Luxurious India: An exploration of the opportunities and challenges of the expansion of luxury goods into the Indian market
By Sapna Shah
Issue 3 Spring 2010
A trip to Mumbai, India’s financial capital and glamour hub, leaves you reeling as you walk through the newly developed malls selling high-end luxury goods from brands like Louis Vuitton to Rolls Royce. The stark images of slum life shown in Slumdog Millionaire seem a distant reality as you come to terms with the emergence of the new Indian consumer market. According to Neilsen, a research group, India is the third-most brand conscious country in the world, trailing behind only Greece and Hong Kong. TimesOnline reported estimates by AT Kearney showing that by 2015 India will hit about 15 billion pounds in annual spending on luxury goods, a dramatic increase from 2008’s 2 billion. According to Forbes Asia, the total net worth of India’s 100 richest people in 2008 was approximately $276 billion, about 25% of the country’s gross domestic product, with the number of Indian billionaires rising from 27 to 52 last year. Despite the general assumption and belief that international luxury brands will enjoy significant gains in the Indian market, most of them have not had the expected success in wooing Indian consumers. Why is it that international behemoths like Liz Claiborne, Pierre Cardin, Bally and more recently Jimmy Choo had to retreat from the Indian market? Part of the reason is that most brands try to use the one-size-fits-all model and apply the same kind of thinking that has worked well for them in their home markets to India. How can these brands apply strategic thinking to gain competitive and sustainable advantage in the Indian market?
The DLF Emporio Mall in New Delhi, India that houses brands like Giorgio Armani, Salvatore Ferragamo, Louis Vuitton, Cartier, Fendi, Dior, Just Cavali, Aigner, Tods, Tiffany’s, Burberry, Hugo Boss , JJ Valaya, Tarun Tahiliani , Manish Arora, Ranna Gill, Ashima & Leena, to name a few.
To begin with, international brands need to understand that the Indian consumer is vastly different from his western counterpart and not only that, but the Indian consumer in New Delhi or Punjab has different purchasing behavior than his counterpart in Gujarat or Bangalore. India’s geographic expanse ensures a nation with a highly diverse culture and one that makes it essential for brands to understand and appreciate this difference in forming relationships with these segments. This involves going above and beyond superficial marketing stunts that bring an Indian celebrity onboard to endorse the brand or use Indian colors, prints or fabrics to design new products. Secondly, the Indian elite are accustomed to shopping abroad and expect the same level of variety and customer service in New Delhi that they get in New York. This presents international brands with the challenge of providing these advantages in India to lure these customers while they may not attain the same sales volume in both places yet. Lastly, international brands looking to successfully establish themselves in India need to build excellent relationships with customers, business partners as well as the Indian authorities. In most cases, this requires the identification and formation of proper business partnerships in India to gain access to established human resources, processes, technology, supply, distribution and information know-how to build profitable customer relationships.
Although, the road ahead for international brands in India is filled with challenges, most find it impossible to resist the lure of the world’s largest free-market democracy with a complex yet growing and increasingly attractive consumer market!