Luxe brands seek help in bridging the gap

While India’s luxe market is set to grow, many fold brands are looking to enter and are facing issues like 30 percent mandatory sourcing norms under the FDI rule, poor infrastructure and lack of premium malls and high-streets to get sorted before formally entering. In fact, many are taking the e-commerce route to test-market their products here. While a growing number of middle class in India, both in metros and Tier II, III cities, are buying luxury goods, it is still not the top market for marketers.

Need to understand the customer

Various studies have shown that international brands planning to step into India must first study the consumer as the diversity is immense here. Being a country with different cultures, traditions et al, preferences differ region to region, state to state. As Abheek Singhi, Senior Partner and Director, Asia-Pacific leader-consumer and retail practice at consulting firm The Boston Consulting Group points out to begin with the definition of the Indian luxury consumer needs to change by banishing that clichéd image of the Maharaja. “Luxury cannot be limited to just the very top or 0.01 percent of the population,” he elaborates.

As per a Kotak Wealth Management Report released in July, for a country with a population of 1.2 billion, there are just 117,000 people who are classed ultra-rich (people with family wealth of over Rs 25 crores or earn Rs 3-4 crore a year). This segment of consumers usually shops for their luxury requirements on their trips abroad. While the concept is gradually changing with global luxury labels making their range available in the country, the consumers are still skeptical about whether they would get the same or similar product locally.

Experts feel that these brands will have to innovate to reach out to the target consumer base, while educating them about buying premium products. There are five luxury consumer segments emerging in India, says Singhi: classpirationals, who want to blend in with the classes; fashionistas, or trendsetters; experiencers who love travelling, wine tasting, etc.; absolute luxurers for whom luxury is about exclusivity and customization; and megacitiers—part of the global elite.

Removing hurdles for brands

Speaking at the recent HT luxury conference, Nirmala Sitharaman, Commerce and Industry Minister had agreed to look into the requirement of 30 percent sourcing from domestic companies for single-brand foreign retailers, who are allowed to invest 100 percent in the country.

Positive steps by the concerned ministry and India government towards understanding and resolving problems faced by the foreign luxury label can spur growth of these labels in the country. For instance, according to Armando Branchini, Vice-Chairman of the Altagamma foundation, a conglomerate of several high-end Italian companies, there are 17 Italian luxury brands in India at the moment, a number that has remained unchanged since 2005. British luxury brands are focusing their efforts in other markets such as China, says Charlotte Keesing, Director at Walpole British Luxury, a consortium of British luxury retailers like Jimmy Choo, Harrods and Burberry.

The reasons are high customs duty, high rentals, lack of luxury malls and high-streets as well as ambiguity over 30 percent local sourcing from SMEs rule under 100 percent single brand FDI. Though there has been a rise in shoppers in India, the presence of the world’s top 100 retailers in Indian cities is sparse compared with others in the Asia-Pacific region, according to a report by Jones Lang LaSalle, a real estate consultancy. High rents and restrictive investment policies that hinder profitable growth in India are among the reasons for global retailers’ comparative disinterest in the country, said the report called ‘A Magnet for Retail’.