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Selling to the super-rich

Selling to the super-rich

Author | exchange4media News Service | Saturday, Dec 11,2004 8:20 AM

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Selling to the super-rich

It’s come a full circle. In the early nineties, when multinationals first started coming into India in a big way, they believed that targeting the upper and premium end, as they have done in many of the other global markets was the way to go in the country. But soon enough they learnt that a cookie-clutter, one market approach will not work here. Along the way, they re-oriented their strategies to take care of the local interests and target the larger market segments.

Today, at a time when management gurus like CK Prahalad are urging marketers to look at the “bottom of the pyramid” in emerging markets, these multinationals are also realising that the market opportunities at the high end are quickly blooming.

From Titan to Cartier, from Palio to Porsche and from Maruti to Mercedes and now to Mayback, the Indian consumer’s aspiration for the best in the class seems to be an unending saga. Today he is spoilt for choice. The world’s biggest brands are lining up their wares for the discerning Indian buyer.

So, despite initial doubts over Indians having the purchasing power, brands like Louis Vuitton, Bvlgari, Canali, Tommy Hilfiger, Ermenegildo Zegna, Valentino, Marco Ricci are rolling out the red carpet and others like Prada, Fendi, Gucci, Yves, and Versace are toying with the idea to follow suit.

Says Darshan Mehta, Director, Arvind Brands that markets Tommy Hilfiger, “The Indian consumer is well-travelled, affluent, brand conscious and wants to live the lifestyle of his international peers. His exposure to global trends has contributed a great deal in fuelling this global lifestyle over the years.”

Infiltration of cable television and fashion magazines had wet the mouths of the Indian consumers for branded western goods and now with the purchasing power apparently doubling in the past four years (the Household Income Survey projects the number of households with an annual income for Rs 1 crore to increase from 20,000 in 2001-02 to 53,000 in 2005), time is ripe for international brands to cash in on the aspiration and the ability.

What also makes India an attractive proposition, says, Prasanna Bhaskar, retail head India, Louis Vuitton, is that “India is a rapidly growing and will continue to do so - making it an attractive market for foreign brands who have very limited numbers of new frontiers to target.” Added to it is the fact that most of these brands have had a high percentage of Indian clientele in their stores abroad.

Fast growing market

India is also one of the fastest growing markets for luxury goods across categories in the South Asia region. Take Louis Vuitton as a case in point. The company expects the Indian market to deliver at the same levels that China does today within the coming five years. China has 13 stores today with the largest store in Shanghai. “With even four stores in the coming years, India has the potential to deliver on similar lines,” says Bhaskar.

Even Ermenegildo Zegna is optimistic. Says Karima Sagrani, director, Ermenegildo Zegna, “The fact that retail is largely unorganized compared to other south Asian markets heralds the enormous growth potential. India is a sleeping elephant — we only expect great things from this country. The sheer numbers of the population is enough to excite any entrepreneur.”

“India is our second largest market after Saudi Arabia, when we take middle east, Africa and the Indian subcontinent into account,” says Manju Kataria, operational marketing manager of Cosmopoliton Cosmetics, that develops and markets fragnances of fashion brands like Escada, Gucci and MaxMara.

Long-term strategy

None is here for short-term gains, and hence willing to invest and build brands. Zegna now in India for the past 4 years, have till date only planted foot in Mumbai. The modi group became a franchise operation of Zegna in India a year ago and have spent this year studying the market and forming a concrete plan to roll into Delhi, Bangalore and Calcutta. Each store is expected to breakeven within 2-3 years. “It is true we are only targeting a niche clientele — an estimated 2-3% of the population. 2-3% of India is no small market. For most luxury brands it is about 10 -15 customers whom contribute to 80% of your turn over,” says Sagrani.

While most of these brands sell through the exclusive outlet route, there are also some who are exploring multi-brand outlets. Tommy Hilfiger, for instance, currently operates 5 exclusive stores in Delhi, Mumbai, Bangalore, Chandigarh and Gurgaon. We will be looking at expanding our distribution to other cities of India as well where we see a potential for the brand. Marco Ricci, entered the country with leather and footwear, and roped in film actor Sanjay Dutt as its brand ambassador. Having created a hype, the company is set to launch its apparels around April next year.

Says Mehboob Haider, director, Marco Ricci, “We are targeting the market with products that can be termed as ’affordable premium’ and has a huge aspiration value.” Marco Ricci will be retailed through a mix of exclusive and multi-brand outlets. Exclusive stores will be limited to the 6-8 main metros and multi-brand outlets all across the country. “ We see a CAGR of over 60% y-on-y, with turnover touching around Rs 60 crores in 5 years,” says Haider. The estimated breakeven period is 18 months.

In India, LV Trading India Pvt Ltd is an exclusive distributor of Louis Vuitton in the country. LV decided to enter through key metropolitan cities to establish its presence. “These cities are also ideal as they cater to their neighboring satellite cities. For instance, in New Delhi we have a large client base from Chandigarh, Ludhiana, Jalandhar; and in Mumbai from Pune, Ahmdabad, Surat and Bangalore etc,” explains Bhaskar. Currently, LV operates through its two outlets at The Oberoi in New Delhi, and at The Taj Mahal Palace & Tower, Mumbai.”

Challenges ahead

Location is a key challenge for top international brands. Any savvy retailer will tell you that it’s difficult here as India does not have an exclusive Bond Street like in London, or New York’s 5th Avenue, or even Los Angeles’ Rodeo Drive. As a result, most premium brands opt for the 5 star hotels. “Says Maurizo Morello, global sales manager, MaxMara Parfums, “When brands are available in a hotel they are essentially not catering to the local crowd, brands will need place in the shopping malls to reach out to the Indian consumers.” MaxMara which is a 1.1 million Euros fashion brand entered the Indian market earlier this week, with the launch of its perfume and body care range.

Says Sagrani, “To be honest, it is very hard to find the right location to open an exclusive outlet store. There is no option in the market today to open in multi brand outlet for a premier menswear brand.”

The luxury brands also face challenges in terms of advertising, as the media environment is unused to the luxury market. The fashion media in the country is also in its nascent stages with a limited number and variety of lifestyle and fashion publications. What is also a hindrance are tight foreign direct investment (FDI) regulations and heavy duties. “We have not met the expectations that we have had for the last 4 years, despite growth of over 100% in the last year. This has much to do with the prohibitive regulations of FDI and heavy duty structures. We had expected more rapid changes and a situation more conducive to retail operations,” says Sagrani.

While brands are pouring in there have been others like Alfred Dunhill, Pierre Cardin, Mexx, amongst others, have been low-key. Some have even made exits exits too. The Indian market has traditionally presented good business prospects for serious, committed players who do their homework and who can offer superior value propositions to customers.

But, with this new breed of Indians with loads of cash to splash, who wants to sport their favourite brands at any cost, that perception is changing.

International brands are thus luring Indians into emptying their pockets and filling up their hearts.

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