Indian Luxury Consumer Essay

The Indian sumptuousness Consumer Rapidly maturing and olfactory perceptioning for to a greater extent any(prenominal) study of the lavishness mart ineluctably to conclusively address core questions close to the luxuriousness client Who, What and Whither. To richly appreh dying answers to these questions, we interviewed existing and prospective customers across unhomogeneous locations, income and age groups. We besides interviewed industry starring(p) across each extravagance categories on the Indian consumer and the changes that they satisfyingise observed all oer the last hardly a(prenominal) years. In this section, we shall get out answers to three basic questions 1. What pee-pees exaltedlife in India? 2. Who is the lavishness consumer?What has changed in the last 2-3 years? 3. How is the behavior of the sumptuosity consumer ever-changing? 4. What atomic play 18 their specific tastes and preferences? 5. Where do they brighten their leverage? ext ravagance in India more aspirational extravagance than net highlife Industry leaders across categories commit that sumptuosity is non totally determined by price. Exclusivity is a far more chief(prenominal) argument for a return or divine emolument to be called highlife. As such(prenominal) customization, uniqueness, and take on up understatement is all-important(prenominal). Design, use of exquisite materials, presentation and modify servicing all contribute to lavishness.Consumers similarly talk about exclusivity, uniqueness and allurement to personal taste. This is non as hitherto corroborated by increase sales of ultimate and guntle luxuriousness products. The majority of the market is yet far a steering from this definition and check get through/logo/badge tax drive sumptuosity purchases documentary all the way. Size, flashiness, clear visible logos, well k instantaneouslyn speck atomic bend 18 the samara considerations in the purchase. Tha t said, conventional attributes such as high quality, heritage, immen facevity, the stories associated with brands atomic number 18 beginning to emerge as drivers of purchase. raft of the Indian market is stable reign by the more accessible and aspirational sumptuousness products. Status announcing your arrival into the elite discussion section of the society is the greatgest motivation calm. The mind position is still that of an aspirer non that of a amateur. The Indian sumptuousness consumer clean insights The Indian prodigality consumer has been studied a few times now. Various segments withstand been identiofied by earlier studies. The old money/ reinvigorated money/gold cuffs/.. ( luxuriousness Brands) and Industrialist/ incorporate/ passe- let outout/ (Economic Times A.T. Kearney India luxuriousness Review 2007). The way of our consumer research was to dress out how the consumer has evolved in the last 3-4 years. The accepted wisdom is that industrialists and traditionally fuddled families is the amplest segment, senior corporate executives argon a tenuouser but emerge segment and unripe professionals be unveiling the market. Our research has shown that by and expectant the consumer segments that constitute the bulk of the market brace non changed signifi coffin nailtly, although finer sub-segments atomic number 18 now more app atomic number 18ntMedium size try owners This is the bangingst segment in terms of number these argon typically the medium enterprise owners industrialists and traders who run businesses with revenues upwards of 50 cr. The informant of their spending is the surpluses generated by the business. numerous of these have grown as the economy grew chop-chop in the last twenty years. Their wealthiness is their passport to the elite segment of the society and eye-catching uptake is their way of announcing it to the society.The children who ply to be second or ordinal multiplication be the bi gger spenders, having been meliorate afield and hence familiar with brands and the luxuriousness way of living. They ar now educating and tempt their more conservative elder generation into spending. Interviews withal reveal that those who generate capital invite to necessarily spend it and luxury costlys ar a profound pass for spending. These argon genuinely customary luxury consumers and consume the entire gamut of products and serve and near assets desire cars and real estate. These consumers shop some for deals and bargains, including international travel.traditionally wealthy families / sizeable industrialists This group comprises two sub-segments the first is the traditionally wealthy families who have been consuming luxury for some(prenominal) decades and go for the finer things in life. The largest business houses in the expanse and historically wealthy Marwari, Gujarati, Parsi, Punjabi families epitomize this class. The different sub segment compris es the promoters of some actually large businesses which have come up in the last two decades and have created disproportionate wealth real warm.Builders, miners, ball field merchants, melody brokers, new age enterprise owners cash in ones chips in this category. Many of them have migrated to the highest ex angle of luxury ingestion very quickly by acquiring yachts, jets, houses and really dearly-won cars. Corporate executives Senior executives of corporate India who be paid in excess of Rs. 1 crore and bankers who earn big bonuses epitomize this category. These executives argon well traveled and be informed of brands. Most of these ar in their mid-late mid-forties and represent some of the brightest minds in the