Indian Luxury Industry - Closet Capers


That's where the new luxury consumer is, says a new report released at the recently held CII-ET Dialogue on Luxury

By: Suman Tarafdar

Posted on: December 6, 2013
 
That’s where the new luxury consumer is, says a new report released at the recently held CII-ET Dialogue on Luxury

India's luxury sector says it is growing, but its representatives and stakeholders sound not so convinced of the figures. India may be experiencing its slowest growth in a decade though India’s well heeled are growing pretty fast. That’s according to the report, ‘The Changing Face of Luxury in India’, jointly published by Confederation of Indian Industries (CII) and IMRB International. The report estimates that the sector witnessed fairly robust growth of about 15 per cent over the last three years and is estimated to have reached $7.58 billion in 2012. Significantly, it also estimates that luxury products have grown much faster, at 22 per cent, compared to luxury services, at 15 per cent and luxury assets, at 9.4 per cent. The fastest growing sectors include apparel and accessories, perfumes, fine dining and auto.
 
This new report divides India’s wealthy consumers into ‘aristocratic’ (khandaani or old rich) and ‘closet’, and focuses on identifying and understanding what it terms as India’s closet consumers. These closet consumers can be further subdivided into four categories – ‘flaunters’, ‘connoisseurs’, ‘experientialists’, and ‘aesthetes’, elaborated Ms Priyadarshini Narendra, Vice President, IMRB International, at a CII-ET Dialogue on Luxury in New Delhi recently. Pointing out that the previous decade had seen considerable economic growth creating a substantial new class of wealthy, she said, however, that there remained barriers to their coming out. Mr Sanjay Kapoor, MD Genesis Luxury Fashion, and chairman of CII Task Force on Luxury and Lifestyle, said the Indian consumer was changing and the guilt associated with luxury purchases was going away.
 
These newly rich, which could be first generation entrepreneurs to senior corporate executives, from farmers who have sold their land off to developers to the BPO generation which lives at home with the parents and has money to splurge, nevertheless remain quite ‘middle class’ in their mindset. This mindset translates to the consumer being wary of getting addicted to luxury consumption, being ‘smart’ about what the consumer buys, as well as being restricted by availability, limited awareness and low levels of knowledge.
 
Different strokes

The sector’s confusion, perhaps not entirely unjustified, is reflective perhaps of its performance, which is trying to be exclusive and inclusive at the same time as it tries to reach out to new consumers! The government, which has to yet get general retail at the same level of higher placed GDP countries, also yet has to focus any attention on the sector. India's additional finance secretary Mr KP Krishnan, part of the conference, admitted there were various issues plaguing further growth of the sector in India. Citing a more than century old seminal work, The Theory of the Leisure Class (1899), by Thorstein Veblen, he agreed that conspicuous leisure gives way to conspicuous consumption. “Numbers indicate the emerging role of India in the global luxury market,” he said. He too pointed out that India has the potential to offer a mass market for luxury goods, saying that there is segmentation within the luxury market, and even if two per cent of Indians were to consume lower priced luxury goods and services, it would constitute a significant part of the global market.
 
Mr Krishnan said the government needs to look into issues like creating a conducive policy, having a sensible taxation environment, and look at fluctuating money, issues of sourcing domestically and lack of adequate infrastructure to put India firmly on the global luxury map.
 
Thoughts were disparate, but often heartfelt. Mr Marco Bizzarri, president and CEO, Bottega Veneta, said a major issue for luxury retailers India is unavailability of “quality space” to open stores. He said growth was still limited by the number of stores a brand could have at the ‘right’ locations. Mr Stefano Canali, general manager of Italian menswear brand Canali, was even more blunt when he said that India could miss the opportunity to grow a market for luxury brands if duties were not reduced, citing the example of China, which has a booming business in the sector. Canali alone has 70 stores there compared to its six in India. “Indians are buying somewhere else,” he said, suggesting India needed more tourist attractions to attract the luxury consumer.
 
Setting up business remains a challenge in India. Mr Dilip Doshi, former cricketer, whose firm has been the India distributor for Mont Blanc for the last 23 years, expressed satisfaction over the way the brand has been accepted as a premium product, though he admitted that early years had been challenging, right from getting a licence. For the then New York based designer Mr Raghavendra Rathore, the challenge had been to set up a brand, a concept Indians were unfamiliar with when he was setting up. Ms Priya Paul, Chairperson, Apeejay Surrendra Park Hotels, said the first goal for any brand is the need to educate the consumer.
 
Mr Philipp von Sahr, President, BMW Group India, cautioned about dilution of a luxury brand. He said that brands such as Rolls Royce, the top end of the groups’ offerings, could not be up for discounts. He also stressed the race in the premium segment is not about being the number one in terms of sales, though a certain volume was needed, but being the “best in class”.
 
“The era of bling is over,” said Mr Amit Dutta, MD, Quintessentially India. “Now there is a renewed focus on craftsmanship,” he said, pointing out the penetration of luxury in India is low, with the consumers often questioning value. Mr Canali agreed, saying the new consumers are interested in knowing every little detail about the product and its heritage. “We have to develop relationships, offer made to measure and customised products and integrate Indianness,” said Mr Ankur Bhatia, ED, Bird Group, whose first luxury resort, Dusit Devarana, has recently opened in Delhi. In hospitality, he said, the touch points remained largely Indian. He, however, bemoaned the lack of adequate infrastructure.
 
Most agreed there was a latent market in India’s smaller cities. “We open 4 to 5 new dealerships every year and this adds to our numbers”, said Mr von Sahr. Something Mr Rajeev Wadhwa, Chairman and CEO, Baron Luxury and Lifestyle, which offers private jet rentals, agreed to saying many owners needed to go smaller cities and ended up wasting time as there was no air connectivity. He also pointed out Indians are still not valuing time, indicating that the time they spent waiting at airports was time lost for them.
 
The lack of adequate infrastructure, especially real estate, was especially addressed. While high rentals charged by successful malls were attacked, Mr Anuj Puri, chairman, JLL India, said Delhi and Mumbai alone contributed about 60 per cent of the country’s demand for luxury retail space, while Bengaluru contributed another 14 per cent. “The rest of the country is still not mature enough to have luxury malls,” he pointed out. Mr Darshan Mehta, CEO, Reliance Brands said India is still a small market for luxury. “There aren’t that many rich customers”, he said in the context of high rental for outlets in premium malls. He also said the Indian customer was paying an upcharge, saying “we need to address luxury retail price issue.”
 
Actress, Ms Sonakshi Sinha, pointed out that during her work shoots, she didn’t get to wear designer clothes, instead doing so at events! Mr Neelesh Hundekari, Partner, AT Kearney, said affordable luxury is important for India, even as he pointed out the luxury consumption was relatively resilient to economic swings. IMRB predicts a growth of 17 per cent this year for the sector. As Hundekari pointed out - Indian consumers are difficult and make the brands work hard. Most agreed, India’s luxury market may have great potential, but its realisation is still some way off. As Mr Rathore said, a rose with a thorny stem!

Suman Tarafdar is a journalist and writer based in Delhi. He has worked with a number of leading Indian media organisations, and writes on various aspects of luxury, lifestyle and culture. When not writing to earn a living, he likes to travel, read, cook, chat, shop and watch all kinds of soppy stuff on tv. Yes, current politics bothers him.

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