I was at ISB Hyderabad last month for a panel discussion titled “Bending Global Brands”. The underlying premise was that while global brands may get away by selling the same stuff across the world—perhaps with minor tweaks to suit local sensibilities—for the Indian consumer they will have to do some serious “bending” if they want big time success here. Nokia bent significantly with its specially-for-India low-priced phone, and it is raking in $4 billion (around Rs18,800 crore) a year. McDonald’s abandoned its core product—the beef patty burger—and is coasting along happily instead on McAloo Tikki and McChicken Burger, and its business has grown to over 160 restaurants. Suzuki, a pioneer in bending for India, launched its cutesy low-on-price, high-on-performance Maruti in the 1980s which rapidly became the No. 1 car in India, and even today with intense competition honking at its heels, it holds on to half the market. Kellogg’s is an oft-quoted example in the reverse direction—it didn’t bend to local eating habits—and Indians ignored its global-standard breakfast cereals in the initial years and continued to munch on parathas and idlis.
Global companies are now bending over backwards to innovate for India—there’s even a new term for it, “Indovation”—and the key theme is to skin prices down till they fit into the Indian hip pocket, while creating a product, often from scratch, that fits Indian needs like a glove. It is happening across the board with hi-tech companies such as GE building a hand-held ECG machine that costs one-tenth and can operate in rural areas, to PepsiCo putting the humble nimbu pani into a bottle and watching its sales curve bending upwards. And management gurus are writing about how all these cheap-and-cheerful Indovations could be sold back to the West in a rush of reverse innovations thereby keeping global P&L’s pumping in both emerging and developed markets.
Inspired: Indian embroidery and jewellery were seen in John Galliano’s Fall collection for Christian Dior.
Which brings us to luxury brands. If going desi is the key to success in a we-are-like-that-only India, what should luxury brands do? Should they bend? Should they too Indovate?
This is where the problem gets particularly piquant as two of the basic building blocks of the luxury business are: high price and Western appeal. In an emerging economy by definition there is predominantly one kind of money—spanking new—and luxury brands with their sky-high prices help meet the human urge to show off new wealth. Western appeal works because the West, especially Europe, is seen as the cradle in which the finest luxury brands are made, and secondly, most people in emerging economies tend to look up to the developed West and want to emulate it. No luxury brand wants to dilute its “Western-ness” because that’s like taking the chocolate out of a chocolate cake. And no luxury brand is going to drop prices drastically because that’s like taking the sugar and butter out too. Indovating for luxury brands runs the risk of being left with just a heap of flour.
There are no precedents as luxury brands have enjoyed enormous success in other emerging markets without ever having to go native. Louis Vuitton in China, for instance, has done so well that Chinese consumers, shopping at home and abroad, have reportedly become the brand’s biggest buyers. Many luxury brands in China, even in these global gloom-and-doom times, have posted 40%-plus growth, and the Chinese consumer now accounts for 11% of the global luxury industry.
But for India I believe that luxury brands will have to “bend” considerably if they want to achieve the kind of scale they have achieved elsewhere in Asia, where they cater not just to the wealthy but enjoy a very wide following, counting junior executives and secretaries among their customers.
One, they will have to create a part of their portfolio afresh for India. The reason is this: While people in almost every Asian country have abandoned their national dress and slipped comfortably into Western attire head-to-toe 24/7, we Indians wear both Indian and Western outfits. The Japanese kimono and the Chinese cheongsam may have disappeared from everyday life, but the sari, the lehenga, the salwar-kameez are alive and well, in fact they are thriving and evolving under local designers. If I look at my own wardrobe, at least half the stuff is Indian, and global luxury brands simply don’t play in this segment as of now, leaving a big opportunity lying unattended on the table. Furthermore, luxury accessories—bags, shoes, jewellery, in particular—will have to work with Indian clothes, and importantly, meet the Indian colour-and-bling quotient, which is a lot higher than elsewhere in the world. And then there is the big fat Indian wedding market—think Shilpa Shetty in a Versace lehenga—ripe for luxury brands.
Two, luxury brands will have to rethink their price-value equation, because we Indians are obsessed with value. I am not suggesting that luxury brands do a Nano on their prices—that would be suicidal—but I do believe they need to widen the net by lowering price points for their entry-level products, even if it means creating new ones for India (wallets and small leather goods typically play that role, but a Rs20,000 wallet is on the high side for India). At the same time, luxury brands will have to up their perceived value in fussy Indian eyes, and figure out how to give them a bigger luxury bang for their buck. (Hermès Birkin is a classic example—at $5,000-plus a bag, it is seen as great value for money.)
The bottom line: If luxury brands don’t Indovate, they will miss out on a large part of the action. If they do, we are all in for a treat—a kurta by Dior, a sari by Gucci, these might become the new to-die-for items for Indian fashionistas.
Radha Chadha is one of Asia’s leading marketing and consumer insight experts. She is the author of the best-selling book The Cult of the Luxury Brand: Inside Asia’s Love Affair with Luxury. She will write a monthly column on the luxury business for Lounge.
Write to Radha at email@example.com