Abhilasha Kale, JCK India, interviewed Preeti Reddy, vice-resident, Technopak Advisors Pvt. Ltd, regarding the current scenario and the market scope for luxury brands in India and give market mantras to jewelers for success in the luxury market. JCK India: Is this the right time to enter the luxury segment in India?
Preeti Reddy: As per our understanding and analysis of the market, we feel that this is an appropriate time to start focusing on the Indian [luxury] market. The total market potential for upscale and luxury products for 2004-05 was US$ 14.8bn for both Indian and international buyers.
The Indian consumers today are in sync with global fashion trends. Most importantly, they have the purchasing power. About 1.6mn households are earning over Rs 45 lacs (US$ 100,000) or more per year. They spend about Rs 4 lacs (US$ 9,000) per year on ‘luxury or premium’ goods and services, thus, giving the luxury segment a market potential of about Rs 65,000 crores (US$ 14.4bn).
Why do jewelers (even established players) find a need to open lifestyle or luxury outlets?
According to Technopak’s India Luxury Trends report, there are three top indulgences for luxury consumers: jewelry (27 percent), clothing (16 percent) and digital accessories (13 percent). Jewelry is not an investment today, but reflects the overall personality of the person wearing it.
The changing psychographics and the increasing number of working women are leading to a shift in the buying patterns and aspirational values that translate jewelry from being a mere investment category to the one that enhances personality.
The per capita per annum spending on jewelry is Rs 104,600 (US$ 2,433). The spending per year in luxury households is likely to grow depending on the direction the market takes. Indian women have a fascination for jewelry and due to the nature of the category; wherein it is considered an investment by the family, there is an approval on the purchase of the same.
North Indians spend the highest on jewelry which is around Rs 106,500 (US$ 2,477) per year. It is followed by the western region with approximately Rs 20,000 (US$ 465) less than the northern region.
Which are the non-jewelry luxury categories that jewelers should stock to cater to the changing needs and demands of the aspiring consumers?
With jewelry, other accessories like embellished time-wear and eyewear can provide a good product mix.
On what basis should the jewelers select the brands for retail?
The brand heritage will play the most important role in this decision, be it Indian or an international brand. Also, apart from heritage, the consumer recall factor needs to be high. Today, an Indian luxury consumer is still at a stage where luxury is a status symbol, not a way of life, so the ability to drop a name is critical.
Which are the key consumer segments that luxury brands should target?
The target consumer pie has extended from old luxury to old and new luxury consumers. The new, affluent generation loves something beyond the traditional. Senior professionals, in their early or mid thirties and early forties, are the target consumers for luxury. The new entrepreneur class, in myriad new businesses like information technology, manufacturing or retail, can be an ideal class of consumers. Therefore, along with the old luxury connoisseurs, it is also important to tap into the new consumer segment.
What's the best way to reach the customers?
Luxury orientation demands that brands actively create awareness, induce trials and arouse the desire to possess the best that the world has to offer in terms of design and quality. This can be best achieved with the help of media and by private placement of products amongst key social circles. For most products, the source of information is lifestyle magazines and references from friends and peer groups.
What would you like to say about the awareness of the Indian consumers regarding luxury brands?
The awareness and appetite for luxury brands is now increasing by the day. The luxury connoisseur moves in circles that know about brand heritage and brand profile. And the best part is that they do not understand the concept of “rationing.”
What is the role of cultural and social factors in the Indian luxury market?
Cultural and social set ups play a vital role in framing the consumer mindset in any society. What they wear, how they think, their behavioral patterns, their aspirations all link to the construction of the society and the culture of that society.
Indian culture has always celebrated personal indulgence and adornment, even luxury. If you read ancient texts, they speak about ‘solah shringaar.’ The Kamasutra even has advice on what jewelry to wear to attract the opposite sex. The gold jewelry has traditionally been something the Indian consumer buys and hoards. However, the external cultures are also influencing the Indian consumers in a recognizable manner. This explains the sudden spurt of expenditure on categories like western clothing, contemporary jewelry and fragrances.
Are five star hotels a suitable destination for luxury brand retailing?
In the absence of a high street for luxury, most high-end luxury brands in India retail at five star hotels. The Oberoi Group, the Maurya Sheraton, the Hyatt Regency and the Taj are the most prominent addresses for luxury retailers in India.
Traditionally, as in all developing economies, luxury brands set shop in the five star destinations of India. It guarantees an exclusive ambience, facilities like valet parking, and an enveloping shopping atmosphere which the target consumer is used to. There is compromise in terms of limited footfalls, limited visual impact and irrational rentals. However, these were overridden by other profitable factors.
As the number of affluent Indians keeps growing at double digits and the personal wealth of existing luxury consumers increases at double digits, these spaces are now proving inadequate in terms of servicing the new luxury consumer. They are unable to attract newer customers, cannot make any visual impact and the rentals are not justifying the current traffic. There is also limited availability of such spaces and new brands are unable to enter. This calls for developing specialized retail spaces for new brands.
Is there any market scope for luxury products in two-tier and three-tier Indian cities?
Although two and three-tier cities are also experiencing the growth momentum, it will take time for these cities to develop an appropriate landscape for luxury retail and develop an orientation towards luxury amongst these consumers.
How you will compare the luxury market scenario in India and China?
At present, China is a much bigger luxury market as compared to India. And the potential that China currently provides is a lot more than that of India. Also, the luxury retail environment is better developed in China. Having said that, China is facing a major issue of counterfeits which is a big deterrent to the growth of the luxury industry. With changing favorable demographics and increasing purchasing power in India, we do not think it will take long for India to catch up and even lead the race in the luxury market.
What would be your market mantra for the jewelers, in order to succeed in this era of luxury?
India is an evolving market with an ever increasing set of luxury consumers – some old but mostly new. These new consumers have to be hand-held, guided and led to higher levels of experience. They are the ones who will climb from the base levels into new paradigms.
There is room for all brands at all levels of premium and all need to be present in the market to create the right context for the pinnacle.