News Wrap: India’s Luxury Market
March 29, 2012
Over the last few years, India’s luxury market has witnessed significant transformation and advancement. The rapidly-expanding Indian consumer market has drawn attention from across the globe. Often considered to be the back-end service center of the world, India has transformed into a large market for luxury goods.
In view of the growing importance of the sector, Mint, one of India’s leading business dailies from the house of HT Media recently held a conference to bring together the relevant stakeholders on a common platform. Below are selected views from some of the eminent participants on India as a unique market for luxury goods and services.
Pamela Harper, Founder, Library Group
On her advice to any new luxury brand that wants to come to India: “I would say research the market very carefully and also I would say spend some time here. Understand the people, understand the culture.”
On the real challenge for luxury brands to grow in India: “Slow growth in infrastructure…And also there is no opportunity at an affordable level for brands to go into an off-mall location. I know Hermes has done it in Mumbai, but that is one-off. The challenge is really still how can we get into the market and set up a store.
Glenn Tutssel, Global Creative Director, the Brand Union
On how the luxury market will develop in India and how ‘local’ is becoming an intrinsic part of luxury in India: “If you look at the local culture and start embracing it, and not just start selling anything, you can engage with the consumer a lot more. With their sarees, they (Hermes) have been very successful. A $1,800 saree is a lot of money, especially when you can buy a saree for a lot lesser than that. So they have taken a part of the Indian culture, applied it to their own materials, their own patterns and design and got a niche market and done very well.”
On Indian luxury brands managing to create a niche for themselves abroad: “Luxury is now a two-way traffic. The West has always assumed that the emerging markets would be a great recipient for their brands. Look at Brazil, China, India, Russia, we are just going to sell to them and they will buy. But actually, these markets are looking to the West to sell their brands as well. So the Oberoi Group, a hotel group, fantastic service, great reputation in its own country as well, is now looking to move out internationally. If they can export their culture and their great service, then those brands will start to export and it will be a two-way traffic. It’s happening in Brazil with restaurants, in Russia with apparel, they are all looking West.”
Armando Branchini, Executive Director of the Fondazione Altagamma
On foreign investment regulations in retail: “First of all, the tariff barriers in this country are incredibly high. They are at least three times the custom duties in Europe and at least two times higher than the custom duties in the People’s Republic of China. The FDI regulation also impacts us but not as much as the high level of custom duties. When your government set up in February 2006 the famous 51-49% scheme, it gave the opportunity on one side for a number of international brands to enter and set up in the Indian market. On the other side, it gave Indian retailers the confidence to create the first luxury shopping malls in Bangalore, Delhi and Mumbai…To my knowledge, there is just one other market in which we have the same situation and this is the Gulf area: Dubai, Abu Dhabi and Kuwait, but frankly speaking, the situation there is much more balanced because of their custom duty conditions.”
On mandatory sourcing from local industry: If 30% of what is retailed in luxury has to be made by cottage industries and local craftsmen in India, it will be impossible for luxury goods. I make the example of 10 Rolex watches: seven are Swiss made and three are made in India; do you think your compatriots will buy the three made in India? Of 10 Ferrari cars, if three are made in cottage industries in India and the remaining in Italy, will your compatriots like to pay the same price for the Indian-made car as for a Ferrari car made in the original plant in Italy? I do not believe that is possible. I am joking of course with these examples, but these new regulations in FDI are a joke in the perspective of the luxury goods industry.
Stephen Alden, Chief Executive Officer of the Maybourne Hotel Group
On why the luxury industry in India just cannot afford to ignore the hospitality industry: “In the preservation of heritage, if you add good service, you have the formula for luxury hospitality. India has core strengths relevant to luxury hospitality. The culture is so strong it would preserve the distinctiveness of luxury hotels, which is critical and so the business does not become standardized. You should never lose the distinctiveness or sanitise it.”
Manish Malhotra, leading Bollywood designer
On whether Bollywood inspires fashion in India, or vice versa: “It’s reflective of society, then it is re-followed. Yes it’s a tad bit more, it’s exaggerated but it’s coming from reality. It’s a circle—inspired by people, highlighted on the screen and then it’s re-copied by society. Having said that, Bollywood is very powerful. Fashion influences people who follow fashion, but not necessarily the masses and today the masses are your buyers. The fashion industry can fool themselves thinking that they do influence, but they don’t. Cinema is much more powerful. How many people actually watch fashion channels, or follow a designer’s work? But movies are pervasive.”
Michael Perschke, Director at Audi India
On how the Indian filmmaking industry (Bollywood) has helped Audi in a unique way: “Probably in India, we have been more spot-on for many reasons: The Q7 was a product Bollywood was waiting for—they loved it. John Abraham (a leading actor) was one of the first to buy that car. He wanted it even before we entered the market. He recommended it to others. It created a certain aura for Audi and since they all are based in Mumbai, with close access to media, Bollywood has worked well as a package for us…In India the (car) horn is a category in itself!”