What is luxury? It might seem like a very obvious question, even bordering on the daft-side. But, just take a moment and think. What does luxury mean to you? Expensive? Exorbitant? Luxury comes from the word luxe, which means dazzle. So, technically, anything that dazzles is luxury. The premium that a luxury product demands is because it is able to dazzle you. Whether you call that dazzle brand equity or razzle dazzle is completely your call.
Luxury retailing has gone beyond trunk shows and the exclusive nooks of five-star hotels, the new host being hybrid malls, which has a mix of luxury and non-luxury stores with customised services. Small wonder, Kolkata's first luxury mall Quest, has an anchor store of Spencers. Developed by the RP-Sanjiv Goenka Group, the mall is going to be the home of who's who of luxury brands: Breitling, Burberry, Canali, Emporio Armani, Estee Lauder, Furla, Gucci, L'Occitane , Michael Kors, Omega, Paul Smith and Rolex. Although the absence of Louis Vuitton, a brand Kolkatans love to flaunt, is felt strongly, especially when it does not have any presence here.
Unlike New Delhis DLF Emporio, which has exclusivity with luxury brands on its premises, Quest is more like the hybrid category, more like Palladium in Mumbai. Therefore, customers who shop at Lifestyle may also walk in and pick up a Burberry trenchcoat or a handbag, all under one roof, and then, who knows, may also pick up wine and cheese from Spencers.
RP-Sanjiv Goenka Group chairman Sanjiv Goenka said in a news report on what made him take this bold step: The desire to have an international, top-quality facility in Calcutta, my birthplace. And a determination within me that Calcutta is second to none.
The city has big spenders, hands down. And they are not subtle. They are mostly used to luxury shopping abroad or at least in Delhi or Mumbai. It has become kind of a habit for them. Whether the city is ready for a full-blown dedicated luxury shopping experience is only for time to tell.
Who drives luxury retail in India?
The luxury market in India, which stands at $5.74 billion as per the latest estimate in a AT Kearney-CII report, is primarily driven by small & medium business owners and traders with revenues above Rs 50 crore. This newly rich class constitutes over 50 per cent of the buyers of luxury. Their wealth is their passport to the elite segment of society. And indulging in luxury buying is their way of flashing their entry into the upper crust. Despite all this, the business-owner segment is still under-leveraged. Unsurprisingly, their children are the bigger spenders, having been educated abroad and hence familiar with brands and the luxury way of living.
Newly acquired wealth or not, the spending pattern is not that new. Traditional choices still dominate this segment of buyers, who primarily spend on real estate and jewellery. Although the real estate segment saw negligible growth in 2010 over the previous year, jewellery buying grew 30 per cent during this period, taking the market size to $950 million.
The owners of medium-sized enterprises, with a personal wealth between Rs 1 crore and 5 crore, are typically traditional in luxury buying, be it real estate or jewellery. They will not go for the brand, but go for value for money. In real estate, it means the biggest house in the most posh locality. In jewellery, it is unlikely to be a Cartier or a Piaget or a Harry Winston, but the biggest rock or the heaviest necklace, and yes, 22 carats, Neelesh Hundekari, principal and head, luxury retail practice, India for AT Kearney had told me. In jewellery, buys above Rs 10 lakh are considered luxury spending, he added.
Luxury companies are trying to catch them young. Given the fast growing and upwardly mobile nature of the youth segment in India today, this seems to be a logical move. While the youth segment does not constitute a significant percentage of luxury consumption yet, by hooking these consumers in at an early stage, luxury players are looking to reap benefits in the long run.
However, the rupee millionaires with incomes of Rs 10-30 lakh do not really spend on luxury. Though there are plenty of young entrepreneurs and cash rich MBAs, but young professionals who are aware of brands go for mostly sub-Rs 1 lakh buys. So, although this segment is growing fast, it is yet to take on the business- owner class in terms of growth in buying.
According to AT Kearney research, the luxury market is likely to grow at over 20 per cent yearly to $8.22 billion in 2012 and $14.72 billion in 2015, and given the consistency of 20 per cent growth in this market, it seems a realistic target.
Some of the critical factors for success in this market include exploring formats that enable players to attract footfalls, getting the pricing right to encourage Indians to purchase locally and bringing in iconic brands, as Indians still buy luxury products for their brand value.
In the end, its all about making a statement!