Indian Luxury Consumer Essay

The Indian racy life Consumer Rapidly maturing and looking for to a greater extent each study of the prodigality commercialize needs to conclusively address core verboten questions around the prodigality customer Who, What and Where. To fully understand answers to these questions, we interviewed pull rounding and future customers crossways various locations, in hump and age groups. We as well as interviewed industry leaders across all opulence categories on the Indian consumer and the flips that they thrust observed all over the last few age. In this section, we shall provide answers to three basic questions 1. What throws lavishness in India? 2. Who is the extravagance consumer?What has changed in the last 2-3 years? 3. How is the behavior of the sumptuosity consumer changing? 4. What ar their specific tastes and taste perceptions? 5. Where do they present their purchase? opulence in India more aspirational highlife than ultimate extravagance Industry leaders across categories study that opulence is non only determined by price. Exclusivity is a far more important parameter for a crossroad or service to be called luxuriousness. As such customization, uniqueness, and flush understatement is important. Design, use of exquisite materials, presentation and personalized service all contri preciselye to luxury.Consumers too talk roughly exclusivity, uniqueness and appeal to personal taste. This is non as yet corroborated by increase sales of ultimate and milltle luxury products. The majority of the food food market is steady far away from this definition and betray/logo/badge value drive luxury purchases actually clearly. coat, flashiness, clearly visible logos, well k at a timen brand be the key considerations in the purchase. That said, traditional attributes such as high quality, heritage, longevity, the stories associated with brands argon beginning to write out as drivers of purchase.Bulk of the Indian market is n whizffervescent dominated by the more accessible and aspirational luxury products. Status announcing your arrival into the elite subdivision of the society is the giantgest motivation still. The mindset is still that of an aspirer not that of a connoisseur. The Indian luxury consumer parvenu insights The Indian luxury consumer has been analyze a few times now. Various fractions de broodr been identiofied by foregoing studies. The quondam(a) money/ parvenue money/gold cuffs/.. (Luxury Brands) and Industrialist/Corporate/ nonrecreational/ (Economic Times A.T. Kearney India Luxury Review 2007). The focus of our consumer research was to distinguish out how the consumer has evolved in the last 3-4 years. The accepted wisdom is that industrialists and traditionally sloshed families is the cosmicst segment, old embodied executives atomic number 18 a smaller but emerging segment and modern professionals argon entering the market. Our research has shown that by and jumbo the consumer segments that constitute the bulk of the market fix not changed signifi senstly, although comelyr sub-segments be now more apparentMedium surface enterprise owners This is the largest segment in terms of number these are typically the medium enterprise owners industrialists and traders who dismission clientelees with revenues up of 50 cr. The source of their sp nullifying is the surpluses generated by the business. galore(postnominal) of these redeem grown as the economy grew rapidly in the last xx years. Their prosperouses is their passport to the elite segment of the society and conspicuous outgo is their way of announcing it to the society.The children who lean to be second or third generation are the bigger spenders, having been educated abroad and hence familiar with brands and the luxury way of living. They are now educating and enticing their more conservative aged generation into spending. Interviews also reveal that those who generate cash need to needfully spend it and luxury goods are a good avenue for spending. These are truly frequent luxury consumers and consume the entire gamut of products and services and approximately assets interchangeable cars and real estate. These consumers break around for deals and bargains, including outside(a) travel.Traditionally wealthy families / large industrialists This group comprises two sub-segments the first is the traditionally wealthy families who have been consuming luxury for several decades and go for the finer things in life. The largest business houses in the country and historically wealthy Marwari, Gujarati, Parsi, Punjabi families epitomize this form. The other(a) sub segment comprises the promoters of some real large businesses which have come up in the last two decades and have created disproportionate wealth very(prenominal) rapidly.Builders, miners, diamond merchants, stock brokers, new age enterprise owners fall in this category. Many of them have migrated to the highest ladder of luxury function very quickly by acquiring yachts, jets, houses and really expensive cars. Corporate executives Senior executives of corporate India who are paid in excess of Rs. 1 crore and bankers who earn big bonuses epitomize this category. These executives are well traveled and are aware of brands. to the highest degree of these are in their mid-late forties and represent some of the brightest minds in the country.Many of them though have come from middle categorise backgrounds and hence have a conservative approach on conspicuous spending. term