Luxury marketing in India is a conundrum. With a booming economy, India is the newest and most challenging target for luxury goods manufacturers worldwide. Indian luxury goods market which was valued at US$ 4.3 billion* in 2007 has grown manifold. The Indian economy has one of the highest disposable incomes and 126,000 HNIs (High Networth Individuals) and another 3 million households earning above 10 lakhs also ready to consume luxury. The base is huge and the market ripe.
According to Forbes, India has the fastest-growing population of millionaires in the world. But for Western luxury brands operating in the country, grabbing a piece of the market has proven more difficult than anticipated and many are in the process of re-conceiving their India strategies. Part of the problem is that Western luxury brands don’t seem to understand Indian consumers. When they first entered India, they created splashy advertising campaigns targeting the old money elite. But the results were poor, largely because this customer segment consists of frequent international travelers who overwhelmingly prefer the experience of purchasing Western luxury goods abroad, where brands offer them wider choice, better service and more competitive pricing than what’s currently available inside India. This plan aims to counter this finding.
* According to India Luxury Review
** Thomas Kastgen, Chairman, Leading Brands of the World
Across all segments, the Indian consumer is always seeking value for their money. The customer is typically very demanding, expecting to be pampered with personal visits to their home or office, and wants to get extra value adds as part of the purchase. These are the segments of consumers you need too look out for:
- Luxuriented. Primary consumers of luxury goods. Source of affluence is largely traditional and inherited wealth. Most importantly, they have high levels of exposure and awareness to world class living. Increasingly showing a preference for European goods. Exclusivity, brand invisibility, and product quality are all important triggers for purchase. They are typically urban, and travel internationally a great deal, from 3 times a year to every month. Prefers to shop overseas for two main reasons: price is lower overseas, and the purchasing experience and surroundings are vastly superior. (e.g., picture the buying experience in Tiffany's on 5th Avenue in New York City to buying the same pen in Colaba Causeway, Mumbai or Connaught Place in Delhi.)
- New Rich. Adequate spending power. Acquiring orientation to luxury. Brand visibility and flamboyance are important, yet price point can be a barrier. Looking for aspirational labels - wants to show peers that they are successful and powerful.
- Getting There. Acquiring spending power. Spends mainly on high end white goods, education of children, better housing and larger automobiles.
- Mid Affluents are also acquiring orientation to luxury, however unlikely to indulge beyond a limit.
Market Growth
The growth rate for the industry is 14.6 per cent. India’s luxury goods market of Rs 717 billion is set to expand dramatically over the next ten years. India’s total retail market has been estimated at $160 billion or Rs 7,170 billion, covering eight million consumers. Of them, one million are considered to be in the luxury brands segment.
There are over one million luxury consumers, which is only a fraction of the eight million plus consumers who have HNW disposable incomes but are unfamiliar with the luxury segment. The growth rate for the industry is 14.6 per cent. India’s luxury goods market of Rs 717 billion is set to expand dramatically over the next ten years. India’s total retail market has been estimated at $160 billion or Rs 7,170 billion, covering eight million consumers. Of them, one million are considered to be in the luxury brands segment.
According to Mr Sanjay Kapoor, Chairman, CII Luxury Goods Forum and MD, Genesis Luxury Fashion Pvt. Ltd., "The luxury industry in India has shown very promising growth over the last couple of years and is set to grow at a minimum of 25% per year over the next few years with India emerging as a luxury shopping destination. We have the right environment in place for international luxury brands to have a retail presence across our major metros. I feel we are at the threshold of a great expansion and it is indeed encouraging to be part of this new drive."
Electronics is growing at the top end, growing at 25 per cent. The fashion industry, cars, and jewelry segments are growing at 20 per cent. Growth in the luxury pens segment is assumed to be similar to the growth pattern seen in the jewelry segment.
Critical Issues
Brand awareness activities should be commensurate with not only this year's middle and upper income group’s spending power, but must also develop their products and their brands so that they can meet the demands of a local economy which will have outstripped many European economies within 10 to 15 years.
Market microsegmentation will be required to ensure the appropriate products are offered to the correct buyer. Messaging, materials, distribution and approach need to be segmented to address their triggers to purchase.
The single most important reason for luxury retail not taking off in India is the lack of luxury retail environments. It is important to see how this segment will evolve in the future considering that existing retail formats in India are in 5 star hotels or as stand-alone stores. I've spoken with a number of high net worth individuals in India who say they'd rather go to Fifth Avenue in New York to purchase because a) the price will be lower and b) the purchasing experience is far better. Stay tuned for my next post on How To Market Luxury Goods in India.
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