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The Taste with Vir Sanghvi: You thought Indians were label-whores? You thought wrong

In this week’s column, Vir Sanghvi investigates Indians’ unique relationship with luxury brands, and how our priorities, our government’s laws, and our inherent rationality define it.

vir sanghvi Updated: Oct 04, 2017 12:43 IST
Vir Sanghvi
Indians have a strange, yet rational relationship with luxury.
Indians have a strange, yet rational relationship with luxury.

Around a decade and a half ago when the great luxury companies began looking at the Indian market, I would frequently get invited to have lunch with some tan-suited representative of a global luxury giant. The conversation would nearly always follow the same lines.

The elegant gentleman from the famous international company would tell me how excited his firm was about opening in India. I would mumble something polite in response.

You know, the designer-company dude would say, we have done so well in Asia. Earlier Japan was our biggest market. But now China is just exploding. We have a hundred (or more) stores all over China and demand is going through the roof. Asia is really the future of luxury!

I would respond carefully that I was aware of the Japanese fascination with designer labels. And yes, China was a huge market.

Then, we would get to the crux of the conversation: “My company is so excited about India. We see India as the next China,” the luxury guy would enthuse.

At that stage in the conversation, I had a choice. If I didn’t like the guy or was bored, I would say something mildly encouraging and let him resume his pitch.

But if he seemed like a nice guy, then I would take the plunge and give him the dubious benefit of my own view. Look, I would say, it may be a mistake to club India with China and Japan. Yes, there is a class in India that believes in conspicuous consumption and spends a lot of money. But there simply aren’t enough such people for India to become a market that is even one-fifth the size of China.

By now, the man from Milan/Paris/London would begin to look concerned, so I would explain further. A luxury boom only occurred when even people who could not afford luxury lusted after it. In China, women were willing to sleep with men to get Louis Vuitton handbags. In Japan, secretaries and receptionists saved up to buy designer accessories.

I was not sure the same was true of India, I would say. Our consumption patterns were different. If a secretary saved up, it would be for a piece of jewellery. Indians tended to spend big money on things that lasted: jewels, real estate, etc. Even Indian marriages tended to last longer than they should because so much had been spent on the wedding.

Yes, of course, there was a market for luxury goods in India, I would conclude. But let’s throw the China parallels out of the window, recognise that India is different and lower all expectations.

The lunch always ended on a sombre note. But of one thing, there was never any doubt: Nobody paid the slightest attention to me. How could they? Their job descriptions were “Director-New Markets”, “Head of Asia” or other such grand titles. They could hardly phone Paris/Milan/London and say “Shall we rethink the India strategy?”

No. They had to go ahead anyway. And if, by some chance, such sceptics as me were right, it wouldn’t matter. By the time the reckoning came, the guy who set up the India operation would have been promoted to a higher responsibility or moved on to some other job. Nobody would recall the early misguided, extravagant optimism about the Indian market.

Now that nearly every luxury brand of consequence (with some notable exceptions: Prada, Saint Laurent and a few others) is in India, this may be a good time to remember those early conversations.

Smugness is not an attractive quality. But I can’t help feeling that I was right all along.

India is nowhere near China and Japan when it comes to the size of the luxury market. I had said we would be, at best, one-fifth of Japan. In fact, I suspect, we are even smaller.

Some brands do make money. Louis Vuitton, the pioneer in the Indian market, is consistently profitable. But the vast growth predicted for Vuitton has not come to pass: Shops in Chennai and Bandra have closed and despite brand loyalty and a dedicated following, I doubt if the brand will ever approach Chinese levels of success in India.

It’s the same with other brands. Chanel, an early entrant, has scaled down its India operation and I don’t see the clothes, beautiful as they are, taking off here. Hermes, which shifted its regional office to Delhi was singed by its brush with our bureaucracy. It continues to have faith in India, with a new store opening in Delhi this week, but its regional office has shifted out and its expectations are more realistic.

I could go on. Tod’s has scaled down. Giorgio Armani gave up half its Emporio store. Tom Ford remains a tiny corner of Vasant Kunj that is forever Punjabi Bagh. Burberry has seen belt-tightening, Gucci has changed licensees, Ferragamo is a mess, Dior runs a massive store in Delhi only to sell a few handbags, all the Zegna shops seem strangely empty, and so on.

So why has the luxury boom never really taken off? Partly, it is the sort of thing I once talked about. Indians are not label-whores.

But it also has to do with government policies. I went to a designer store a fortnight ago to buy a trinket as a gift. The apologetic salesgirl asked for my PAN card and Aadhar card. She made Xerox copies of both and then asked me to sign my name across two copies of each. She knew I was paying by debit card, she said, not with an envelope full of cash. But all this paperwork, alas, was the law now.

Nobody enjoys filling out forms in duplicate only to buy a wallet. But while the new regulations may merely annoy you and me, they have had a more devastating effect on a large and significant segment of luxury buyers: People who paid for everything in cash.

At one famous designer store in Delhi, groups of eager buyers from Ludhiana and other cities where there were no luxury outlets, would turn up just before closing time. The store knew that they were high-rollers so it let them stay long after the doors had been closed. Then, it sold several lakhs worth of merchandise to these customers, most of whom had arrived with monogrammed briefcases full of cash.

No matter what the luxury stores tell you, some cash purchases continue to take place. But the effect of the new regulations has been to severely reduce the total number of cash transactions.

The high rollers know the tax man is watching. So, they buy their designer goods when they are abroad. And the Indian luxury sector is hurting.

You can’t necessarily tell how hollow the Indian luxury business is if you only look at it from the outside.The glitz and glitter remain in place.A new luxury mall opens in Delhi this week. Another one is planned for Mumbai. The glossy magazines are filled with ads from global designer brands for products that nobody will ever buy. But if you have any insight into the luxury sector, you will not be fooled.

I’ll give you my own example. I’ve written for many of the so-called luxury and luxury-travel magazines. Abroad, these magazines can create spending crazes and transform consumer behaviour. Not so in India.

With the notable exception of Vogue India, I doubt if anyone even reads the Indian versions of the glossies. I never get any feedback on anything I have written, have rarely met a single person who has read my articles in any of these magazines and am convinced that the only people who even look at them are advertisers who get mailed free copies.

Mostly, these publications get by on advertorial (sometimes disguised as editorial), sponsored events (the sponsors are usually liquor or car companies: not designer brands) and bogus award shows where the largest advertisers get the biggest awards.

In retrospect, none of this should shock us too much. The pattern has been the same in virtually every sector. When the wine boom began, at the start of this century, the same parallels with China, where they would order so much Lafite that they drove up the global price, were trotted out. The Indian experience has been nothing like that. Once again, government regulations have been a factor in harming the trade but it is clear that early expectations were vastly inflated in any case. Indians are drinking more wine now but it is middle-rank wine, not China-style big labels.

Or take the case of the hotel industry where branding is the name of the game. A decade ago, the big hotel companies believed that Indians were just waiting for the great brands of global hoteliering: Four Seasons, St. Regis, Ritz-Carlton, etc.

Well, the brands have arrived and despite their best efforts, not one of them is among the top three hotels in any Indian city. It is the same story with the upmarket global restaurant brands: Nobody cares how big they are in London or New York.

I empathise with the luxury industry when it complains about government over-reach and corruption (though the crackdown on black money has my full support). But apart from that, I have no real sympathy for the global big names who believed that Indians would prostrate themselves before their brands.

At some deep and fundamental level, Indians are a deeply sensible people. We may enjoy the hype that surrounds designer brands. But we are rarely taken in by it. When we do spend our money, we spend it wisely, and on things that will last.

I hope that never changes.