New Delhi: With ‘The Mystique of Luxury’ as its theme, the third Mint-Hindustan Times Luxury Conference kicks off here on 28 March to deliberate on a broad swathe of issues spanning fashion, hospitality, interiors, yachts, jets, gourmet cuisine and intellectual property rights.
The two-day conference will be inaugurated by Minister of Commerce and Industry Kamal Nath.
Some of the prominent personalities, included in the delegation of 400 people, who will be present are Mark Lee CEO Gucci, Andrea Perrone CEO Brioni, Vittorio Missoni, Chairman of Missoni, Armando Branchini, Managing Director of Altagamma (association of Italian luxury goods), Joseph Wan, CEO Harvey Nichols and Andrea Illy, Chairman of Illy Café.
The eminent New York-based French corporate lawyer Alain Coblence and Pravin Anand will look at the issues pertaining to IPR in the luxury goods sector.
Global consulting firm A.T. Kearney recently put India at the top of a list of emerging markets for global retailers in its 2007 Global Retail Development Index. While other markets, especially in the developed world, are getting saturated, India is turning increasingly attractive for retailers, it said.
India may even overtake Germany as the world’s fifth-biggest consumer market by 2025, the report maintained.
Economic reforms spread over a decade and half, coupled with sustained high growth rates has led to the emergence of the high net worth individuals (HNIs) in India, who are spurring the demand for luxury goods in a big way.
The 2007 Asia Pacific Wealth Report, released by Merrill Lynch and Capgemini says that India has recorded the world’s second fastest growth in the number of HNI’s at 20.5%.
With the report estimating India’s population of dollar millionaires at about 100,000, it said growth rate was more than twice that of the US.
Many factors have contributed to the growth in demand for luxury goods, and it is now becoming increasingly apparent that for international luxury brands, India is no longer a mere testing ground, but a lucrative market.
Estimates suggest that India has more consumers for luxury goods than the adult population of several countries.
No wonder then, more than 200 international luxury brands are making inroads into India and those who are here are planning to expand their businesses.
From a long-term perspective, India’s consumerist culture is clearly an important draw. Middle class mindsets that money should not be wasted are gradually melting away. Indians are now becoming acquisitive and brand conscious. The display of wealth is no longer a dirty word.
An average Indian today can potentially spend double of what he or she could spend in 1985; in the next 20 years, he or she will be able to spend four times what he does now.
In fact, a McKinsey study released earlier in 2007 estimates that India may overtake Germany as the world’s fifth-biggest consumer market by 2025.
Key consumerism drivers in India today include:
• High salaries of employees in the corporate sector, especially in IT companies
• The increasing number of working women
• The rise of a new breed of self-employed entrepreneurs
• A large young working population with a median age of 24 years has emerged. This group today is more willing to spend, rather than save.
• There is growing prosperity in more than 100 small towns and cities across India. This is typified by emerging malls, surging automobile sales, water parks, rise in credit card sales and investments in mutual funds. These emerging urban centres represent the future of India’s growth story.
• The changing habits of the metropolitan youth are also an important trend to watch out for. Today’s modern Indian youth lives in a world where videos are being watched on Mobiles and MP3 players. It started with television, but now broadband and new technologies have started as catalysts for changes in consumer behaviour.
The problem of fakes
Fakes have been giving sleepless nights to luxury companies all over the world. The global fake market for luxury goods, is estimated to be more than $27billion, according to the World Customs Organisation. The value of the counterfeit goods market in the UK was predicted to be £14 billion last year, up 10% on 2006, according to the report by law firm Davenport Lyons.
With the top luxury brands enjoying operating margins of 60% to 70%, it’s not hard to see why many marketers view counterfeit products as the biggest threat to these brands. Indeed, reports suggest that worldwide, fakes are making significantly higher profits than that earned by the companies being copied and equivalent to returns in the illicit drug trade.
The potential in the Indian luxury market is huge, but the question being asked is whether global luxury brands are getting the right push from Indian policy makers. The government is opening up the retail sector, but the liberalisation process has been slow because of political sensitivities.
In early 2006, the UPA Government decided to allow 51% foreign direct investment in single brand retailing.
But the process isn’t easy. The foreign partner has to apply for permission to the department of industrial policy and promotion, which takes the application to the foreign investment promotion board. Each application is scrutinised by the FIPB and sometimes it could take months to get a proposal cleared.
Also, retail outlets set up under single brand retailing can sell products that come from only one brand name. In this kind of a policy scenario, multi products are allowed as long as they are from the same brand. This at times can act as a huge deterrent.
The Indian government’s 2008 Economic Survey, which is seen as the policy intent of the government, recently recommended a share for foreign equity in all retail trade. It has also called for opening up of multi brand luxury retailing. It also suggested that 100% FDI should be allowed in single brand retailing.