The pursuit of luxury

With the emergence of a new class of very affluent young Indians with tremendous purchasing power, India is no more a mere testing ground for luxury brands but a lucrative market with explosive growth potential.

IN a swanky Mumbai mall, 26-year-old Vidisha Handa finds herself in a dilemma. The half an hour she has already spent in the fragrances division of the mall hasn’t helped her make up her mind between Chanel’s Chance Eau Fraiche and No. 5 Eau de Parfum. Although her parents can make little sense of her indecision, they know for sure it doesn’t stem from the price tag. Their daughter, an executive in a management consultancy firm, isn’t the type who would even bat an eyelid before parting with Rs. 4,100 or Rs. 5,500 that the 100 ml sprays of the luxury fragrances cost. Vidisha is only one among India’s burgeoning population of luxury brand aficionados. “I don’t understand what the fuss is all about,” she says on being grilled about what appears to be an extravagant lifestyle to her parents. Increasingly spoilt for choice, countless others of her ilk can be seen succumbing many times over to the lure of the other desires on display: Handbags from Louis Vuitton and Prada, sunglasses from Bulgari and Gucci, shoes from Sergio Rossi, Tod’s and Jimmy Choo, or designer outfits from Armani, Versace and Condici.No longer an indulgence
It’s time to get real: Brands are no longer incidental and luxury indulgences much less about ethical dubiety. On the contrary, they are about feeling precious and pampered, buoying up lifestyles, and flaunting a superiority of taste. Luxury brands may well seem distinct, but as the definition of luxury turns increasingly nebulous, many of the essential differences between luxury and mass market brands are blurring faster than one could notice. At once a concept, a subjective impression and a polemical term, luxury and its pursuit are here to stay. For, given the sheer attractiveness of today’s luxury brands and the fortunes that are being pumped into driving them in emerging markets like India, it appears increasingly unlikely that they will fall out of favour.
For international luxury brands, India is no longer a mere testing ground, but a lucrative market. Estimates suggest that India has more consumers for luxury goods than the adult population of several countries. Little wonder, as the World Wealth Report 2005-06, published by Merrill Lynch and Capgemini, puts the number of millionaires in India at a whopping 83,000 and states that India recorded the world’s second fastest growth at 19.3 per cent in the number of high net-worth individuals in 2005. High-end luxury brands cannot take their eyes off the fact that over 25 million people are getting added to the hallowed Indian middle class every year. It is estimated that nearly two million Indian households earn more than $1,00,000 annually and can spend about $9,000 on premium goods and services. That itself translates into a potential market of $16 billion, even as the number of such affluent Indian households is believed to be growing by 12-15 per cent.
Industry estimates suggest that as many as 200-300 international luxury brands are trying to make inroads into the Indian luxury market, already worth Rs 2,400 crore ($444 million according to the “India Luxury Trends 2006” report by KSA Technopak), growing at 30-32 per cent, and expected to touch Rs. 5,000 crore by 2010. One study pegs the Indian market potential of the 15-35 year bracket at a whopping $14 billion. According to the Synovate PAX media survey 2006, the ownership of luxury goods has grown from 15 per cent to 19 per cent since last year. Those owning luxury jewellery ($500 and more) now account for 17 per cent of affluent India. Spurred by this growth in the purchasing power of young India, these brands are actively looking to either launch themselves here or scale up their existing presence.Driven by “aspirations”
Heinz Jurgen Krogner, chairman and group CEO of Esprit Holdings, the $5-billion luxury apparel and accessories maker that set up shop in India in 2005, ascribes the growth of the luxury segment in India to its “highly aspirational” youth. Xavier Bertrand, managing director for Chanel in India, also thinks that what makes India unique is a young population that aspires more and more to luxury products. Arvind Singhal, chairman of Technopak, asserts that the country is witnessing the emergence of a new class of very affluent young Indians. According to Pam Danziger, president of Unity Marketing, affluent youngsters in India with a median age of 24.9 years will play an increasingly important role in the target market for global luxury marketers over the next decade or two. Yves Carcelle, President and CEO of Louis Vuitton Malletier, too is a firm believer in the potential of the Indian market.
Sample these indicators. Luxury fragrance brands such as Davidoff, Bulgari and Jennifer Lopez - Live Luxe are selling like hot cakes at the more than 150 outlets of Beauty Concepts. An upbeat Tony Chin, CEO of Beauty Concepts, believes that the market for luxury fragrances has come of age in India due to the retail boom being witnessed here. Two Escada flagship stores recently debuted in Mumbai and seven more are scheduled to open in India within the next two years. Frank Rheinboldt, CEO of the Escada Group is convinced that Escada will be positioned successfully in the Indian market by then. The retail chain Shoppers’ Stop has announced plans to introduce such foreign brands in the luxury category as Tommy Hilfiger, Calvin Klein, and Espirit.
