Economists call it ‘Demonstration Effect’ — after the tendency by the less affluent to mimick upscale lifestyles — while sociologists call it ‘upward mobility.’ The less enchanted call it ‘snob value.’
Whatever the terminology, consumption of luxury goods and services is growing in India, thanks to rising incomes and matching aspirations.
That the world’s very top-end brands and marquee labels across a cross-section of sectors are jostling to sell in India, where an estimated 153,000 US dollar millionaires and tens of thousands a rung or two below form a customer base in a nation that still has a poverty problem to solve at the other end.While designer labels Canali and Etro take inspiration from the Indian "bandhgala" jackets Hermes has launched sarees that can cost Rs 200,000.
An Aston Martin car, a Louis Vuitton bag or a limited Montblac pen are things that millions of middle-class Indian now aspire to acquire, thanks to rising disposable incomes and greater brand awareness built by media and advertising.
A CII-AT Kearney report said this month that the Indian luxury market grew at a sizzling 20% in 2010 to $5.8 billion, despite strong signs of slowdown in the broader economy.
The report estimates the luxury market in India to grow to about $14.7 billion by 2015.
“We have entered the next phase of luxury thanks to the debt crisis in Europe accompanied by global slowdown. India has gained tremendous confidence and surely, as a market we are maturing every day,” said Abhay Gupta, executive director, Blue Clothing Company, which operates boutiques for designer labels such as Versace, Corneliani and Cadini.
Luxury watch maker Cartier recently announced the expansion of its distribution network in India. Italian luxury-shoe maker Salvatore Ferragamo is firming plans to add more stores in India to meet growing demand.
“This is just a beginning where the big boom is waiting to happen. Many other brands are also planning to increase their footsteps by opening more stores within metros and looking at retail spaces beyond the metros. Most of the brands with us are also keen on expanding,” said Sanjay Kapoor, managing director at Genesis Luxury, which operates stores on behalf of Canali, Paul Smith, Cavalli, Bottega and Jimmy Choo. It has also started a joint venture with UK’s Burberry.
And we are not talking of the big metros alone for luxury items.
“Luxury is percolating to mini metros such as Chandigarh, Surat, Ludhiana, Nagpur, Pune and Amritsar. These cities have witnessed significant growth in income with ascendancy of young and old industrialists and entrepreneurs thus giving rise to the potential luxury consumer,” said Saloni Nangia, executive vice-president (retail) at consulting and research firm Technopak.
This consumer is wealthy, eager to spend and most importantly, has the desire to indulge in luxury with 30% of the business coming from the luxury shoppers in these towns, she said.
Luxury car makers Audi and BMW and pen maker Montblanc have also fanned out to small cities with boutiques.
Across other categories, such as fashion and home décor, watches and sunglasses, hotels and yachts, shoes and jewellery, brands such as Canali, Jimmy Choo, Bottega Venetta and Lladro are witnessing a sharp increase in sales, say industry officials.
“There is a tremendous momentum in branded sunglasses segment due to which we are hugely investing in professionalizing distribution and training our retail partners which is critical in the success of a luxury brand,” said Amitabh Sehdev, marketing head, Luxottica, India which works licence agreement with luxury brand Salvatore Ferragamo.
Global brands are also working on picking the right sales staff.
“It is not easy to lure the top spenders of the country and yes, they need to do that,” said Gupta.