they can well afford to spend, their propensity to spend is low. A gradual change is universe seen as they see more and more of their compatriots spend. These consumers spend on some luxury products such as watches, accessories, select apparel, fine dining, international and domestic travel and high end cars. They also tend to shop on their frequent international trips to get the best deals. egotism utilize professionals These comprise of professionals such as lawyers, doctors and architects A small but nook segment, comprising the go by stars in their profession, who have made it big. While many an(prenominal) of these come from middle class backgrounds, they use their new found wealth to live a good life. They shop for the entire range of products and services although are found less(prenominal) often at the absolute top end of the ladder. Young professionals Working in service industries these earn the least compared to the others, but since they dont have family responsibilities, the disposable part of the income is high.They are in tune with the latest fashion trends, travel abroad once in a while and retrieve in spending on what they fancy. They tend to consume entry level products and are infrequent consumers. Other segments Expatriates Expatriates in the country are growing and they are staying for longer periods These are on expatriate packages and are accustome d to luxury consumption in other parts of the world. However most of these fly back very oftentimes and stack up on their luxury products need on these trips. Luxury services and assets (mostly cars) are influenced in a small way by this segment.The segment is definitely driving the increasing awareness and need for luxury products Politicians and bureaucrats Interviews reveal that politicians and bureaucrats are a large segment for all luxury products, but have a much more pronounced preference for jewelry, watches, cars and real estate. Contrary to the popular perception that is generated by the flashy lifestyles of require and television actors, they are not large spenders by themselves and collectively it is still not a large segment. Luxury consumption of film and TV stars is paid for by the producers.They alsoi shop abroad a lot. Many celebrities buy the farm to rich business families and owe their luxury consumption to their family wealth or get a lot of luxury products a s gifts. Citywise sub-segments There are sub-segments in each city that drive most of the purchases * Mumbai stock brokers, diamond merchants/exporters * Delhi industrialists, traditionally wealthy, politicians, bureaucrats * Chennai traditionally rich, industrialists * Bangalore builders, IT top brass * Kolkata traditionally wealthy Marwari businessmen, traders time profile.The average consumer is still infantile between 30-45. This is in line with the boilersuit demographics and is expected to stay that way for some time. It is thus a young luxury market in contrast with some of the mature markets like Europe and the USA where the average consumer is much older (need some information here). Consumer Behavior We found that while the average Indian luxury customer values spunky Quality, Exclusivity and Social Appeal as key drivers of luxury purchase, they are also very Price Conscious and often straddled with a middle class mindset.Corporate Professionals in particular ten d to be more price sensitive than the Traditionally richesy and Business Owners. This is also due to the fact that the average fashion cognizance of Indian consumers is still quite low most consumers prefer well known brands and make luxury purchases for brand value and not fashion value. The circuit board below summarises the typical behavior patterns of the consumers in each of the segments Medium Size Enterprise Owners Traditionally Wealthy Families & Large Industrialists Corporate Executives Self Employed Professionals Young Professionals Average Age .Awareness mild proud heights Medium High Fashion consciousness ( apparel and accessories) Low High Low Low High Price Consciousness High Low High Very High Very High badge Consciousness High Medium-Low High High Very High appetite to buy overseas High High High High High Greater awareness rapidly increasing and the entry of brands, development of malls and magazines has helped. Compared to three-four years ago, the number of people who can correctly pronounce Chanel and Gucci correctly has increase dramatically, although there is still a long way to go.What is evoke to bloodline is that the Indian luxury customer is maturing rapidly and brand awareness has increased significantly over the past 3-5 years. Brands are beginning to see patriotic customers who have their preferred set of brands. Among brands, the pedigree of a brand is very important. There is a heritage value with luxury brands customer typically put more value on brands that have been around for many years. When it came to Indian brands, there is clearly a mixed perception. While most customers were willing to purchase luxury services from Indian players, the luxury products market still has a long way to go.Specifically in services, Indian service quality is considered to be at par with the best in the world. Within products, the categories that customer preferred have a high class value attached to it. Hence very select ca tegories like jewellery and Indian designer apparel products are considered luxury. Fashion consciousness changing very fast, dressing for a look