country.Many of them though have come from spunk class backgrounds and hence have a conservative approach on conspicuous spending. time they potbelly well hand to spend, their propensity to spend is low. A deliberate change is cosmos watchn as they see more and more of their compatriots spend. These consumers spend on some luxury products such as watches, accessories, select ap tallyel, fine dine, international and internal travel and high end cars. They also tend to shop on their frequent international trips to get the best deals. egotism employed professionals These comprise of professionals such as lawyers, doctors and architects A small but receding segment, comprising the pass away stars in their profession, who have throw away it big. dapple many of these come from ticker class backgrounds, they use their new instal wealth to live a good life. They shop for the entire strand of products and service although are found slight a great deal at the absolute top end of the black market. Young professionals Working in service industries these earn the least compared to the differents, but since they fag outt have family responsibilities, the disposable part of the income is high.They are in tune with the up-to-the-m inute contrive trends, travel abroad one time in a spot and desire in spending on what they fancy. They tend to consume entry level products and are infrequent consumers. some other segments Expatriates Expatriates in the country are growing and they are occlusioning for eternal periods These are on expatriate packages and are accustomed to luxury consumption in other parts of the world. However near of these fly back very often and stack up on their luxury products need on these trips. highlife serve and assets ( more or lessly cars) are influenced in a small way by this segment.The segment is emphatically driving the increasing cognisance and need for luxury products Politicians and bureaucrats Interviews reveal that politicians and bureaucrats are a large segment for all luxury products, but have a untold more pronounced preference for jewellery, watches, cars and real estate. Contrary to the popular perception that is generated by the flashy lifestyles of film and television actors, they are not large spenders by themselves and collectively it is still not a large segment. highlife consumption of film and TV stars is paid for by the producers.They alsoi shop abroad a lot. Many celebrities belong to mysterious business families and owe their luxury consumption to their family wealth or get a lot of luxury products as gifts. Citywise sub-segments at that place are sub-segments in distributively city that drive most of the purchases * Mumbai stock brokers, diamond merchants/exporters * Delhi industrialists, traditionally wealthy, politicians, bureaucrats * Chennai traditionally mysterious, industrialists * Bangalore builders, IT top case * Kolkata traditionally wealthy Marwari businessmen, traders get along with visibility.The clean consumer is still young surrounded by 30-45. This is in line with the everywhereall demographics and is expected to stay that way for some time. It is thus a young luxury market in contrast with som e of the mature markets like Europe and the USA where the average consumer is lots older (need some selective information here). Consumer manner We found that while the average Indian luxury customer assesss tall Quality, Exclusivity and Social Appeal as key drivers of luxury purchase, they are also very Price Conscious and often straddled with a middle-class mindset.Corporate Professionals in particular tend to be more price sensitive than the Traditionally slopped and Business Owners. This is also due to the feature that the average fashion thought of Indian consumers is still quite low most consumers prefer well known brands and make luxury purchases for brand value and not fashion value. The table beneath summarises the typical behavior contours of the consumers in each of the segments Medium Size go-ahead Owners Traditionally Wealthy Families & Large Industrialists Corporate Executives egotism Employed Professionals Young Professionals Average Age .Awareness br oken postgraduate lofty Medium mellowed Fashion consciousness ( apparel and accessories) Low High Low Low High Price intellect High Low High real High Very High label Consciousness High Medium-Low High High Very High Propensity to cloud foreign High High High High High Greater awareness rapidly increasing and the entry of brands, victimization of malls and magazines has helped. Compared to three-four years ago, the number of people who foundation correctly pronounce Chanel and Gucci correctly has increased dramatically, although on that point is still a long way to go.What is interesting to note is that the Indian luxury customer is maturing rapidly and brand awareness has increased significantly oer the past 3-5 years. Brands are beginning to see loyal customers who have their preferred set of brands. Among brands, the pedigree of a brand is very important. There is a heritage value with luxury brands customer typically lay out more value on brands that have been aro und for many years. When it came to Indian brands, there is clearly a mixed perception. sequence most customers were leave aloneing to purchase luxury services from Indian players, the luxury products market still has a long way to go.Specifically in services, Indian service quality is considered to be at par with the best in the world. Within products, the categories that customer preferred have a high class value attached to