What downturn? The market for luxury goods in India, from cars to handbags, is only growing. Avantika Bhuyan and Priyanka Sharma find that brands are “very excited”
It is a crisp winter morning and DLF Emporio, the luxury mall in south Delhi, is just coming to life. A Range Rover Sport and a Mercedes-Benz E-Class stop within inches of each other, and a gaggle of ladies with Prada handbags, Chanel sunglasses and Jimmy Choo stilettos emerge. In the neighbouring “mass market” mall one can see the less well-heeled ambling about, soaking up the sunshine, couples snuggling in quiet corners — but these ladies are armed with a sense of purpose. Their agenda is to find the perfect Louis Vuitton bag or Harry Winston watch to beat the winter blues.
Inside, early customers can be seen at the Jimmy Choo and Louis Vuitton stores. A burgundy Jimmy Choo stiletto catches one woman’s eye and she “simply must have it”. Mention the economic slowdown to the sales representative and she grins. Genesis Luxury Fashions, which markets Jimmy Choo and Canali in India, says the luxury market has grown by 25 per cent in the last year and the company is “equally optimistic about 2012”.
The representative at Cartier is ready for a busy day ahead. She says that about 100 people from various age groups walk into the store every day. Most of them know which watch to buy. At the Christian Dior store, the counters are being shined and the floor waxed. On the weekend, footfalls can go up to 100. Sales, says Bhoomika Pant, manager of the store, rose 20 per cent in 2011 over 2010.
The economic slowdown, the stock market crash (investors lost Rs 19.5 lakh crore on the Bombay Stock Exchange in 2011), the 20 per cent fall in the value of the rupee vis-à-vis the dollar, high inflation, political turmoil in the country, fears of joblessness, and uncertainty in Europe mean nothing to shoppers at DLF Emporio. Shop they must, come hailstorm or sunshine.
“Luxury watches are priced at Rs 3 lakh and above. Anyone who can afford that won’t be affected by the petrol price hike or the stock market meltdown,” says a sales manager at the Kapoor Watch Co outlet. The company retails brands like Chopard, Rolex, Cartier, Montblanc, Omega and Longines. Luxury brands across categories like apparel, accessories and automobiles insist that there is no slowdown. And there is no down-trading. This is a trend that social scientists and economists have long observed: luxury is recession-proof.
Gone are the days when people would just stroll past Dior and Chanel stores, ogling the products. According to Dinaz Madhukar, vice-president of DLF Emporio, there has been a huge conversion from window-shoppers to actual buyers in the last year or so. The mall has seen footfalls grow 20 per cent in the last year.
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In her opinion, the consumer has become more brand-conscious. She cites the example of Pakistan’s foreign minister, Hina Rabbani Khar, whose black Hermès Birkin bag and Roberto Cavalli sunglasses became trending topics on Twitter during her visit to India in 2011. She can’t help but laugh when asked about why the slowdown doesn’t affect the luxury market. “For these consumers, luxury is not a necessity, they are used to it,” she says.
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So, luxury is here to stay. AT Kearney says the Indian luxury market was $7.5 billion (over Rs 37,500 crore) in 2010. That is, almost the size of the consumer electronics market. Various estimates put the number of Indian millionaires (in equivalent dollars) at over 100,000. But that, experts feel, could be a gross underestimation. Most luxury brands started to notice some years ago heavy purchases by Indians at their stores in Hong Kong, Singapore and Dubai. That made them aware of the possibilities in India. Porsche Design tracks 10 luxury brands like Montblanc, Prada and Ferragamo; if eight of them start in a city, it knows the market is ripe for it to enter. Porsche Design has opened in Delhi and plans to expand to other cities.
The brands a notch below luxury have felt the pinch. “Watches that cost between Rs 50,000 and Rs 1.5 lakh have been affected,” says Kapoor Watch Co General Manager Parvinder Singh, “as their customers make money in the stock market and real estate. But higher brands — anything that costs Rs 4 lakh and above — haven’t been affected. That clientele comes from the moneyed elite. In that segment we have done better than we did two years ago.”
Louis Vuitton has recorded double-digit growth in 2011, though from a small base. “Louis Vuitton has been a star performer globally and in India,” says Tikka Shatrujit Singh, chief representative in Asia for LVMH (Moët Hennessy-Louis Vuitton) and advisor to the chairman of Louis Vuitton. “Every region, be it West Asia or East Asia, is on fire. These are exciting times. We are hoping to look at new stores in newer cities this year.”
Luxury has started to take deep roots. Harley-Davidson has found buyers from the North-east and cow belt towns like Kanpur and Allahabad. Shreyans Group Chairman Ashish Chordia, who retails Porsche and Ferrari, claims he has sold 10 Porsches in Kanpur till date. “The affluent in these cities are fairly discerning and appreciate luxury as much as the rich in metros,” he says. Business is buoyant, and car marques like Porsche, Ferrari and Maserati are seeing an upsurge in demand. While Ferrari received 20 orders between May and November last year, Porsche delivered 312 cars to customers in 2011. This was more than twice the 2010 number. “All of these cars are customised to the buyer’s preference.” He adds, “The time from order to delivery can be anywhere between three and nine months, thus neutralising any immediate impact of a temporary slowdown.”
Also, prices in India are now more or less the same as abroad. Three years ago, buyers would arm themselves with lists of Chanel lipstick shade numbers or Dior bag descriptions before going abroad. Today they prefer to purchase in India. “The difference between Indian and global prices is kept at a bare minimum and is usually the value-added tax,” says Madhukar.
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Entrepreneur Tanya Chopra (name changed), whose wardrobe overflows with luxury brands, shares Madhukar’s views: “The difference between international prices and Indian is small.” She has always had a fetish for Louis Vuitton and Dior handbags. “A bag from Louis Vuitton may be slightly cheaper in London, but the Delhi and Bangkok prices are almost identical.” Has the slowdown interfered with her appetite for high luxury? “No,” she says, “I would rather buy an expensive handbag that I can carry with me through the year than a gold set for the same amount of money that I would only wear during a wedding. It is all about how you choose to spend on luxury.”
Chopra is a perfect example of the new young, jet-setting consumer of luxury products in the 21-35 age group. “This is a very exciting market segment,” says LVMH’s Singh. “This kind of consumer is fresh, wants to show success, and is ambitious and driven. I was at Wharton this summer and all the young Indians I met there were so bright and tuned in to what was happening globally. They all want to come back, as India is extremely exciting in terms of opportunities. They have money to spend and are discerning enough to know which luxury brands to spend on.”
Badge consciousness reigns high. There are few better ways to flaunt your success than by click-clicking in your Jimmy Choos across shining hotel floors, or casually flinging out your Canali wallet during a meeting.
Then there is the other kind of consumer — 37-plus, mature and established. “He belongs to the old world money and is in the connoisseur category,” says LVMH’s Singh. “It is these demographics that make India an interesting market.”
Brands have new ways to engage with this new demographic. Some brands are on Facebook, where they post news about launches and new collections. “I have even watched a live fashion show on Louis Vuitton’s Facebook page,” says Singh. Companies like Ferrari and Porsche do not advertise. Instead, they establish direct communication with customers by hosting special evenings in an environment “complimenting the exclusivity Ferrari has”, as car retailer Chordia puts it.
That is perhaps why rents have not crashed. DLF Emporio has not increased rents for existing brand tenants, which constitute 98 per cent of the mall space, but for newer entrants it will certainly charge higher rent. Luxury, surely, is a good business to be in.