increasing in the metros still a long way to go in the language of one of the luxury fashion CEOs Indians are sartorially challenged.The younger members of the rich families and the young professionals are leading are leading the pack. Badge consciousness continuing, no doubt. A logo is probably the most important thing about a product. It is easier to sell a pair of sunglasses or a polo shirt where the logo is clearly visible than a shirt where it is not so obvious. Price consciousness here to stay.The entire industry acknowledges this and both the principals and the Indian parties strive hard to match prices to make it price so-so(p) for the Indian consumer who would not mind taking a flight to capital of Singapore or Dubai or ask someone to get it, if the difference is more than 3-5%. The economics is simple its costs 15-20,000 for a return trip (economy of charge ) to Dubai or Singapore. On a product costing upwards of Rs. 200,000, this is less than 10% of the product price. That puts a limit on the amount of premium that anyone will be willing to pay for products that can be easy purchased overseas and carried back. The grey market will willingly carry products for a fraction of the cost of a return trip.The only exception is cars where it is not possible to bring it in either legitimately or smuggled. craving to buy overseas reducing but still very significant. peerless interesting observation is that Indian luxury customers are not unwilling to buying from India, just that they feel there are better avenues abroad. cardinal of the key challenges is to provide luxury shop destinations that takeer a pastiche of brands under one roof. While most of them purchased from boutiques in New York or Malls in Dubai, in India there are not many avenues for luxury purchase.While most consumers also mak e luxury purchases in India, obtain abroad is still by far the preferred option. Consumers have authorized perceptions about luxury shopping in India, that have held them back fashioning large scale and frequent purchases in the local market. Interviews with industry leaders reveals that the consumer wants the same package here merchandise (range, freshness), convenience (location), price and make (ambience, service) with an extra expectation of service, given that this is India, where labor is cheap.The development of the Indian job free has meant that Indians have an option of buying duty free products in India when they arrive rather than carting it all the way from popular shopping destinations overseas. Consumers still believe that the widest, most recent range is not operable here and that prices are more expensive here, though at least two of these clearly are myths that need to be broken. In fashion, collections are designed for the whole world once, no one creates s eparate collections for India and old collections are not available.Width of range is a trade-off that has to be made depending on the depth of the market, so that is a possibility. Converting the overseas market is a big challenge for retailers. Propensity to buy from the grey market by all accounts, this is reducing in established brands. Concerted efforts by players to bring in the latest merchandise, efforts by brands to supply products at spurn prices to India and Indian retailers willing to work on thin margins has meant that the consumer now gets a good bargain. New brands which consumers want and are not available find their way through this channel.Driver of Luxury consumption Number of HNIs, HNI Wealth or Household Income? It is generally accepted that luxury market size is positively correlated to household income (GDP/capita), the number of high networth individuals and/or their wealth. Discussions on luxury are never complete without a reference to these parameters. A correlation between the size of the luxury market, the GDP/capita, number of HNIs and HNI wealth over the years 2004-2009 shows that in terms of importance the number of high networth individuals is the most important driver, followed closely by GDP/capita and HNI wealth.Interviews with leading luxury brands in India points to the fact that family wealth is a very strong determining factor of spending than household income. Consumer interviews with traditionally wealthy families indicates a very interesting pattern they are habitual consumers of luxury and less price conscious. most of the segments mentioned above would fall in the HNI category. However luxury consumption in India is not limited to only the HNIs.The masstige phenomenon can be observed very clearly in India. Luxury products in India are appealing to, and purchased by, middle-class consumers that do not fit the typical profile of an elite consumer segment. For these shoppers, luxury represents status and prestige , a place in society that they fit into as a result of their purchase of high-end products. This phenomenon is observed even in the large mature markets such as UK, where a large number of individual consumers buy very small volumes.Luxury goods companies develop products that re-enforce the masstige and drive volumes. As such it is very important to look at the other index of the market the GDP/capita. In India given the fact that wealth is being created due to the rapid maturation, growing household incomes are converting the middle class into emerging luxury consumers. As such there is a large segment (below the 1 cr income category) where while the wealth might be low, it is the incomes