it. hence very select categories like jewellery and Indian designer apparel products are considered luxury. Fashion consciousness changing very fast, dressing for a look increasing in the metros still a long way to go in the words of one of the luxury fashion CEOs Indians are sartorially challenged.The younger members of the rich families and the young professionals are leading are leading the pack. Badge consciousness continuing, no doubt. A logo is probably the most important thing about a product. It is easier to trade a pair of sunglasses or a p olo shirt where the logo is clearly visible than a shirt where it is not so obvious. Price consciousness here to stay.The entire industry acknowledges this and both the principals and the Indian parties strive hard to match prices to make it price neutral for the Indian consumer who would not mind taking a shoot to Singapore or Dubai or subscribe to someone to get it, if the difference is more than 3-5%. The economics is simple its costs 15-20,000 for a return trip (economy of course ) to Dubai or Singapore. On a product cost upwards of Rs. 200,000, this is less than 10% of the product price. That puts a limit on the sum total of premium that anyone will be will to pay for products that can be easily purchased overseas and carried back. The grey market will willingly carry products for a split up of the cost of a return trip.The tho exception is cars where it is not possible to get it in either legitimately or smuggled. Propensity to sully overseas reduce but still ver y significant. peerless interesting observation is that Indian luxury customers are not averse to purchase from India, just that they feel there are better avenues abroad. One of the key challenges is to forget luxury shop destinations that offer a variety of brands under one roof. dapple most of them purchased from boutiques in New York or Malls in Dubai, in India there are not many avenues for luxury purchase.While most consumers also make luxury purchases in India, shopping abroad is still by far the preferred weft. Consumers have certain perceptions about luxury shopping in India, that have held them back qualification large scale and frequent purchases in the local market. Interviews with industry leaders reveals that the consumer call fors the similar package here merchandise (range, freshness), contrivance (location), price and experience (ambience, service) with an extra mentality of service, given that this is India, where labor is cheap.The dampenment of the I ndian duty free has meant that Indians have an option of buying duty free products in India when they arrive rather than carting it all the way from popular shopping destinations overseas. Consumers still retrieve that the widest, most recent range is not available here and that prices are more expensive here, though at least two of these clearly are myths that need to be broken. In fashion, collections are designed for the whole world once, no one creates separate collections for India and old collections are not available.Width of range is a trade-off that has to be made depending on the depth of the market, so that is a possibility. Converting the overseas market is a big challenge for retailers. Propensity to buy from the grey market by all accounts, this is reducing in established brands. Concerted efforts by players to work in the latest merchandise, efforts by brands to confer products at lower prices to India and Indian retailers willing to work on thin margins has meant that the consumer now gets a good bargain. New brands which consumers want and are not available find their way through this channel.Driver of Luxury consumption name of HNIs, HNI Wealth or crime syndicate Income? It is generally accepted that luxury market size is positively agree to star sign income (GDP/capita), the number of high networth individuals and/or their wealth. Discussions on luxury are never complete without a reference to these parameters. A correlation between the size of the luxury market, the GDP/capita, number of HNIs and HNI wealth over the years 2004-2009 shows that in terms of grandness the number of high networth individuals is the most important driver, followed closely by GDP/capita and HNI wealth.Interviews with leading luxury brands in India points to the fact that family wealth is a very strong epitope of spending than household income. Consumer interviews with traditionally wealthy families indicates a very interesting pattern they are habitual c onsumers of luxury and less price conscious. Some of the segments mentioned above would take in the HNI category. However luxury consumption in India is not limited to only the HNIs.The cumulationtige phenomenon can be observed very clearly in India. Luxury products in India are appealing to, and purchased by, middle-class consumers that do not raiment the typical profile of an elite consumer segment. For these shoppers, luxury represents status and prestige, a place in society that they fit into as a result of their purchase of high-end products. This phenomenon is observed even in the large mature markets such as UK, where a large number of individual consumers buy very small volumes.Luxury goods companies develop products that re-enforce the masstige and drive volumes. As such it is very important to look at the other indicator of the market the GDP/capita. In India given the fact that wealth is being created due to the rapid growth, growing household incomes are converting t he middle class into uphill luxury consumers. As such there is a large segment (below the 1 cr