India’s luxury market – 2018 Outlook

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Hermes store at DLF Mall Chanakya, Delhi

Editor’s Note: India continues to be the next great Asia opportunity for luxury brands as classes continue to move upward and consumers continue to show preference to ‘rep brands’ that offer the status they crave. Our good friend Abhay Gupta is truly the expert when it comes to anything India and luxury and offers his take on the country’s outlook for 2018 via

May 2014 saw a regional controversial political figure walk into the power corridors of New Delhi with a never before witnessed sweeping victory. A grim & challenging economic condition coupled with several other crisis situations welcomed Mr. Modi. Obviously the Luxury Industry could not have been on top of the Governments agenda?

However, some of the key developments that unfolded have directly or indirectly affected the industry positively or negatively:

Digitisation of financial services & Demonetisation: The attempt at weeding out alternate economy from the system came as a big blow to various sectors. Luxury however was gainfully impacted during the initial window of relaxations. Cash transactions peaked for a few hours when accessories, jewellery, watches, real estate and other high value goods ended up being replaced with stashed away cash. Posts this period, there are mixed reports with respect to positive or negative impact. Most brands feel that the initial slow down was replaced by a more balanced cash less transactions bringing in more controls and ease of doing business at store front levels.

Unified national tax on Goods & Services: The single most factor driving mixed emotions post demonetisation has been the implementation of GST. With multiple slabs, a plethora of paperwork and confusions galore, GST started with a resistant trade blockage in general. Luxury brands operating in malls found their overall costs coming down due inputs being credited for gst paid at imports and or rentals to real estate player. With a uniformity of taxes across stores in various states, the margins could be healthier too. Clearly, if implemented well, GST can give a boost to the luxury trade. The governments endeavour to rationalise GST slabs is also a welcome move for sectors like fine dining and hospitality.

Reduced restrictions in FDI policy: Whilst FDI was technically opened up in 2012, complex sub clauses on sourcing norms, investment size, location etc had restrained brands from announcing their plans. However, with current relaxations on sourcing restrictions, more brands are announcing their arrival into the country, the latest being Uniqlo.

Ease of doing Business:  With several positive announcements with respect to new company formation, single window clearances & faster clearances of permits etc (new business owners can now expect to receive all clearances and permits in ten days or less), the ease of doing business index has seen tremendous improvement. As a result of such reforms, Moody’s has upgraded India’s sovereign rating to Baa2 from Baa3, putting India on similar lines as Philippines and Italy.

As a collective result of the above, over 250 to 300 international brands have announced their plans for India.

Women Empowerment & GES: The three day 8th Global Entrepreneurship summit jointly organised by India & USA saw Modi’s vision of women empowerment get a further boost. Led by Ivanka Trump, the summit brought to forefront Modis’ booster schemes of ‘Make in India’; ‘Stand up India’ & ‘Skill India’. Indian entrepreneur is now able to access funds, certified talent and mentors with ease. The growing list of Indian origin premium to luxury brands is a witness to this. Several Indian brands have now entered the list of top 100 luxury brands in the world. Three Indian companies — Gitanjali Gems, Titan and PC Jeweller — have been named in the list of top 50 luxury goods firms globally that was topped by Louis Vuitton.

Creation of Mass Affluence: With increased focus on infrastructure development, employment generation & growth in smaller cities is eminent. Rapid urbanisation is leading to increased awareness and a new demand for premium to luxury goods. Brands like Zara, HnM have now become household names in most middle class families in tier II and even tier III towns. Luxury brands have begun to seep in via trunk shows, private sales and events organised to attract the rich and affluent classes.

What could be the success factors for new entrants in 2018?

The luxury goods market in India is one of the world’s most diverse, exciting & challenging markets. Brands & retailers that want to capture a share of this fast-paced business need to learn to adapt, or risk missing one of the next greatest untapped opportunities for the luxury business.

1.     Learn, adapt & educate the market: India is a vast demographic giant. A ‘one size fits all’ strategy will not work. Diverse strategies are needed in handling different demographics in order for brands to be unbeaten in the luxury sector. Luxury experiences, both in store as well as online has become of prime importance for consumer acquisition & retention. A deeper research into the ethnicity of the region can be a great help. A region wise marketing & communications campaign could pay rich dividends.

2.     Focus on value proposition of your brand: All Indians are extremely value conscious. Ensure you communicate your value systems clearly and loudly. Provide closeness, uniqueness, product and brand acquaintance with appropriate messages. Educate this new Indian customer with your value proposition – reach out – engage – inform – indulge – entertain and then retain.

3.     Indians are digitally savvy: Don’t ignore the digital medium. The R-O-B-O (research on line – buy off line) phenomenon is perhaps the deepest in India. Recent reforms towards a ‘Digital India’ have ensured that the power of the net is freely available to a larger populace.

4.     Train, educate, invest and believe in your staff: With so many varied customers, a key challenge is talent! Cannot be too sophisticated to scare away the new customer at the same time, cannot be too ordinary to not make a aristocratic customer shy away! Driving this balance in line with the brands cultural customer experience is perhaps the biggest operational challenge for any franchisee or brand.

5.     Believe in the market and stay invested: India is a long term paradise. A brand needs to be patient, keep controls in place and let the brand & customer relationship evolve. There is no short cut to success – no quick gain methods in this market.

6.     Collaborate not compete: A relatively easier method that can work in the brands favour is to collaborate with a like minded but differently skilled Indian brand and add value to each other. Recent examples of such associations between Christian Louboutin & Sabyasachi ; Swarovski and various designers are a gaping example of this factor

By Abhay Gupta Courtesy

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