Luxury Retail has Bright Prospect in India

News Posted - 2010-02-03

Luxury retail in India has been a fascinating journey from a socio-economic perspective. Projected as the next China for luxury goods consumption, the Indian economy has evoked a lot of interest globally given its statistics of some of the highest disposable incomes and increase in the number of millionaires. Incidentally, luxury is not new to our country. India was fabled for its riches in pre-British times and even the post- British era saw its pockets of richness of erstwhile royal families and the newly-developed industrial classes who were the users of European luxury brands. Indian princes had a penchant for luxury goods from the west. Brands such as Cartier and Louis Vuitton were patronized by the Patiala royal family among others, and many princely families in Rajasthan had their own private collection of luxury cars.

The last couple of years have seen a profusion of luxury brands into the Indian market: from stand-alone stores in five star hotels to luxury Malls, these labels which were previously only seen in international fashion magazines and high streets abroad, were now household names in India. With one of the highest levels of disposable incomes, the well-traveled Indian luxury consumer is being wooed by all. Rightfully, as an economic growth story we will be compared to our eastern cousin China.

The comparison with China, on one hand, maybe fair due to the sheer numbers of the consuming population, but the socio-demographics of the population differ. If we try to properly understand the various economic and market trends and features of the countries, we can make a comparison between the Indian and Chinese economy. In spite of being a Socialist country, China started towards the liberalization of its market economy much before India.

This strengthened the economy to a great extent and exposed the population to foreign labels much before they made their inroads into India. While India’s liberalization policies started in the 1990s, China welcomed foreign direct investment and private investment in the mid 1980s. With higher levels of exposure and also education of the masses as compared to India, the Chinese were obviously more dominated by western influences, which explain the intrinsic need to copy the conspicuous consumption patterns of the west. Emerging from its socialist frugality syndrome the need for the new rich entrepreneurial population to flaunt a luxury good as a social symbol far outreaches India.

In China, the working population saves through the year to make luxury purchases such as handbags, shoes, suits that visibly show a social status they aspire for. The example is nowhere more evident than in Hong Kong where there is a profusion of luxury stores on the high street and in hotels. There are queues outside these stores! This fascination for luxury goods is unseen in any other part of the world. Indians have been consuming luxury brands but they nowhere compare to the obsession that that Chinese have for these brands.

In India even in places where there is the propensity to buy, acquiring a luxury brand is not such a social status thing as it is in China. So while the brands continue to employ marketing strategies to reach the hidden pockets of wealth in India, it is in China and Hong Kong where the real growth in numbers is for the brands. India will, on the other hand, see a more controlled but sure growth pattern. In any case, the Indian consumer is more sophisticated, discerning and in that manner more demanding. Being culturally richer, they need less education on luxury than the Chinese counterpart.

It is India’s decades of red tape coupled with the inability to develop infrastructure fast enough, which is a debilitating factor. Another reason is that India has not established itself as luxury tourism and shopping destination as Dubai and Singapore have successfully done. If luxury shopping were added to the travelers’ itinerary in India, we’d see interesting results. With the current rate of growth, an average younger consuming population than China, sophisticated manufacturing know-how, India would be the new Mecca for luxury brands in the years to come not just as a market for their goods produced in Europe, but even as a manufacturing hub.

Source: Indian realty news