Luxury in India
Luxury in India
Luxury in India
Painting a Picture
“Luxury is the necessity which
begins when real necessity ends”
- Coco Chanel
#1 Demographically
understanding the luxury
market in India
Sources:
The International Herald Tribune Luxury Brand Conference, New Delhi (25th-26th March, ‘09)
Qualitative Consumer Research (Quantum Market Research, April ‘09),
Qualitative expert interviews (Quantum Market Research & Rediffusion Y&R, April ‘09)
Desk research
Secondary data mining
A Brief Demographic Introduction
Understanding the Potential
Some Voices
‘You will be surprised to know that we have no market study, no set
market size for our brands in India. We don’t have a precise plan, we
just play it by ear’
-Mohan Murjani, Chairman- Murjani Group (Local Partners of Tommy
Hilfiger, Gucci, Calvin Klein & Jimmy Choo)
‘The affluent Indian consumer is for all intents & purposes a blind
spot. There is no one agreed on figure for how many of them they are
or where they live. The reasons for this are various- chief among
which are we are yet to all agree on who this consumer is. From a
marketing point if view, segmenting them purely basis income is
meaningless. ’
-Vinay Dixit, China Country Head- McKinsey & Co
‘There are no real numbers readily available with regard to the luxury
consumer in India. Reason being that our marketing plans are still
retail rather than consumer focused. We have no interest in knowing
how many super rich consumers there are in India when we have only
3 stores in the country.’
-Shantanu Mukherji, India Country Head- Ermenigildo Zegna
In 2006, there were 1.6 million households in India earning $100,000 a year and spending $9,000 annually
on luxury products
Both these figures are expected to grow at approximately 14% a year making the current number of
$100,000 household around 2.07 million
India has about 123,000 high net individuals, or millionaires in US dollar terms
The category of super wealthy is growing faster in India than anywhere else in the world, with a 22.6 %
increase in millionaires from 2006-2007
India has about 464,800 families with an annual disposable income of $75,000 or more, which translates
into less than 0.1 % of the country’s overall population
No Clear Consensus
Estimates that India’s luxury market will grow by 25% between 2009 and 2014
There are around 1.5 million households in India that can afford luxury goods (defined as ‘Globals’, i.e.
households earning $20,000 and above)
Currently, there seems to be no consensus regarding the definition of the luxury consumer in
India, with benchmarks for the same ranging from $20,000 to $75,000 to $100,000 to even
$10,00,000 AHI
This is compounded by a strong cash component based , ‘black money’ economy, ensuring
that incomes are largely under-reported
However, despite the relatively small size of the super affluent consumer vis-à-vis the overall
population, one thing that all sources agree on is that this segment is growing rapidly and
exponentially
The Big Picture
Annual Household Income : Rs. Lac Total HH: Million
2008/09 2009 2012 2015
Pun 6% Hyd 2%
Nag 3% Bang 1%
Ahm 2% Coi 1%
W : 43% (94/6) E : 4% (92/08) 1% Koc 0.4%
Sur
Nasik 1% Del 34%
Aur 0.6% Lud 2%
Raj 0.5% Chd 1%
Vado 0.5% Amr 1%
S : 8% (85/15) Fbd 1%
Kol 4%
Jal 1%
Source : Technopak India Luxury Trends 2006, NCAER MISH 2004, Y&R Analysis
What do they spend on?
Total Size of the Luxury Market in 2010 = $14350 mn
Others 24
1220
(8%) Home
Products
decor
49
Personal
care
73
Wine &
spirits
183
Services 3240
Electronics 232
2008
9890 Apparel/
Accessory 280
Assets
• Luxury defined as goods with very high price premium
compared to the average for the category
Watches/ • The Product Market size represent goods bought in the
Jewelry 378 Indian market only
A Google Image Search for ‘luxury’ indicates a move towards a more experiential definition
of the word, with not a brand in sight.