that are driving the consumption.Measured in PPP terms, 25 - vitamin C lakhs in India is equal to $ XX-YY,000 of income in the US or EUR AA-BB,000 in Europe, which is definitely a luxury consumer. The above two factors combine to make the consumer spectrum in India very broad. Our research sh ows that sporadic/ infrequent luxury consumption for products and services begins when yearly household income goes upwards of Rs. 20 lakhs, becomes frequent when annual household income crosses the Rs. 1 crore mark and becomes habitual when the wealth crosses the HNI milestone ($1 mn in liquid assets).For luxury assets, the markers are understandably much higher and even within assets, the ladder become quite steep as one goes higher. For example, consumer for private jets would be the top 200-400 richest families in the country the billionaires, super rich families (the HNIs) anywhere around 200-400 families such as the private jets, yachts and the largest houses earning anywhere upwards of 50 cr per annum or with family wealth in excess of 100 cr. The spectrum thus begins at rupee millionaires and goes all the way to real billionaires.While the small traditionally super wealthy families who know what absolute or real exclusive luxury means, and can be called connoisseurs, bul k of the incremental wealth generation in India has been the the handiwork of new age businessmen/industrialists who were not so wealthy a couple of generations ago. As the new money matures, one can expect that the tastes and preferences will also evolve. rupee Millionaires Near Millionaires Real Millionaires Category Household Income 10-25 lakhs 25 lakhs 1 cr 1-5 cr 5 cr+ Networth/Wealth .Estimated number of households 2,373,000 1,292,000 141,000 Typical Occupations serve up Industry professionals Corporate Executives, Self Employed Professionals Medium Enterprise OwnersTraditionally wealthyCompany CEOs, top bankers Large IndustrialistsTraditionally wealthy Luxury products Low ticket value items such as leather accessories ties, cuff-links,Wines and spirits, personal care Watches, some apparel, accessories completely All Luxury Services Spas, Infrequent fine dining Travel, frequent fine dining, hotels, spas All Luxury Assets Cars, YachtsReal estate, Paintings Private j ets.Geographical dissemination of consumers Luxury consumption in the country has so far been concentrated in Delhi and Mumbai with Bangalore being a distant third. Brands have been thinking of expanding their footprint beyond these cities and have been wondering about where their next store should be opened. We now believe that the distribution of the rupee millionaires is a good indicator of the luxury consumer distribution in the country. We also believe that for luxury consumption to take off a minimum slender mass is needed in a city.While Delhi and Mumbai continue to be the mainstay markets for luxury consumption, there are several other cities with a large base of strength luxury consumers. A look at the figure below suggests that while Mumbai, Delhi and Bangalore are the top three cities, other cities also have significant potential for luxury consumption. Show a chart between the number of families (X-axis) and the growth 2006-2009 (Y-axis) and number of such households as the bubble size. Use the data below. course of study 2006-07 2009-10 Income Category Annual income >Rs.10,00,000/- CAGR Top 20 Cities ranked on the base of Annual Market Size Number of Households Number of Households Delhi 132,258 348,000 38% Mumbai 98,164 347,000 52% Bangalore 101,550 126,000 7% Thane 69,658 137,000 25% Pune 57,130 106,000 23% Chennai 28,025 109,000 57% Ahmadabad 45,224 91,000 26% Hyderabad 26,670 69,000 37% Surat 34,457 60,000 20% Coimbatore 18,076 37,000 27% Salt Lake (Urban Areas in North 24 Parganas district) 14,373 65,000 65% Kolkata 15,790 94,000 81% Thiruvallur 17,837 22,000 7% Lucknow 20,654 29,000 12%.Jaipur 27,011 21,000 -8% Vadodara 22,911 53,000 32% Nagpur 23,637 46,000 25% Kancheepuram 13,920 24,000 20% 767,345 1,784,000 32% witness Indicus Analytics Extrapolating the growth rates seen in these cities, over the next 3 years implies that several new cities will become potential centres of luxury consumption. Kolkata, Ch ennai, Hyderabad, Pune, Vadodara are high potential destinations to watch out for. A quick resemblance with China shows that there are atleast 20 cities/towns where luxury brands are present. equivalence between luxury stores in India and China. LV Burberry Chanel Hugo Boss Beijing 3 2 2 9 Shanghai 3 2 5 5 Other Tier I 6 6 0 8 Tier II 12 10 1 22 Others 11 13 0 43 LV Burberry Chanel Hugo Boss Mumbai 2 1 - 1 Delhi 2 1 1 1 Bangalore 1 1 - 1 Others - 1 - - We believe in the next 5-7 years, atleast 5-7 new towns will get added on the luxury map of India. We also believe that the potential in Delhi and Mumbai has not been fully exploited and that there exist a few more micro markets within these cities that need to be tapped. Pockets of wealth and good infrastructure could be the next big destinations.In Mumbai, South Mumbai, Central Mumbai, Bandra/Juhu, Powai and Thane are micro markets which are far abounding from each other, have concentration of wealthy families and decent infrast ructure. In Delhi, akin(predicate) micro markets could be South Delhi, Gurgaon, Saket, .. In summary, while the Indian luxury market is evolving, so is the luxury customer. Understanding the nuances of the customer is extremely critical to succeed in this dynamic industry.