While China and India remain one of the worlds largest spa markets in the world as executives increasingly seek to rub off stress accumulated over driving the world economy forward, a recent report trashes India’s luxury market as compared to China’s. In contrast to China where a secretary piggy banks ever penny to buy the Prada bag she is pinning for, India India accounts for only half a percent of the global luxury market at US$846 million, although it has more billionaires than China! The total net worth of “ultra” high net worth Indian individuals — defined by net worth of more than US$5 million — is US$1 trillion and is expected to surpass US$5 trillion by 2016. Greater China, on the other hand, accounts for 10 percent of the global luxury market at US$17 billion.
Trying to sell expensive chic in India faces several challenges: steep import duties of up to 30 percent, inadequate luxury retail infrastructure, real estate regulations and a clientele that prefer to buy its luxury overseas for reasons of cash and cachet. Indians are a different breed, and selling luxury items to them underscores a deep understanding of the Indian psyche. Wealthy Indians are not opposed to spending money on expensive goods, as can be seen in the proliferation of Porsches and other high-end cars in Indian cities. But a rich businessman driving an expensive foreign car may not spend lavishly on luxury branded suits, for example.
Unlike his Chinese cousins, the average Indian isn’t brand conscious, rather he is value conscious. If he feels that the value of the product is worth it, if he is able to see that value for himself and weigh the price against what he’s gaining from the acquisition, the deal is made, otherwise its just not worth it. As a result of which A limited edition ‘India-specific’ product which isn’t available anywhere else in the world is designed keeping indian cultural elements in place be a hot with consumers.
Further, with so many products on the shelf, innovative and inventive gizmo’s hitting the street, quality unbranded goods make do just as well. Retailers have seen that young Indians still value their culture and ethnicity, unlike the Chinese who crave everything western, Indian’s revel in Indian inspired products. Then, in a society where brand names do not feature, spending hard earned cash is most often not deemed sensible.
Signs are that this will not change soon. The Indian luxury market is expected to grow at an average of 5 to 10 percent between now and 2013, compared with a robust 25 to 30 percent forecast for China, according to consulting and research firm Bain & Co.
Besides the Indian mindset, analysts also blame the poor retail infrastructure and high tax brackets – as a result of which India’s rich prefer to shop abroad where the environment is more conducive to buying luxury items, a larger range of items are available and prices are cheaper. Take for example, Mumbai, home to some of India’s richest and Bollywood actors, the city does not have a single dedicated luxury mall like those littering China, Singapore and Western capitals. “It’s pointless having a luxury mall on a road that is potholed. Even the so-called ‘luxury malls’ in India are not really luxury. They have issues with basic infrastructure, with training of staff, it’s just not a luxury experience,” Anand Ramanathan, manager at KPMG Advisory, told Reuters.
Further with import duties in the range of 30 percent, sky high real estate prices, luxury retailers are thinking twice about the Indian consumer. As the Indian government ponders brining in 100 percent FDI into multi-brand retail, it is something retailers will need to consider.