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Decoding The Success Of India’s Luxury Market

The Great Indian Middle Class is the driving force.

24/07/2017 9:43 AM IST | Updated 24/07/2017 9:43 AM IST
Adnan1 Abidi / Reuters

My quest for luxury began two decades ago, with an inheritance from my grandfather: his Omega Seamaster manual-wind mechanical wristwatch. I always held it very close to my heart, not because it was an Omega limited edition, but because it was my grandfather's last gift. I was fascinated with its movements and complications. Even today, I never forget to wind it, every day. But it is since then that I started exploring the world of fine craftsmanship and luxury.

Over the years, my quest has helped me explore the various facets of the dazzle—luxe. The rich history of craftsmanship, the heritage, the sheer finesse with which an exquisite hand-crafted piece is created—every bit of it is a treasure trove for a story teller.

To sell or not to sell to the masses? That has been the big question that all retailers of luxury brands face.

Unfortunately, the literature on luxury is very limited, globally, and writers have mostly focused on cataloguing luxury products and showcasing them. Moreover, there is not much written on the Indian luxury market, which is unique in its own right.

A sneak peek into the age-old love affair between branded luxury and our great nation of royalty will give a sense of this unique history of luxe. In the 1920s, 20% of Rolls Royce's global sales were from India. In 1926, the Maharaja of Patiala commissioned Cartier (in its largest commission till date), to remodel his crown jewels, which included the 234.69 carat De Beers diamond. The result was a breath-taking Patiala necklace weighing 962.25 carats with 2,930 diamonds. In 1928, the Maharaja of Jammu and Kashmir placed orders for more than 30 custom-made trunks from luggage maker Louis Vuitton over a period of six months.

Cut to today, with the ebbing Chinese luxury story, most luxury goods providers are shifting focus to the growing luxury consumer base in India, which is poised to grow at 25% from 2013 till 2018, and is likely to touch the $18-billion mark from the level of $14 billion in 2015.

For many luxury brands India was the past and India is the future.

So I felt an urgent need to narrate a wonderful tale of luxe in India—capturing this wonderful dazzle in a holistic way, unveiling its various facets. The result was my book Decoding Luxe, which challenges popular misconceptions and exposes certain unconventional and counter-intuitive realities about the luxury market in India. Let me share a few.

The super-rich don't drive luxury, the Great Indian Middle Class (GIMC) does

Major luxury brands owe their existence to the GIMC. The secret behind the survival of high-end brands is the play in volumes. Shopping malls, in order to lure the middle-class towards luxury and to give them its taste, are mixing luxury, premium and super-premium in the same shopping mall. You can't afford to restrict luxury retailing for five stars and exclude this group as they are your lifeline. It is this aspiration that has led to the exponential rise of the market of knock-offs and first copies. To sell or not to sell to the masses? That has been the big question that all retailers of luxury brands face. Most of them have been struggling to strike a balance. The key lies in pricing.

What we see today is the democratisation of luxury, the rise and rise of "masstige"—a portmanteau of the words mass and prestige.

What we see today is the democratisation of luxury, the rise and rise of "masstige"—a portmanteau of the words mass and prestige. Essentially, "prestige for the masses".

All luxury brands need the GIMC to drive growth as that gives them the volumes which are the sustainability drivers. So the low-hanging products by luxury brands such as accessories become the stairway to elite aspiration for the masses.

Luxury escape rather than ostentation is the next billion-dollar industry

The desire for escape has always been a very dominant yet not-so-obvious reason behind the love for luxury. But it's only recently that brand custodians have been wising up to this fact. The promise of escape, if properly harnessed, is the next billion-dollar-churner for all luxury brands across the globe. They just need to recalibrate their positioning.

Instead of positioning a brand where the payoff comes from flaunting a logo, it needs to stand for transcendence from the mundane, a getaway from the ordinary. Consumers will pay top-dollar for that one hour a week, or that lazy private beach or yacht holiday, away from everyone, where the brand will be the lone companion to their luxury solitude. Luxury is the great escape and it can make brands millions.

E-commerce and the rapid growth in the luxury counterfeit market

According to a 2014 study by ASSOCHAM, the counterfeit luxury products market in India is growing at a rate of 40-45% annually. This has a lot to do with the advent of e-commerce platforms selling them at affordable prices. Web shopping portals account for over 25% of the fake luxury goods market in India. Globally, with a share of about 7%, fake luxury products account for over $22 billion of the $320 billion global luxury industry.

It is all about being special or exclusive, to be someone who is not ordinary. About being able to stand out in the crowd. This razzle-dazzle industry thrives on ego.

Luxury counterfeits are not a new phenomenon, but with technological advances and sophisticated new ways to reach consumers, the business is increasing rapidly. Historically, luxury counterfeits were often shipped in large cargo containers and passed through numerous middlemen before reaching the final consumers. Compared to the purchase of a fake handbag on the street, the purchase of a bag online makes it harder for a consumer to tell whether the product is genuine. An online advertisement by these portals for a Gucci bag could show a photo of a genuine Gucci bag, but the purchaser would actually receive a fake one. The counterfeit seller may create pseudo product reviews, blog entries and rogue social media profiles to enhance its legitimacy. Suggestible consumers may fall for this fake content.

Ego drives luxury brands

It is all about being special or exclusive, to be someone who is not ordinary. About being able to stand out in the crowd. This razzle-dazzle industry thrives on ego.

The idea that a marketeer sells is the exclusivity of the luxury brand and the exclusiveness of its owner. You will belong to an elite club such as a Lamborghini Club, flaunting your standing in society. The sheer arrogance that a brand exudes using prohibitive pricing to crowd out clients will make it aspirational. So the users will get an elevated feeling that he or she is part of an exclusive club. A brand such as Rolex is selling a legacy, a life of greatness, pandering to a masculine ego that craves distinction.

This three-letter word drives the luxury industry globally.

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