Jewellery retailer Damas recently launched its twelfth store in India and intends to open another sixteen in the coming year. According to Anaggh Desai, CEO, Damas India, India is currently the world’s largest consumer of yellow gold and the third largest in global diamond jewellery. Vertu, Nokia’s luxury mobile phone brand costing upwards of Rs. 15 lakh, has been selling phenomenally well in India. LVMH, the French luxury goods conglomerate that owns famous brands like Dom Pérignon, Christian Dior, Givenchy, Donna Karan and Louis Vuitton, has met with encouraging response in India and plans to launch other brands like Fendi, Dior and Celine. Shoe brand Jimmy Choo is looking to open 10 stores in India by 2011. Be it a $1,000 Vuitton bag, a $1,20,000 diamond-encrusted Mont Blanc pen, or Rs. 10,000 T-shirts and Rs. 55,000 luggage from German luxury brand Aigner, branded luxury products are a growing rage.
Making a beeline for India are a host of international luxury brands such as Gucci, Herm, Christian Dior, Cartier, Piaget, Tiffany, Moschino and others. To Reto Cina, president and CEO, Davidoff Group, which is launching cigars in India through Godfrey Phillips, India spells one of the fastest growing tobacco markets. According to chairman Diego Rossetti, Fratelli Rossetti is investing more in the Indian market because Indians understand luxury better. Even porcelain figurine designer Lladro is adding three more stores to its existing six stores in India. Genesis Colours, popular for its high-end fashion label Satya Paul, is reported to be in negotiations to bring the luxury apparel and perfume brand Kenzo to India. Kenzo is one of the two LMVH brands, the other being Thomas Pink, that will be entering India shortly. They are all here
Global designer brand Giorgio Armani is in talks with an Indian real estate major in its quest for a partner to tap into the Indian market. William Penn is bringing three of its Rs 9.5-lakh Sheaffer pens to India. Italian fashion group Ittierre Accessories is reported to be entering the domestic accessories market with the launch of Plus IT boutiques that will stock brands such as Ferré, Malo, Extè, Versace Sport, Just Cavalli, C’N’C Costume National, and the John Galliano Young brand. Another French firm, Estee Lauder is planning to introduce the Donna Karan range of fragrances, colour cosmetic line M-A-C and skin-care brand Clinique. Christophe Caillaud, CEO of Jean Paul Gaultier, known for its beauty products, apparel and accessories, said recently that his company is working to bring its ready-to-wear garments to India. Diageo India will soon be bringing in its Johnny Walker Blue label-King George V line, priced at $800 per bottle. Marilyn Carlson Nelson, chairman and CEO of the $28-billion Carlson group of integrated companies, has spoken about the group’s plans to open 70 hotel properties, including three belonging to its luxury brand Regent, in India by 2010.
The once unsophisticated retailing environment is making way for luxury malls like MBD Zephyr and Emporium. As many as 600 new malls are reported to be coming up across the country. The Gitanjali Group is planning a string of high-end wedding and luxury malls in eight cities across India.
The market for high-end luxury watches such as Rado, Omega, Breguet, Christian Dior, Tag Heuer, Corum and Franck Mueller is estimated at Rs. 650 crore and is growing at about 20 per cent annually. This explains why the Swatch Group had no apprehensions while introducing its Breguet watches in India with a price tag of $30,000. Watchmaker Tag Heuer expanded from 80 shops to 120 in 2006. According to Roland Streule, President, Rado Watch, India has the potential to be among the top two or three markets for Rado in the next five years.In the fast lane
The action has also spilt on to the roads. As if Mercedes and BMW, priced between Rs. 25-30 lakh were not enough, Maybach has come in to set the buyer back by Rs. 5 crore. While others like Volkswagen, Lamborghini, Rolls Royce Phantom, Bentley and Porsche have already joined the bandwagon, Aston Martin and Ferrari are in the process of following suit. The Indian luxury car market is growing at over 25 per cent. More than 5,000 luxury cars were sold in 2006, up from 3,000 in 2005 and just 1,000 in 2004. According to Suhas Kadlaskar, finance director, DaimlerChrysler India, there is more demand for luxury cars in the country today than ever before.
With India’s commerce and industry minister Kamal Nath recently signalling India’s willingness to reconsider import duties on luxury goods, this could well mark just the beginning.
http://www.hindu.com/mag/2007/06/03/stories/2007060350090400.htm