Thursday, April 5, 2012
‘Disclosure of income’ – the term itself may seem rather curious to most people from other nationalities, but in India, it’s a rather common practice. The high income tax structure in India, makes people devise various unique ways to save on the tax money. Hence, a lot of deals are made in cash, with no formal record. That is how, India, has a huge parallel economy, which is where the bulk of sales for luxury brands in India come from. So, most businessmen prefer buying in cash, so that they do not have to ‘show’ their income, and also because they usually have excess ‘cash’ and less of ‘white money’. (This is mainly true for businessmen only and not for the salaried HNI, whose entire salary is on paper and recorded – and it’s the businessmen who are the primary buyers of luxury goods in India as of today)
Requests for cheque payments and credit card purchases are extremely low, and are often made only in cases where the buyer is able to show the purchase as part of a business related expense (since that becomes non-taxable). Hence categories like travel and hospitality see a lot of credit card purchases. In case of high-end fashion, it is primarily purchased in cash, except in unique cases, like those of Bollywood producers, etc. who very well buy them for their business needs.
India, hence, also has a unique market for payments made in ‘part cash – part cheque’ in order to disclose only how much the buyer wants to. This is most common in high value, home grown industries like jewellery, where a part of the same purchase is made with a proper record and the rest, without record.
Now, in such a scenario, what do you think is the future of e-commerce and online retail for Luxury goods in India, since most online retail requires an ‘on record’, credit card payment?
The Indian businessmen don’t mind buying smaller items, up to a certain value online, but not high-value purchases like luxury goods.
Hence, any e-commerce portal for luxury goods retail in India, will have to arrive at alternate methods of cash payment, e.g. cash on delivery, etc. However, when it comes to expensive items, companies would obviously be sceptical, and not want to risk cash on delivery... hence, there have to be other methods as well. For example, Lx-world.com, the first to enter Luxury e-commerce website in India, offers a cash payment procedure, where only once the company collects cash, the order is processed. This however, makes the process much longer. Also, in such a case, the trust on the online portal and its credibility is extremely important, and that in itself is something Indians are still struggling with – to trust an online portal with their money.
Hence, in my opinion, contrary to what most the brands and marketers believe, Luxury e-commerce in India still has a long way to go...
Wednesday, October 5, 2011
Friday, August 26, 2011
Today however, People seem to have confused 'being luxurious' for simply 'being expensive'!! Why otherwise would a Louis Vuitton monogram bag, one of the most commonly seen things around the globe, mass produced in India, made in canvas ( not even leather), still be considered a luxury to own?
Tuesday, June 1, 2010
Monday, February 1, 2010
1)the middle class child, tends to aspire for his rich friend’s lifestyle
2)the rich child starts feeling guilty about his wealth!!!
It’s a natural phenomenon... I have seen students asking their drivers to drop them far from the college gates, slightly embarrassed of their expensive car! And it’s not just about kids or teenagers... this is just the age when it all begins. We have seen our mothers not wear expensive diamond jewellery in front of close relatives who can’t afford the same. When a friend, who can’t afford the same watch, asks about its cost, one usually scales it down considerably just so that they don’t feel bad... Why does one do such things?! I believe that it’s out of guilt... guilt of making the other person feel lesser... the guilt of making someone else envious... And if they are so guilty of showing off their wealth to friends and close relatives, then one can imagine if people would actually show it off on the streets!!!
Several rich Indians buy swanky cars like Porsche or the Rolls-Royce, but never take them out to work! They still go to office in their lowest model of the Mercedes, the basic BMW or Honda Accord. Again, guilt – “I don’t want my staff to feel that I have too much money!” (Tax evasions is another issue – ‘I don’t want to come under the public eye’ – but that could be a logical justification to the sub-conscious guilt i.e. ‘I don’t want people to know that I have so much money and feel jealous’)
So when does the Rolls-Royce or the Berkin or the Chanel dress actually come out of the closet... only when they move out in their own circles - socializing, in parties, get-togethers, special occasions. Hence, the consumption of luxury products in India is very specific to occasions, leading to infrequent usage. So, how can luxury brands drive higher sales, if the usage occasions are themselves limited?! It’s a huge opportunity, locked away in the socio-cultural construct of the Indian value system and I believe that the key to unlocking this opportunity is the high street brands in India.