Luxury no longer means one thing…
Global
Today
Yesterday
Local
The global luxury brand- a brief timeline
Founded in Paris, Founded in Paris,
1837 as a harness 1847 as a Founded in Florence,
workshop, jewelers, Founded in Paris, 1921, as a retailer of
creating harnesses primarily 1910 as a retailer exclusive women’s
& bridles for the supplying to of women’s hats purses
European gentry European royalty
Food
Painting
Music
Clothing
Process Led
Product Led
Luxury was rooted more in the process of
Luxury was rooted in the physicality of the its delivery; in the aspects of how it was
product; in the quality of its craftsmanship offered and consumed
and authenticity of its pedigree
Luxury became ingrained in the overall
Luxury emanated outwards from the process, with the product becoming the
product, and by consequence from the end point of this experience- luxury had to
brand, leading luxury to be purchasable be lived not just purchased
Given today’s
rapidly evolving
luxury consumer, a
brand needs to
‘Story Telling’ deliver on all 5 of
Product Brand Brand Consumption these counts in
1 Name Ideology Experience Potential
order to be viewed
2 as ‘true luxury’
3
The Fondazione Zegna,
4 dedicated to safeguarding
5 the environment &
promoting community life,
the Oasis Zegna in Trivero,
Italy, association with the
WWF, world leader in wool
Fine Men’s Ermenegildo ‘The nature Bespoke tailoring, unparalleled production innovation,
Clothing Zegna of luxury is attention to detail, the world’s official producer of the
derived from largest single buyer of Merino world’s finest wool (in
the luxury of wool, private tailor to Benito terms of micron count)
nature’ Mussolini, Ermenegildo Zegna
Vellus Aureum Trophy for wool
that is 13.9 microns or finer
The Consumption of Luxury in India
What it takes to build luxury in India
Luxury in India…then
THEN NOW
A key marker of The most socially A symbol of status A clear indicator One of the most
status as well as significant day in a & gifting as well of class and social overt external
an investment family’s life as an investment standing indicators of social
and an asset status
Beverly Hill’s famed Rodeo Drive shopping DLF’s Emporio Mall in Vasant Kunj, New Delhi-
district currently running in heavy losses
Indian consumers are open to splurging on expensive product abroad but not willing
to spend equivalent amounts at home
The ‘Global Indian’
The need to drive exclusivity vis-à-vis the masses has reached its apex in the rise of the
‘Global Indian’, who are the true consumers of luxury in India
These Global Indians, while citizens of India are truly residents of the world; they
travel extensively and consume culture and products first hand from around the world
In turn, they are the culture leaders back home in India are heavily influence brand
perceptions & imagery
As a result, luxury in India is slowly moving in a global direction
INTERNALIZED EXTERNALIZED
Prevalent among consumers who are confident and self Prevalent more among the ‘new rich’ consumer who is
assured; they seek discernment & quality and consume less confident and more focused on reinforcing his status
brands based on their individual tastes through conspicuous displays of ostentation; they
consume brands based on recognizeability & flaunt value
However, these two mindsets can often co-exist; the same consumer who drinks single malt by
himself will only serve Johnnie Walker Black Label socially, due to the cultural cachet of the brand
Regardless of the prevalent mindset, luxury remains about
exclusivity & scarcity
Ensuring the
Building a story brand’s offering
at a global level is culturally
relevant
Creating peer
Building in
based
exclusivity at
acceptance for
every level
the brand
Global Luxury Brands
What we can learn from them
A Brief History
Hermes is one of world’s most exclusive fashion houses, and specializes primarily in leather
goods, lifestyle accessories and perfumes
Unlike its competitors such as Louis Vuitton, which are largely considered to have spear headed
the ‘democratization of luxury’ Hermes is considered to have maintained its standards of
quality, craftsmanship and exclusivity
Hermes was one of the first global luxury brands to move from
product to experience
In the 1970s, Hermes was considered ‘too mature’ and ‘too boring’
for the times (with a two week period in 1975 being the first and
last time the Hermes workshop in Paris had to be closed due to
lack of orders).
•The Birkin Bag was named after British actress Jane Birkin and is now
considered the symbol of ‘ultimate luxury’ according to luxury expert Michael
Tonello
•A basic Birkin starts at $7500 (not including tax). There is no upper price limit
on the bag, as this depends on the type of leather and degree of
customization required (prices of some Birkins have been known to reach 6 Victoria
figure numbers) Beckham
•The average waiting period for a Birkin in two years and Hermes does not
retail the product online
•Birkins are considered ‘investment products’, with the value of the bags
actually appreciating over time
Jennifer
•Hermes provides a 4 step tutorial regarding verification of authenticity, which
includes such details as ‘the interior leather zipper tag needs to be parallel, Lopez
not perpendicular to the zipper hardware’
•The legend of the Birkin has grown immensely due to its role in pop culture
(television, music & film) as well its popularity with celebrities including Carla
Bruni, Janet Jackson, Julia Roberts, Oprah Winfrey, Katie Holmes, Lindsay
Lohan, Paris Hilton and Naomi Campbell to name but a few
The brand today
Above The Line communication focuses on building aspiration and a unique brand ‘feel’ through
highly differentiated visual imagery
The brand today
Online, Hermes is an entirely different animal; warm, friendly and charming; inviting the
