Luxury in India: The way forward
By Dr. Sheetal Jain
Indian luxury market is poised to reach US$ 50 billion by 2020 from the current US$30 billion (Assocham Report). Growing middle class, multiplying millionaires, rapid urbanization, higher disposable incomes, favorable trade policies, burgeoning millennials and social media proliferation are the key drivers fuelling the growth of the Indian luxury market. The Indian luxury landscape is undergoing a drastic shift; from conspicuous consumption to self-indulgence; from buying logo-driven brands to looking for experiential value and product authenticity; from going to physical stores to accessing online platforms; from being limited to upper echelon of society to being democratic; from brand new to pre-owned luxury items; from Bollywood celebrities to social media influencers and from uninformed and loyal consumers to well-travelled, discerning and prudent consumers.
Following are the key trends that will redefine the future of Indian luxury industry:
The roaring digitalization: In India, digitally influenced spending is presently around $50 billion a year and it is estimated to grow ten-fold to $ 500 billion by 2025 (BCG Report, 2017). Growth in internet penetration, convenient payment platforms, efficient logistics, user friendly shopping experience and better value proposition offered to consumers are some of the key factors triggering the growth of online shopping in India. Online luxury shopping is catching fire while putting the role of physical channels at risk. Various international luxury brands are collaborating with premium e-retailers to reap the benefits. As per BCG report, 50 to 60 million consumers are making fashion purchases online in India and these numbers are estimated to double by 2020. Around 70% of premium apparel purchases will be digitally influenced in the near future. Therefore, global luxury players need to rethink their digital strategies.
Younger luxury buyers: India is home to the world’s largest millennial population (AT Kearney Report, 2016). As millennials possess high spending power, they are driving and ruling the entire consumer market. They have greater preference for luxury items as compared to Gen X and baby boomers. They are regularly seeking social media as the first source of information. They crave for personalized and targeted promotions. This extremely valuable cohort provides great opportunity as well as pose challenge to the luxury marketers as this generation is significantly different from their older counterparts. Therefore, it becomes imperative for the luxury marketers to understand this lucrative consumer segment and the values associated with them.
Growth of luxury in emerging cities: As a result of increasing opulence, consumer spending in emerging cities are rising by around 14% per annum whereas expenditures in top tier cities is growing by nearly 12% a year (BCG Report, 2017). For more than a decade, luxury brands have put all their efforts in enticing wealthy consumers in metro cities only. However, sales records clearly depicts that tier 2 and 3 buyers are outpacing their counterparts with respect to their luxury appetite. Emerging cities like Ludhiana and Surat are now among the top 10 markets for luxury cars. E-commerce is providing a further spurt in this phenomenon. Recently, Montblanc’s offering through digital platform Tata CLIQ Luxury attracted first sales from Kanpur, followed by Bilaspur, Raipur, Coimbatore and other tier II cities. For luxury brands to tap this big opportunity, it is important to understand the tier 2 and 3 consumers’ mind-set and accordingly devise suitable marketing strategies.
Offer beyond Product: Today, it is really crucial for luxury brands to offer unique services and exceptional products. There is need for trained store associates who aren’t there, just to ‘hard sell’ but to understand, engage, interact and build long-term sustainable relationship with the consumers. Sales associates should be experts in their domain and encourage customers to ask questions or seek advice.
‘Wow’ shopping experience should be offered to make the clients feel ‘special’ before, during and after making the purchase. In order to achieve this, luxury companies have to invest in latest technologies and ‘out of the box’ ideas. Burberry offers entertaining and engaging experience to its clients by having large screens and live-streaming hubs throughout its Regent Street flagship store in London. Sephora provides beauty lessons to provide unique experience to its clients. To attract the increasingly demanding young Indian consumers, luxury stores will have to offer more than just shopping. They can enhance shopping experience by having their own cafes, art galleries or even spas in their outlets.
Marrying Physical and Digital: Luxury retailers should offer a seamless, bespoke experience across online and offline channels through omnichannel marketing approach. Burberry offers collect-in-store service, where consumers can browse and select items on digital platform and then go to brick and mortar store to collect those items. Luxury marketers should harness the power of social media for storytelling and engaging the target group.
E-influencers making a mark: Social media influencers are now-a-days proving to be very effective. Today’s consumers trust word of mouth over companies’ advertisement. More than 70% consumers in India are more likely to make their purchase based on social media reference. Furthermore, around 70% of teenage YouTube subscribers trust influencer opinions over traditional celebrities. Therefore, luxury marketers need to invest more on influencer marketing.
Pre-owned luxury goods gaining traction: Second hand luxury goods market is rapidly growing in India as making luxury affordable makes it attractive proposition for value-conscious Indian buyers. Start-ups like Luxepolis, Confidential Couture and Envoged are working in this untapped market and see tremendous growth potential in this segment in the times to come.
Going green: Lately, brands like Gucci, Burberry and Stella Mc Cartney have pledged to be fur free. Indian consumers, particularly millennials are increasingly becoming environment conscious. A recent study by Mastercard revealed that about 70% of buyers in India give importance to ‘green’ and ‘ethical’ while making their purchase. Therefore, luxury brands need to innovate to entice Gen Y who yearn for sustainable produce.
(This article has also been published in ET Retail on December 3, 2018).