The interesting thing about brands like Tommy Hilfiger, Mango and Esprit in India is that they aren’t just high street brands; they’re in fact considered semi-luxury brands! The accessories and starting lines of these brands are actually well within the reach of the Indian middle class, however, the semi-luxury status of these brands, intimidates them. There’s a firmly rooted belief in India... ‘Jitni chaddar ho, utne hi pair failao’ (spread your legs only till the length of your blanket) Hence, Most middle class Indians don’t even enter these stores thinking that they will not be able to afford it.
And alongside this, Indians also tend to have an unusually high self respect. In India, one will never find a queue outside a luxury brand store like in other Asian countries! Indians don’t like window shopping unless it is with the intent of buying soon... We don’t like to enter a store and feel that we can’t have it!! Hence, most middle class Indians will not even consider a Mango or an Esprit, even though they might actually be able to afford it!! During a research I was working on for a major fashion retailer in India, I came across dozens of consumers who spent large amounts of money in Indian stores like Globus or Pantaloons, but had never even thought of visiting an Esprit or even a UCB outlet, thinking they're too expensive. It’s only when I took them to these stores that they realized they could very well afford it!
This is a huge opportunity for these high street brands which they have been unable to leverage in spite of their presence in departmental stores. It’s much easier to lure people to check out your collection in departmental stores. These brands could probably have more accessories, belts, wallets, t-shirts, etc. and in-store communication to attract footfalls from within the departmental store, even in the non-‘sale’ days. But they must be cautious enough not to lose their semi-luxury status!
Acceptance of semi-luxury brands by the middle class friend leaves the rich one free of guilt to show off his luxury item!! Hence, the opportunity unlocked for the high-street brands can actually unlock a much larger opportunity for the luxury brands here. It also gives the richer consumers the excuse to start consuming their luxury products more regularly, on a daily basis, thereby benefiting both! Thus, a slight bit of an inclusive strategy adopted by the high-street brands gives the runway brands the liberty to remain with their exclusion strategy. In India however, both seem to be following the same exclusion strategy, hence, I believe the problem for both.
Sunday, October 25, 2009
Anywhere in the world, all the shops of any luxury brand look the same. The product offering is the same, the look and feel is the same... luxury brands, or should I say ‘luxury fashion brands’ have taken standardization to a different level – Over-standardization! I’m not saying that standardization is bad...in fact, it is good! But over-standardization can have a huge negative impact on the brands’ performance and sales.
Let’s take India for example. Why do luxury fashion brands present in India, not sell in India? It’s not like people don’t buy luxury fashion. But they buy the same thing abroad. Why don’t they buy it from India? Well, why should they?!!?
Is there anything that the brands provide here that they can’t get abroad??!! NO!
Plus they have much higher duties levied on them. So if the same is available in Dubai, New York or Singapore, minus the taxes, then why not buy it from there? A person, who can afford their products, can obviously afford foreign trips and chances are, is planning one at any given point in time. And when one travels, s/he is always in a better mood to shop and tends to spend money more freely than s/he would when at home. Then why should one shop in India?!? Brands give them no reason to do so...! And the same goes for all the countries and cities, the world over. The luxury stores in London have majority of their sales coming from Arabs and people from the Far East... New York has a mixture of other nationalities, Dubai from Russia, India and other Asian countries, Miami from South Americans... Hence, it’s the same story everywhere!!
However, Mumbai and Delhi are not considered as major international shopping destinations... nor has our Indian government done much in order to promote tourism in the big Indian cities. How then are these luxury brands going to survive in India?
According to me, they can only if they are able to sell to Indians!
In fact, I believe that this is something brands must look at doing as a corrective measure in the post-crisis period. Like all luxury experts say – ‘going back to the core business’... I say, also ‘going back to your own people’... the people who belong to the city that you are present in.
Brands must start generating the bulk of its revenue from the citizens of the city in which they are present. And this can only happen if brands start offering something different in each market, to cater to the local needs and cultural requirements, which is different from the offerings that they get when they travel abroad. They have to customise their offerings, experiences and services based on the local cultural requirements.
That way, a brand will keep the consumer’s interest alive in his own city and while travelling abroad. Hence, by appealing to ‘their own people’, they can appeal to the tourists even more.
Let me explain:
What is it that a brand can do in India?
Providing a customised offering does not mean that Prada should start doing Indian ethnic wear... Ethnic wear should be left to the experts – the Indian designers. But there are other cultural trends and habits that luxury fashion brands can take advantage of.
For example, Indians traditionally have a mindset whereby they appreciate their own culture better, when the western world starts to appreciate it. This probably has its roots in the century long British rule that they’ve been subjected to, but brands, especially big international fashion brands can take advantage of this and leverage this.
