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Western Brands Eye India's $3.0 Billion Luxury Goods Market

Luxury brands are eager to take advantage of India’s new wealth. But the road to success is strewn with political and cultural obstacles.

Article illustrative image Partner logo Indians prefer jewellry over luxury brands

NEW DELHI - Advertising campaigns for luxury brands in India usually feature Bollywood actors or fashion models. Mahatma Gandhi, the embodiment of monastic life, barefooted and draped in white cloth, was for a longtime off limits. But in 2009, the German company Montblanc engraved the silhouette of India’s most famous political and spiritual leader onto the nib of a limited edition pen. It retailed at $25,000.

After years of austerity, has India finally converted to luxury? The country now has some 126,000 millionaires, and this number increases each year. But very little is known about them. Their habits and consumption patterns were at the heart of a conference on luxury at the end of March in Mumbai, organized by Mint newspaper in partnership with a group of Italian brands.  

The local market, estimated to be worth three billion dollars, could become the fifth biggest in the world by 2025, says Laxman Narasimhim, director of the McKinsey consulting group in India. The forecast is an optimistic one, because while Indians are turning to luxury, the presence of big brands in India remains limited.

Louis Vuitton has 35 stores in China, against only three in India. Just recently, a LVMH manager visiting the country noted, in despair, that potential customers living in northern Mumbai would be better off flying to Dubai rather than spending three hours in the traffic jams to buy a bag in the Louis Vuitton store in south of the city.

In India, the development of the luxury sector is stymied by the lack of infrastructure. There is no equivalent of Rue de la Paix in Paris or Fifth Avenue in New York. Luxury brands have no choice but to open stores inside famous hotels or shopping centers protected by security guards. The products sold there are more expensive than elsewhere because of tariffs and tax.

The Internet might save the day

"Contrary to what happened in Western countries, the luxury industry in India could best develop on the Internet," suggests Amit Dutta, director of the Luxury Hues consulting firm. India’s large cities do not have the monopoly over the market: it is the small town of Jalandhar in northwestern state of Punjab where the highest number of Rolls-Royce per inhabitant is sold.

In India, the brands have not yet cannibalized the luxury market. The jewelry market accounts for 30 percent of spending, in comparison with nine percent on average for the rest of the world.  Half of the jewelry is purchased for weddings.

“The luxury industry here is only just beginning,” says Dutta. “Rich Indians didn’t want to flaunt their wealth for fear of tax adjustments, for example. But little by little customers, and especially the newly rich, aren’t scared of ostentation and have started to use luxury as a symbol of social success."

The only question is whether luxury brands are recognized as a symbol of success by the more affluent. “This is not yet the case,” says Santosh Desai, director of the Future Brands marketing firm. “India has many other social markers beyond consumption." A Ferrari or a Mercedes is thus considered a far safer bet than a discrete luxury item.

Thanks to the media, brand awareness has lately been improving. More and more magazine supplements dedicated to luxury have been published, and explained in a very didactic way how to appreciate a good whiskey or cigar. Vogue magazine even organizes workshops on how to dress.

But foreign luxury companies are holding back from launching into the Indian market, put off by the fact they are not allowed to own their retail outlets 100 percent. The maximum limit for foreign ownership is currently 51 percent. Indian partners are known to prefer concentrating on driving up sales rather than investing in a brand that could be one day out of their reach.

Vogue tried some years ago to popularize the concept of luxury throughout the country – and in the process make its readers feel less guilty- by publishing pictures of toothless villagers wearing luxury clothes. The images sparked a scandal, just like the sale of Montblanc pens bearing the image of Gandhi. India may be getting richer by the day, but its spirit remains closer to that of the modern Mahatma than to its legendary maharajah kings.

Read the original article in French

Photo - Eric Vernier

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