The Cash Rich Indian

While buying Luxury goods using Credit card is a huge trend globally, Indians, as usual, choose to stand out! From my observations, I have arrived at the fact that most Indian businessmen would prefer to buy in cash rather than by using credit card or cheques, because using a card or any form of formal, recorded transaction would mean disclosure of their income.

‘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...

A few days ago... at the DLF Emporio...

The other day I was in Delhi with my parents for my cousin’s  wedding. We had some free time before we had to head back for the airport so I dragged them to the DLF Emporio, just to look around ;)

My mom liked a LV patent leather bag and a bright red Bottega Veneta... but my dad didn’t seem to be particularly interested. After checking out a few more stores, we ended up in front of a Harry Winston timepieces store. That was the 1^st time since we’d entered the Emporio that I saw my dad’s eyes sparkle. He saw this brilliant watch in the window and went in. A young lady – very much Indian - dressed in a pink western formals greeted us with a smile. My dad, looks like an average middle-aged Indian man, very down-to-earth, with a radiant, stern expression on his face and like most Indian men of that stature, a growing waistline. My mom on the other hand has an enigmatic elegance about her which instantly would identify her as a luxury consumer. I am a mixture of both, and on that particular way, was dressed more like a junkie in a ‘Hare Krishna’ top.  My dad, though didn’t know the details about the brand Harry Winston, knew that the watch he liked would be priced around Rs. 25 lakhs. And so it was. I was mighty impressed with his guess though he seemed pretty focused on that watch he’d set his heart on. The young girl in pink rattled off her sales pitch, about Harry Winston being the best and the watch being in 18 Karat rose gold with a certain number of VVS quality diamonds and automatic movements...etc...etc...

Just then, a question that my dad asked... stumped both her and me! “What’s the re-sale value of these diamonds?!” His question was genuine and I knew from his expression that he expected a straight answer, just as straight and innocent as his question was! But in response, he got a flabbergasted, almost disrespectful, “You don’t resale a Harry Winston! People who buy it buy it for the brand... how can you even say that you want to resale the diamonds!!!!” Not that she was wrong... she was probably trained on the product and didn’t know the answer, but she failed to understand the sentiment behind that question. The question wasn’t meant to ask the resale price, it was meant to get the true value of the item that he was investing in... and Indians are verrry good at this! But the European training that was given, didn’t tackle these simple, innocent but extremely smart questions that only a moneyed Indian businessman would ask!

Anyways, WRONG ANSWER + WRONG TONE & MANNER = Daddy not impressed = Lost sale!

Moral of the Story: Unlike the Europeans, Indians and especially the first generation Indians, are very particular about whether they are getting their money’s worth. They do not go by the reassurance of the brand name only; they also want to know their product equally well, especially in the case of watches and jewellery. As I have often mentioned... A watch to a man is what Jewellery is to a woman. Indians are used to getting the price break-up on jewellery and sub-consciously the same applies to anything else that involves gold, diamonds or precious materials like in the case of that watch. 

When entering the Indian market and training their staff for the Indian market, luxury marketers must train their staff in a way that they can handle the Indian sensibilities. These nuances can make or break a sale and at the point of sale, not being able to anticipate questions and not having the right answers or presence of mind can be disastrous!