Why can’t a big brand like Gucci or Prada ropes in a big Indian designer to adapt Indian motifs or silhouettes for a certain special range of the brand? Again, it’s not about making ethnic wear, but more about giving an Indian touch to the international product range. The fact that a large international brand has introduced an Indian inspired line would be a big enough motivation for Indians to buy and the association of a big Indian designer is important since it provides credibility to the collection while maintaining the luxury imagery. Also, doing so will make the product twice as desirable.
Another way could be to look into the cultural needs of the client and provide offerings based on that. For example, Indian women above the age of 40yrs, the typical luxury consumers, usually wear sarees (traditional Indian drapes) to social gathering and parties. International luxury brands usually do not have accessories (bags, footwear, etc.) that match these outfits since everything is made to go with western wear or for a total look by the brand. Hence, can luxury fashion brands have a special collection of bags, footwear and accessories that go well with Indian outfits?
Indian weddings are the biggest occasion for jewellery purchase (read article on jewellery ≠ luxury brand name, but much beyond that!) but do not attract sales from international luxury brands like Cartier, Bvlgari or Tiffany. Can they do a special 22 karat gold collection for the Indian weddings?
This strategy will not only motivate the citizens of India to purchase your brand from India, but it also motivates the tourists coming in to buy from your brand, as it’s like taking back a piece of the local culture – but belonging to a luxury brand. This can act as a great motivation for being selected over the competition!
And this strategy must be implemented across markets and across cultures.
Now I’m sure the question looming large in your mind is, ‘what happens to the brand identity?’
Well, most big brands, except LV, Hermes and maybe Dior, have lost their luxury status over the past 10yrs owing to excessive massification and have suffered its repercussions during the economic crisis. Hence, post the crisis all these luxury fashion brands are already planning their revamp strategies. In my opinion, if a brand were to adopt this strategy across markets, this strategy could itself become a part of its new identity.
This time is the best opportunity for brands to try something innovative like this – as innovation is now the key to gaining back the lost luxury status.
Indian Jewellery has its own character that dates back to the days of inception of jewellery. Jewellery is not only a decoration article or an ‘ornament’ for the Indians... but much beyond that. It’s about the value of the article and not about the brand...because jewellery in Indian culture itself has its show-off value, and does not need to have a brand.
What do I mean by value beyond just jewellery? Since generations, gold in India has been considered as ‘stri-dhan’ i.e. the wealth of the woman of the household. In Indian weddings, which are huge occasions for luxury consumption, maximum amount of money is spent on jewellery to be gifted to the bride by her parents, to make her financially strong before she leaves their house. And gold in India has always been synonymous with ‘purity’ and ‘savings’. Jewellery is the biggest investment that Indians have traditionally made which is also why they only prefer 22 karat gold jewellery. 18 karat gold jewellery is considered more like ‘fake’ or ‘impure’ since its value does not appreciate the same way as of the 22 karat ‘pure’ gold jewellery. Also, unlike diamonds or other precious stones and metals, gold being the only precious element whose value appreciates constantly, also makes it the best choice for investment.
Hence, unlike the western cultures, where jewellery is considered luxury and a brand name attached with it, makes it more luxurious... In India, jewellery is a cultural necessity and financial security... hence, though there is an emotional motivation to buy jewellery, the decision is usually made keeping all the basic functional aspects in mind. i.e. the purity of gold, the quality, the re-sale value, potential returns on the investment, etc...,things which are usually not the considerations while buying jewellery in the western cultures. While the western cultures focus more on design and the ornamental value of jewellery, Indians focus more on the purity and value of the materials used. It probably comes from the fact that India was the source of all precious stones and pearls centuries ago...hence; the mindset is still such that we look for purity and value... Hence, the brand name does not make that much of a difference.
If you look at the Indian jewellery market, the traditional family jewellers still rule... customisation of jewellery, bespoke and tailor made jewellery are almost like a give-in when it comes to the Indian jewellery market. It’s more about trust associated with these family jewellers over generations, rather than the brand name. In fact, India is one market, which does not trust brand names when it comes to jewellery. Why? It’s because unlike the traditional family jewellers, the brands do not give the split between the costs of materials being used and the cost of the designing and making charges. That itself, acts as a huge mental block for most Indians to buy branded jewellery.
So if that’s the case, why would an Indian buy a Tiffany or Cartier jewellery piece, at ten times the price (price of design and making, not the actual elements) of ‘real’ gold for ‘fake’ (18 karat) gold?