According to a survey done by AT Kearney for The Economic Times, Indians spend $2.9 billion on luxury products and services (private jets, luxury homes, cars, yachts and art), and spend another $953 million on luxury services and top it by buying luxury goods worth $377 million. The survey was revealed at the Economic Times first-ever luxury conference “Dialogue on Luxury”.
Now if you believe such reports as prepared by McKinsey or AT Kearney, the luxury market is well on its way to becoming a huge market for foreign retailers and indigenous India retailers. I caution you however, these reports are typically made to suit the interests of the report payee. I do agree with its conclusion, India luxury goods and services will be a tremendous growth opportunity in the future.
The survey revealed that the typical luxury brand consumer is 25-34 and usually an industrialist. Most remarkably, according to Neelesh Hundekari of AT Kearney, there is no guilt feeling associated with spending on luxury. The survey also revealed that the Indian consumer wants to be first to get luxury items, is a tough negotiator for the same goods, and likes the recognition and respect of “making it”.
We have covered the HNW individual, luxury goods and luxury services for some time. While it may seem a bit strange at this point to see luxury and India in the same sentence, it’s coming to India like it or not. We like it - it means the country is creating wealth. Yes, some will get ultra-wealthy and ostentatious, but a rising tide floats all boats, so India’s poor will also benefit.
“The high net worth Indians have a catchment area of $500 million which is growing rapidly. So we must look forward to the emergence of new rich category that may immediately translate into spending in the market,” said Ficci secretary-general Dr Amit Mitra.
BBC Video on Luxury in India
Still there are challenges for foreign luxury retailers that need to be overcome. First, customs duty for watches are 65%, and some watch dealers don’t like operating in India because of the low profit margins. Another issue is the fake luxury good market. Mahesh Mehta, manager business planning and merchandiser, Priority Marketing, which distributes brands Emporio Armani, Fossil, DKNY, Kenneth Cole Reaction, Aspen, Levis, and others, says: “The biggest challenge in the luxury watch market is that the volumes are low and the valuation is very high. Also, India has a blooming grey market, which nestles fake watches of almost every brand.”Need a Luxury Model – Follow Singapore
So despite the challenges (mainly again infrastructure) the luxury market is well on track to reaching $30 billion by 2015. India’s new airports are a good start while only the tip of the proverbial iceberg. Examining Singapore’s 3rd world to 1st world model, they built a world class airport, then world class avenues from the airport to the center of the city, then started demolishing and rebuilding Class A buildings in the city center.
Hence, picture a wealthy international visitor or businessman entering Singapore for the first time back then. All they saw from airport to downtown office or shopping areas were world-class infrastructure that they were accustomed to at home. They felt comfortable, so the businessman invested in Singapore, while the wealthy visitor spent money on Singapore goods. When businessman and luxury traveler returned home both reported to their circle of influence of the need to invest or visit Singapore.
India needs a similar “user experience” for first time and returning foreign travelers. While “old India” still provokes blissful memories for some, today’s India youth want a better life with better infrastructure to support their growing affluence. Thus $30 billion by 2015 is not only good for the high net worth (HNW) individual and luxury retailer; it’s good for all of India because the top of the income pyramid will trickle down to the poorest.
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