Sunday, October 25, 2009

The future of luxury fashion brands...

way ahead post the crisis...

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.

The Indian Complication: Part II

Jewellery ≠ luxury brand name, but much beyond that!

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?

Friday, October 9, 2009

The Indian Complication - Part I

We all hear things like India is one of the biggest upcoming markets for luxury brands... and most people, when they say luxury brands; they’re referring to luxury fashion (apparel and accessories) brands. The growth of LV, Prada, Armani and Gucci in China and other Asian markets, has the whole industry optimistic about India too. And with the economic crisis in USA and Europe, the industry is betting a lot more, more than ever, on these two largest growing economies – India and China!

However, India, unlike the USA, has a vast ocean of history and legacy, right from the Vedas and other mythological texts. It is one of the oldest surviving cultures of the world. Hence, most of our habits, mannerisms and beliefs stem from hundreds of thousands of years ago. Obviously they have all gone though several modifications, but the roots still remain intact. Which is why, unlike the USA, which is young, and has borrowed most of its culture from Europe, India, is one of those cultures, which finds it most difficult to borrow from others. Even though religious practitioners talk about westernization and growing influence of western cultures in India, India is one of those unique nations that Indianizes all those western concepts as they enter in. The resistance to foreign concepts is very high at a subconscious level.

One of the biggest barriers that Luxury brands will face in India is to overcome the Indian mindset of ‘saving’ v/s ‘spending’. Though we’ve seen a change in this over the past few years, the current economic crisis has thrown us back into the past in terms of these values. Modern day Indians are suddenly realizing the worth of what their parents always told them, and are going back to saving.

Now I’m not saying that Luxury is a western concept that will find resistance in India. No! In fact luxury is very much an Indian concept, culturally since the age of Gods, and kings and princes. India has been used to opulence and show off forever, and hence, to consume luxury, is in our DNA. However, what kind of luxury is also in our genes.

Opulence in India is mainly displayed through jewellery and property much before clothes and bags. The Indian weddings are the biggest occasion for Luxury consumption in India – more like a platform used to show off how rich you are. Even here, jewellery is what we most spend on! (However, why branded jewellery has not been successful in India is another discussion, which I shall touch upon in my next article)

Rich Indians don’t mind buying diamonds for lakhs, but would definitely think twice before buying a dress for a lakh.

In terms of hierarchical show-off values, the house and jewellery would come first, then a car, then gadgets, then clothes, and then bags, shoes and other accessories. Hmmmn... This takes us back to the Indian mindset of ‘saving’ v/s ‘spending’. Because if we look here, there is only one kind of luxury that Indians most indulge in, and most value – Luxury with an ‘investment value’.

So then what will happen of all these European luxury brands of designer clothes and accessories, hoping to make a fortune in India? They have to do something to overcome this Indian mindset, and as seen in the current figures, simply being present in India is not really helping too much.

Perhaps, to overcome the ‘saving’ mindset of the Indian, luxury brands need to portray themselves as an ‘investment’ rather than an ‘expense’.

Why can’t branded designer wear dress or a bag have an investment value? Why can’t they have a resale value?

Now, ‘resale’ has another complication in India. The concept of ‘Vintage’, unlike the way it is looked at in Europe, is considered as ‘second-hand’ items, by Indians. The concept of used clothes or rented outfits, is traditionally, seen as derogatory in India. Hence, the brands have to handle it carefully, from their own end. For example, the ‘resale’ value could be in the form of brands willing to buy back the products after 30-35yrs or in the form of auctions, organised by the brands themselves, which would give it the feel of ‘true vintage’ and not ‘second-hand’.

Are there other ways that European designer wear brands can overcome this mindset of ‘saving’ v/s ‘spending’? Post your views...