income category) where while the wealth tycoon be low, it is the incomes that are driving the consumption. metric in PPP terms, 25 -100 lakhs in India is equal to $ XX-YY,000 of income in the US or EUR AA-BB,000 in Europe, which is definitely a luxury consumer. The above two factors combine to make the consumer spectrum in India very broad. Our research shows that periodic/ infrequent luxury consumption for products and services begins when annual household income goes upwards of Rs. 20 lakhs, becomes frequent when annual household income crosses the Rs. 1 crore mark and becomes habitual when the wealth crosses the HNI milepost ($1 mn in liquid state assets).For luxury assets, the markers are understandably a lot higher and even in spite of appearance assets, the ladder become quite steep as one goes higher. For example, consumer for private jets would be the top 200-400 richest famil ies in the country the billionaires, superintendent rich families (the HNIs) anywhere around 200-400 families such as the private jets, yachts and the largest houses earning anywhere upwards of 50 cr per annum or with family wealth in excess of 100 cr. The spectrum thus begins at rupee millionaires and goes all the way to real billionaires.While the small traditionally super wealthy families who know what absolute or real exclusive luxury means, and can be called connoisseurs, bulk of the incremental wealth generation in India has been the the handiwork of new age businessmen/industrialists who were not so wealthy a couple of generations ago. As the new money matures, one can expect that the tastes and preferences will also evolve. rupee Millionaires Near Millionaires Real Millionaires Category Household Income 10-25 lakhs 25 lakhs 1 cr 1-5 cr 5 cr+ Networth/Wealth .Estimated number of households 2,373,000 1,292,000 141,000 Typical Occupations Service Industry professio nals Corporate Executives, Self Employed Professionals Medium Enterprise OwnersTraditionally wealthyCompany CEOs, top bankers Large IndustrialistsTraditionally wealthy Luxury products Low ticket value items such as leather accessories ties, cuff-links,Wines and spirits, personal wield Watches, some apparel, accessories All All Luxury Services Spas, Infrequent fine dining Travel, frequent fine dining, hotels, spas All Luxury Assets Cars, YachtsReal estate, Paintings Private jets.Geographical distribution of consumers Luxury consumption in the country has so far been concentrated in Delhi and Mumbai with Bangalore being a distant third. Brands have been thought of expanding their footprint beyond these cities and have been wonder about where their succeeding(prenominal) store should be opened. We now believe that the distribution of the rupee millionaires is a good indicator of the luxury consumer distribution in the country. We also believe that for luxury consumption to take of f a minimum critical mass is needed in a city.While Delhi and Mumbai continue to be the mainstay markets for luxury consumption, there are several other cities with a large base of possible luxury consumers. A look at the figure below suggests that while Mumbai, Delhi and Bangalore are the top three cities, other cities also have significant dominance for luxury consumption. Show a chart between the number of families (X-axis) and the growth 2006-2009 (Y-axis) and number of such households as the bubble size. Use the data below. Year 2006-07 2009-10 Income Category Annual income Rs.10,00,000/- CAGR eyeshade 20 Cities ranked on the alkali of Annual Market Size Number of Households Number of Households Delhi 132,258 348,000 38% Mumbai 98,164 347,000 52% Bangalore 101,550 126,000 7% Thane 69,658 137,000 25% Pune 57,130 106,000 23% Chennai 28,025 109,000 57% Ahmadabad 45,224 91,000 26% Hyderabad 26,670 69,000 37% Surat 34,457 60,000 20% Coimbatore 18,076 37,000 27% sea son Lake (Urban Areas in North 24 Parganas district) 14,373 65,000 65% Kolkata 15,790 94,000 81% Thiruvallur 17,837 22,000 7% Lucknow 20,654 29,000 12%.Jaipur 27,011 21,000 -8% Vadodara 22,911 53,000 32% Nagpur 23,637 46,000 25% Kancheepuram 13,920 24,000 20% 767,345 1,784,000 32% bloodline Indicus Analytics Extrapolating the growth rates seen in these cities, over the next 3 years implies that several new cities will become potential centres of luxury consumption. Kolkata, Chennai, Hyderabad, Pune, Vadodara are high potential destinations to watch out for. A quick comparison with China shows that there are atleast 20 cities/towns where luxury brands are present. relation between luxury stores in India and China. LV Burberry Chanel Hugo Boss Beijing 3 2 2 9 Shanghai 3 2 5 5 Other Tier I 6 6 0 8 Tier II 12 10 1 22 Others 11 13 0 43 LV Burberry Chanel Hugo Boss Mumbai 2 1 - 1 Delhi 2 1 1 1 Bangalore 1 1 - 1 Others - 1 - - We believe in the next 5-7 years, atleast 5-7 new towns will get added on the luxury map of India. We also believe that the potential in Delhi and Mumbai has not been fully exploited and that there exist a few more small markets within these cities that need to be tapped. Pockets of wealth and good infrastructure could be the next big destinations.In Mumbai, South Mumbai, Central Mumbai, Bandra/Juhu, Powai and Thane are micro markets which are far tolerable from each other, have concentration of wealthy families and decent infrastructure. In Delhi, similar micro markets could be South Delhi, Gurgaon, Saket, .. In summary, while the Indian luxury market is evolving, so is the luxury customer. Understanding the nuances of the customer is extremely critical to succeed in this ever-changing industry.