Delhi NCR – Has the most enriching retail legacy among the Indian cities, therefore the city tops all real estate drivers. Delhi, especially the National Capital Region, remain one of the strongest markets in terms of sale volumes for the manufacturers
Mumbai – Mumbai has the highest retail demand potential. However, a lack of availability of land parcels leading to high rents in prime areas act as a dampener that causes Mumbai to lag behind Delhi
Pune – Pune provides the most affordable rents in prime areas among the Tier I, Tier II cities
Bangalore – Affordable rents in the city—compared to other Tier I & some Tier II cities, have helped the retail to flourish here. However, the city has lesser household expenditure even when compared to Kolkata and Chennai
Ahmedabad – A cash rich city, increased spending on premium high-end offerings from global auto makers. For Italian super-luxury sports car maker Lamborghini, cities like Ahmedabad have put up sales figures of six units in the last six months. These figures are significant because the Volkswagen-owned brand sold 16 units in 2014 as against 22 in 2013
Chennai – “Chennai-ites are mature shoppers. They are well-travelled and not afraid to pay for quality,” says Ajay Agarwal, Managing Director, Bergamo. Chennai embraced the concept of department stores much before the other metros did. Demand for office space continues to grow for the third straight year
Hyderabad – Hyderabad offers attractiveness in terms of affordable rents, which is higher only to Pune among the Tier II cities. However, lesser household income and household expenditure has ranked it lower.
Indian Luxury Retail Trends-– Emerging Tier 2 and 3 cities
44 per cent of these wealthy Indians reside in tier-two and tier-three cities. In the tier 2 and 3 cities, the highest demand is for luxury automobiles, followed by apparel for women and accessories for both sexes. 600 cities from Tier 2, 3 and 4 categories would be 4.5X times the current size (Source: BCG)
Indian Luxury Retail Trends- Performance drivers
Value Conscious consumer – India is essentially a value conscious consumer base. New trends in this direction are :
Customization : With the increase in consumer desire for exclusive products, luxury brands such as Zegna, Tom Ford, Corenliani are adopting bespoke services, as an ultimate expression of luxury for the UHNI’s. This has also given rise to limited editions or special series to generate artificial desire and demand. Customization and strong supply side are imperative steps for boosting the luxury market growth. In addition, past offerings by International brands (Sari by Hermes; Nawab jacket by Canali) have set the tone for future directions for brands to adopt India specific range.
Increasing digital influence – Digi-lux, the new mantra : Luxury brand were vary of making their products available online as it erodes the ‘exclusive’ element from the luxury product but they are realizing the importance of online platform not just for commercial viability but also to connect better with their consumers. Suddenly jewellery to cars to real estate to services – all being sought on the net. A combination of physical stores, digital experiences and social media engagement is the new mantra.
Competitive landscape – Collaborate not compete : Although, there are multiple brands in every segment within the Luxury domain, the key to expansion and continued development of Indian Luxury Industry is collaboration, not competition. it is imperative to keep growing by synergizing our knowledge of craft with contemporary needs. Bringing together the expertise while not diluting the brand equity is the key in a market with highly fragmented consumer base. A recent collaboration of an Indian designer brand, Sabhyasachi Mukherjee with an international designer brand Christian Louboutin set a new trend of collaborative approach of non competing brands, that showcased the best amalgamation of craft , culture and design sensibilities of two great creative geniuses.
Indian Luxury Retail Trends- Barriers
Despite the positivity outlook, the market does have certain inherent trade barriers:
Indian Luxury Retail Trends- Opportunity
Entry level range models make up for maximum sales and provide the ‘bridge to luxury’ that the millennial generation is aspiring for. For example, from the above info graphic, it is quite clear that in case of both BMW as well as Audi, majority revenue share comes from the entry and the middle level ranges of 1 & 3 series respectively.
2) Targeted Distribution Channels : Lack of quality retail space & presence of customer in different geographical areas and inability of suppliers to reach the target customer necessitates that the brands develop innovative models for distribution. An example of innovative distribution strategy was adopted by Judith Lieber, luxury handbag brand, when they conducted an exclusive ‘Trunk show’ in Indore, a tier 2 city. The sales from this event equalled 10% of the previous years. Brands like a Kiton and John Lobb have entered through a private sale model with no physical showroom or permanent over head.
In addition, with the rate of increase of internet penetration, E-commerce in India is at an initial stage and has a long way to go. There is rather an over-supply of start-ups expressing the immaturity of e-commerce market and Luxury brands must be conscious of choosing the right distribution channel
Concluding Remarks & Suggestions : The Road Ahead
Luxury comes a full circle in India. India is not new to luxury brands. Although India may be the fasting growing economy in the world but grabbing a piece of this market is more difficult than anticipated. What was western luxury brands’ biggest consumer base during the times of the maharaja’s, is once again the target market for the same brands. This time, it’s the new maharaja, the new corporate Henry, the new young pulsating India that is driving in sales of luxury goods. This customer has dreams and expectations. He wants luxury to be providing a personalized, customized and Indianized experience. India’s new breed of consumer indulging in luxury goods and services is expecting a more cherished luxurious experience. Luxury brands should engage themselves in creating a brand connect with the consumers through media, PR, special events & so on.
Provide closeness, uniqueness, product and brand acquaintance with appropriate messages. Educate this new Indian customer with your value proposition – reach out – engage – inform – indulge – entertain and then retain. This customer is loyal and will remain with the brand if assured of prompt service, efficient sales staff, continuous engagement and mutual respect.
Some of the luxury brands entered the market with flashy advertisements and low product width, but wrapped up because their target old rich consumer was expecting the same experience as they get abroad. Now they are shifting their focus on the newly affluent customer who is aspirational but doesn’t understand the products very well. Their current mass marketing strategies are not working.
In a country with a multitude of cultures, languages, religions, festivals, colours and tastes there needs to be a localized marketing strategy. Brands will have to understand the flamboyant Punjabi and a reserved Bengali. For example, luxury brand Montblanc — which successfully operates nineteen retail points across first, second and third tier cities in India — has regionalised all their marketing material. “There is a clear distinction in customer values between [Indian] states,” says Tanya Kapinda of ID8 Media Solutions, an agency which works with Montblanc’s marketing division in India. “Any time a letterhead, invitation or a newsletter is produced, we customize [it] according to the local language and other aesthetic considerations such as colors used and the amount of decoration.”
With varied types of customer categories, it is imperative to connect and convert the first time walk in client in a luxury store. As from the study, store staff interaction came out as one on the most important parameters for customer conversion and retention. Sales staff can elevate the consumers’ involvement with the brand, both emotionally and materially. For closing the sale and retaining repeat customers, brands must deliver influential, enlightening and touching experiences as the physical store experience is the most memorable form of communication that a luxury brand can offer.
Organizations need to create value experience through the digital platform in alignment with the store experience.
A vast nation, multitude of cultures, unity in diversity and a majorly young population makes India a distinct consumer base for the luxury industry. Brands focusing on India specific strategy and connecting with the local Indian consumer will be the ones who will be most triumphant in the coming years.
Luxury from maharaja to masses is here to stay.
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