BackIndia is not yet on the priority list of the luxury companies: Abheek Singhi
The Boston Consulting Group's Asia luxury head on the Indian luxury consumer and developing the luxury market
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Mumbai: As the Indian luxury consumer relies on imports or buys bespoke products, luxury in the Indian context needs to be redefined, Abheek Singhi, Asia luxury head, Boston Consulting Group, said at the Mint Luxury conference in Mumbai on Friday. In the local context, luxury denotes brands that globally are a notch lower than the finest, appealing to a wider audience of the top 1%, 5% or even 15% who have the aspirations and the money to buy them as opposed to just the 0.001%, Singhi said. In an interview with Mint, he spoke about the Indian luxury consumer and developing the luxury market. Edited Excerpts:
How large is the Indian luxury market and how is it different from the global market?
The Indian luxury market is $14 billion. It’s split across conventional luxury 30%, services 40% and devices—cars, yachts and gadgets—is 30%. It is largely similar in composition to the global $1.7 trillion market; however, services in India is smaller.
We have not seen any significant investment in terms of expansion or new luxury brands coming to India in the past couple of years. Why is that?
India is yet not on the priority list of the luxury companies. There are two reasons for that, firstly, the period following the global financial crisis saw brands focus on their core markets and not expand or think of new markets. The second reason is that China was a big growth engine for many of these brands. So, now with China slowing down, people are going to look for alternatives.
It is often said that the Indian luxury consumer does not buy his luxury products in India. What are marketers doing to go around this?
In our survey, we have seen that consumers who buy brands like LVMH or Burberry, they don’t purchase them in India. They buy these brands outside India as the retail experience is better in terms of service and ambience, the variety is better and also the price. As such, from a consumption perspective, growth here will continue unbridled. However from a purchased-in-India perspective, the absolute top of the market is not going to see dramatic growth. It is the one tier below that is actually driving the growth of the luxury market. As such, apparel and fashion is less than 15% of the luxury market in India. When it comes to conventional goods in India, it’s the jewellery market that is seeing high growth and here it is the Indian brands that are leading the growth.
Luxury in India remains restricted to the top 2-3 cities in India. Do you see that changing?
There is luxury consumption in the top 50-70 cities of India. In terms of percentages, the consumption patterns in tier-II and tier-III is similar to the metros, however, the amounts or spend outlays are lower. Again, it differs by categories, but on an average 40% of the luxury market is beyond metros. These consumers visit the metros to buy their luxury goods or then purchase them overseas.
You mentioned earlier that the male consumer has a larger say in the purchase of luxury. How important is the male consumer?
Globally, men are under-targeted segment. When we did the research in India we found that in India as well. In categories like gadgets, devices, assets and shared experiences, men are the majority decision makers. These categories account for 60% of the overall market. In the conventional luxury which is apparel, jewellery, accessories, women are the decision makers and the users, similar to the global market. Nearly, 70% of this market is gift market and men are the dominant gifters. As such on an average, more than 50% of the market spend is controlled by men. However, not enough marketing dollars go after men.
What is the role of the Indian women in purchase of luxury?
India is among the lowest countries where spend is controlled by women. In fact, India is the second lowest, after Saudi Arabia, with women controlling just 48% of the spend, compared to 55% in China, 60% in Japan and close two-third in the US and UK.
What is the reason for this low participation of women?
The number of working women is much lesser than some of the other countries that we spoke about. Also, working women have a greater say on their spends and that of their households.
Today everything is being bought online. Do you feel that luxury marketers are doing enough to tap the medium?
What we find today is that 50% of consumers actually engage online before purchase decision. However, the response by marketers is lacklustre. Especially in luxury. Digitization is a massive white space and nobody has done a good job. Even, globally, not many companies have done a great job.
Do you think consumers would buy luxury online?
...given that the ticket size for many of these products is fairly high, I don’t think physical transactions are going to move online. May be in experiential services, some of it may move online. But in many of the others, it’s not about online commerce, it will be about omni-channel presence.
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