20% and is likely to cross $14 bn during the course of next three years on the back of rising per-capita income and evolving consumer trends.
As is quite obvious, majority still view the recently approved 100% FDI in single brand retail with a certain amount of apprehension. Leaders surveyed feel that best returns would come through investments in luxury assets for the long-term and luxury products in the short-term. Considering the knowledge and expertise a local partner brings, 33% said that joint ventures are the preferred route of entry for international brands. While about 26% said wholly owned Indian operations are a preferred medium for entry.
About 65% agreed that tier II cities in India are ready to become new consumption hubs for luxury and many said that ‘ladder to luxury’ is the ideal marketing strategy to penetrate in these towns followed by the e-retail route. About 36% said that quality, exclusivity and social appeal are key drivers for luxury purchases in India followed by price and perceived value, while about 32% said Indian consumers are badge conscious.
Since different tastes and preferences makes marketing to Indian consumer challenging, most CEOs said print, followed by word of mouth publicity, digital, sponsorships and outdoor advertising are most effective marketing medium for Indian luxury consumer.
Over half the CEOs plan to primarily recruit local talent, while about 25% plan to move experienced employees from home markets to India, and about 22% plan to recruit from luxury business management programs. Around 30% said private equity and 32% said equity infusion by promoters are the preferred routes to raise finances for expansion. On the other hand, about 21% said debt is the most ideal method of raising capital while about 17% said IPOs are the preferred route to raise finances.
Apart from the survey, some insightful discussions also held our attention throughout the conference. We share a collection of some interesting quotes, said at the India Luxury Summit 2012, which struck a chord with the current situation of the Indian luxury industry.
The Indian luxury market
“Luxury is becoming a necessity, not only for the rich, but for the middle class too” – Mr DS Rawat, Secretary General, ASSOCHAM
“India is European Union’s eighth trading partner, overtaking Brazil and South Korea. And European Union is India’s first trading partner” – HE Mr Joao Cravinho, Ambassador & Head of Delegation, Delegation of European Union
“In the beginning, luxury brands over-estimated the Indian market, especially those who came mathematically” – Mr Piero Braga, Senior VP, Gucci – Middle East & India
“Fashion and accessories market really opened in India in 2003. By that time, China was in its booming phase. China took two decades to really get going through. Similarly, India will also take 5-10 years to reach that level.” – Mr Vispi Patel, Group Representative, LVMH India
“Brand should not approach a market because other markets are not working” - Mr Piero Braga, Senior VP, Gucci – Middle East & India
“Foreign Trade Agreement with European Union is in negotiation for five years. It’s the most comprehensive FTA we are entering into.” – Mr Sumanta Chaudhuri, Joint Secretary, Ministry of Commerce, Government of India
“India is a long term market. You can’t come here, make money, break even and then think what’s next.” – Mr Ashok Wadhwa, Group CEO, Ambit Holdings Pvt Ltd
“Success in 10 countries is no guarantee you will see success in India” – Mr Ashok Wadhwa, Group CEO, Ambit Holdings Pvt Ltd
The Indian consumer
“Indians are extremely sophisticated. They know what they want. You have to customize according to their needs.” – Ms Francesca Bortolotto Possati, Chairwoman & CEO, The Bauers, Venice
“A Chandigarh consumer is different from that in Chennai. Each city is a learning experience. The difficulty is that everytime you expand to a new city, you have to understand the consumer.” – Mr Marco Riggio, Director, L’Oreal Luxe India
“Consumers in India expect a lot. Some consumers say ‘leave it with us, we’ll pay a week later’, whereas abroad, they pay upfront.” – Ms Priya Sachdev, COO & Creative Director, TSG International Marketing Pvt Ltd
“India is less than 1% of worldwide luxury consumption, but Indians, as a nationality, are, 4-5% of worldwide luxury consumption” – Mr Armando Branchini, President, ECCIA & Executive Director, Fondazione Altagamma
“Affluent masses are no longer at a distance from luxury. But distance has to be created to retain prestige and exclusivity, maybe through knowledge.” – Mr Sabyasachi Mukherjee, leading Indian fashion designer
“New money wants to cling to old moneyed and be seen as old moneyed too, but not possible. Old money dissociates itself from new money products/brands.” – Mr Sabyasachi Mukherjee, leading Indian fashion designer
“In the long run, there is a lot to be gained, even though the current circumstances are not favourable. Import taxes are as high as 30-40 per cent. At state levels, taxes are almost prohibitive.” – HE Mr Joao Cravinho, Ambassador & Head of Delegation, Delegation of European Union
“Another big impediment in India is service. Customer service needs to make great strides before we can compete with other countries.” – Mr Vispi Patel, Group Representative, LVMH India
“We are supportive of creating opportunities in India for employment, not in manufacturing, but only in retail, marketing, operations. Who will buy this Ferrari if 30% of its parts are made in India?” – Mr Armando Branchini, President, ECCIA & Executive Director, Fondazione Altagamma
“Brands can’t just sit back and say we are not opening because there is no infrastructure. Brands have to be willing to contribute also like Hermes did in Mumbai.” – Mr Pankaj Renjhen, MD – Retail Services, Jones Lang La Salle
“India has one of the best IP laws, but India is also importing a lot of fake goods from China. So India needs to enforce those laws. If counterfeiting is not stopped, it will affect domestic brands too.” – Mr Armando Branchini, President, ECCIA & Executive Director, Fondazione Altagamma
Luxury going online in India
“Most consumers in emerging markets are evolving faster, also because of social media” – Mr Vispi Patel, Group Representative, LVMH India
“We are very confident in ecommerce. We have experimented with it in other markets and have got a good response. Once the consumer knows the brand and knows what he wants, buying online becomes more preferable. But it’s very early to talk about luxury ecommerce in India.” – Mr Piero Braga, Senior VP, Gucci – Middle East & India
“Ecommerce is easier to reach towns where you don’t have a physical experience. But make sure the ecommerce experience is good.” – Mr Marco Riggio, Director, L’Oreal Luxe India
“Digital space will be of more and more use to inform customers about what we are doing” – Mr Piero Braga, Senior VP, Gucci – Middle East & India
Indian brands going global
“We didn’t want to start a brand only for India, but it had to be global with Indian essence too. We have great craftsmanship and we are still sourcing the most quality raw material. But still, getting a luxury brand out [of India] is still a long way off.” – Mr Dilip Kapur, President, Hidesign
“India has stopped believing in itself, that’s why no brands are coming from India. India has to create its own identity and not follow rules. Otherwise, it will be just like any branded luxury.” – Mr Sabyasachi Mukherjee, leading Indian fashion designer
“We are a long way from getting our back end right. As long as our back-end is not right, we cannot come up globally.” – Mr Dilip Kapur, President, Hidesign
“India will not produce branded luxury for the globe, but pure luxury” – Mr Sabyasachi Mukherjee, leading fashion designer