LUXURY & THE INCREDIBLE AFFLUENT INDIAN – TOP TEN MISCONCEPTIONS
2016 comes to an eventful end with various upheavals across the globe. Ranging from terror attacks in Europe ; the Brexit fiasco in Great Britain ; the unexpected victory of Donald Trump in USA and to the last but not the least, the demonetization drive by Prime Minister Modi in India.
All these factors have had adverse and or positive impacts on the luxury domain. Global luxury industry valued at a whopping 1 trillion Euro in 2015 (Bain & Co) registered a mere 5% growth over 2014. The global luxury market has reached an era of single digit growth.
However, as the rest of the world stabilizes, the Indian growth story is hard to discount. For most luxury brands, India has become the ‘hottest market place’. Growing at approximately 25% CAGR, it is estimated to have reached $18.3 billion from $14.75 billion in 2015.
The single biggest factor contributing to this growth is the steep rise of the affluent class due to the stellar performance of the economy and the ‘start up’ culture. Estimates reveal that the number of HNI households have grown at a CAGR of 16% from 81,000 in 2011-12 to 146,600 in 2015-16. This is further expected to increase to 294,000 representing a total net with of IRS 319 trillion !
While there is a tremendous buoyancy around the affluent Indian & his luxury consumption, there are clearly a few misconceptions in the minds of the marketeers.
- The affluentIndian makes & spends money easily: This perhaps is the biggest misconception going around. Making a Indian spend his money is a acid test for any brand. India typically has two types of affluent – ‘The khandani raaes’ (traditional rich) and or the ‘New Maharaja’ (people who made money post partition in 1947). Both of them work long hours, forego a lot of personal time, make sacrifices, undertake a lot more risk & add value to the society as compared to many others. Hence, they are cautious spenders & research well before they splurge on luxury, only to seek the best. The traditional rich, being generally well-informed & highly knowledgeable, likes to preserve his heritage and wealth handed over by the generations. The new maharaja, on the other hand, having made the entire wealth in his own lifetime, is a cautious, hard working and extremely value-seeking customer. His erstwhile middle class background makes him seek justification for every spend he carries out.
Both seek respect for their time, recognition for their hard work, status and individuality – do not take them for granted.
- All Indian Nouveau rich are conspicuously ostentatious spenders: While this may be true for a vast variety of customers visiting luxury stores, it is a grave mistake to generalize all the nouveau rich into logo thirsty clientele. Fact remains that many of the ‘valuation business’ (read e-commerce boom) super rich generation have made quick money in the past few years. Usually of highly technical background, the back end culture they belonged to never give them any real need for all things fancy & expensive. They now wish to acquire style to suit their status, which is not necessarily loud, & logo driven. They are shy as well respectful towards others, typically will experiment with brands, products, services. Influenced by other user experiences rather than just pure sales talk in their decision making process, they usually like to be subtle and elegant rather than loud and garish.
Treat them with respect for their human values and admiration for the success they have achieved in a short span of time. Not many can duplicate what they have achieved in a very short span of time.
- Most (new) Indian affluent can’t define luxury nor recognize luxury brands: On the contrary, most of them are clear with their definition of luxury. To mistake their simplicity for ignorance can be a fatal mistake. In a fast emerging market like India, they may not recognize the brand or even get the brand name pronunciations wrong. However, each one has his own purchase motivations, which may run beyond the standard boardroom definition of luxury. They are fast learners and would like you to arrive at the value proposition of your brand quickly.
‘Underestimate yourself & overestimate the other’ can be a sure shot success mantra. Inform, educate, guide and lead them to purchase.
- Luxury is the sole prerogative of the affluent class: On the contrary, in a country like India, luxury is a bigger pull for various other classes. These range from the Henry, the upper middle class, the returning NRI, to the first time aspirant. (Read ‘The Incredible Indian Luxury Consumer). Luxury brands and services need to address and offer products that can draw in all such classes into their zone and create a much wider reach, recognition and goodwill for the brand.
India is a market with a majorly unexposed population – people with rich tastes and high cultural values seek all things good in life. Expand your horizon beyond the theory book definition.
- Indian affluent spend more on luxury goods than services: There can be no bigger misnomer than this. While the initial spends are towards luxury goods like watches, apparels, accessories, automobile followed by home and interior, the switch to services happens quickly. The newly acquired status needs to be shared and appreciated by near & dear ones extending into a wider social circle. Spending on beauty, fitness, entertainment, fine dining, concierge, travel, tourism etc quickly ramp up the spend chart.
Offer compelling experiences to them and their circle of friends to enable them feel important in the eyes of their social network.
- Indians do not shop Luxury online: A generally tech oriented nation, thanks to the smart phone revolution, the customer has quickly leapfrogged into the digital space! From books to cars to homes and now even yachts are being sold online. Newer concepts like ‘Pre-owned luxury’; ‘Rent a luxury’ are not only adding new dimensions to luxury purchases but also new customers.
Be open to experiment and adapt to a fast evolving market.
- Indian affluent and Luxury is restricted to metro’s: Contrary to popular belief, the Indian affluent is spread across the entire country. Luxury brands do face a challenge with respect to setting up physical stores in every location, but servicing this fragmented market may be the key to success. The digi-wave has given many new customers to the luxury brands. They now order through various channels ranging from whatsapp to facebook messenger to trunk shows conducted by brands or event companies across the sub-continent.
Think beyond the metro’s – reach out, inform, educate the affluent beyond traditional markets.
- Indian affluent does not refer to consumer ratings: The sharing economy encourages one and all to share experiences, thoughts, opinions and post purchase reactions. Once again, a typically technologically inclined nation, engages with unknown brands basis not only the opinions shared by the brand website but also other uses comments and reactions. This is particularly so in the service sector. While WOM is the universal promoter for luxury goods & services, online referrals are equally important for a wider reach.
Be true to the customer by sharing genuine advice & information rather than exaggerated claims. The customer is in all probability pre-informed.
- Indian affluent in not brand loyal: While most Indian are yet experimenting with luxury brands and services, the fact remains that by basic nature Indians are generally very loyal – to their wives as well as their brands ! Affluent who have done the entire trial cycle swear by the brand they settle with unless until they encounter some quality or service issue.
Ensure to deliver product and service value every time that the customer shops with you. Do not take him for granted.
- Demonetization will affect luxury consumption: Against popular belief, a informal survey with most brands across goods & services show that the affluent and the brands both have embraced the digitization drive for money transfer very well. Post an initial lull and slow down, it is anticipated that business will be back to normal very soon.
Luxury surely is recession proof – unaffected by shocks in the economy or otherwise. The Indian affluent continues to enjoy his taste of all good things in life.
By Abhay Gupta
Founder & CEO
Luxury Connect & Luxury Connect Business School
New Delhi, India