consumer to immerse himself into the various aspects of the brand
A Brief History
The Four Seasons was the first 5 Star chain in the world to
introduce a full service spa on premise, which it did as early as
1986. From 2001 onwards, all Four Seasons properties worldwide
have spas Isadore Sharp, Founder
& Chairman, Four
Today, the chain operates 22 AAA 5 Diamond rated properties, Seasons Hotels & Resorts
more than any other chain in the world
To positively impact on
and support
community goals in
each location
To involve all The hotel also eschews the normal luxury cars
employees & guests in used by most hotels and instead only uses red,
the preservation & Indian made Ambassadors for guest pick ups
protection of the planet and other services
A Brief History
Bang & Olufsen was founded by Peter Bang & Svend Olufsen in
Struer, Denmark in 1925
Quintessentially is first
and foremost a club ‘for
those who believe that
life is too short to waste
time on the mundane or
second-best’
Quintessentially has an intensive screening process and offers accepted members entry
into an exclusive social circle that includes celebrities from a number of different fields
In essence, this is the anti-thesis of the ‘democratization’ of luxury, and takes it back to its
roots- the provision of services that are only available to a select, elite few
A Few Luxury 1. Luxury, by definition can never be large or mass; Louis Vuitton, which is today
owned by 40% of all Japanese citizens is no longer a true ‘luxury’ brand but merely
Imperatives an expensive one
2. Luxury can never be overt; it needs to be understated and not easily understood
3. Luxury needs to set its own standards; it needs to create its own benchmarks for
itself as well as for its competition
7. Luxury needs to optimize life; ultimately, the consumer’s life experience needs to
be enriched and optimized -physically, mentally and most importantly emotionally
8. Luxury is driven by its consumers; high profile consumer usage is critical in order to
build aura and desirability around a brand
9. Luxury needs to give something back; luxury can no longer afford to be self
absorbed- it needs to give something back in order to retain consumer empathy
and create a ‘soul’
Luxury Brands in India
The story thus far
Current Scenario- Brand over Business
A number of international luxury brands are now
available in India in malls such as Emporio (New
Delhi), Palladium (Mumbai) and The Collective
(Bangalore)
‘For us, its all about planting the flag and letting the
consumer know that we believe in the Indian
market…its not about making money just yet’ – John
Hooks, Deputy Managing Director, Giorgio Armani
Group
Its success has largely been attributed to the ability of the brand
to become part of the lifestyle & culture of the super affluent
Indian consumer at various different touch points
‘The only thing our consumers like more than being seen, is being
Actress Perizaad seen doing something good’ – Arvind Krishnan, Marketing Head,
Zorabian at the Grey Bacardi Martini India
Goose fund raiser in
Mumbai Today, Grey Goose is the #1 selling super premium brand of vodka
in India , virtually creating the category in a country largely
predisposed towards whisky at the higher end of the market
And finally…one of India’s most visible global luxury brands
Amarvilas
In 2008, Travel + Leisure Magazine rated the Rajvilas,
(Agra) Udaivilas & Amarvilas as the World’s 2nd, 4th & 6th best hotels
and as Asia’s 1st, 2nd & 3rd best hotels respectively
What makes the Vilas brand so special?
The key to The Vilas’ service excellence is its philosophy of Dharma, an 8 step
code of conduct defining its approach towards its business, its consumers and
each other. Chief among these are;
1. Putting the customer first, the company second and the self last
3. Eschewing the short-term quick fix for the long term establishment of
healthy precedent
Asides from this, the ideal of ‘meeting and consistently exceeding customer
expectations’ be it in terms of architecture, facilities, décor, amenities and of
course service also forms an integral part of both the brand’s mission as well as
vision. Its primary focus is on ‘showcasing India to the world like no other’
In a way, the Vilas brand is the Four Seasons of the Indian hospitality industry- a
purist brand whose philosophy for service is so internally driven that it is
almost precognitive in its anticipation of consumer needs
The Vilas is less a hotel brand that is luxurious than a luxury brand that just
happens to be a hotel
Therefore…to succeed as a luxury brand in India
1. A brand needs to tread a fine line between global imagery & local relevance;
strong global imagery with no local relevance will render a brand aspirational yet
excessively niche, while strong local relevance without a maintenance of global
imagery will erode exclusivity
2. A brand needs to go deep; ultimately business success will depend on the depth
to which a brand can penetrate the market; urban metro consumers while highly
susceptible to luxury brands, do most of their shopping abroad thereby leaving it
up to Tier 2 consumers to really build the luxury business
3. A brand needs to integrate itself into the lifestyle of its consumers; luxury
brands can no longer expect to be aspirational enough to attract consumers to
them, instead they need to insert themselves into the lives of their consumers at
every possible point while at the same time maintaining their exclusivity
4. A brand needs to have a heart; contrary to popular belief, the Indian luxury
consumer is also highly attracted to brands that ‘give back’; the relative dearth
of brands currently doing so in India make this an ideal platform through which
to build differentiation & empathy