Luxury is now about having an experience: Abheek Singhi
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Luxury is a $1.5 trillion market globally and is growing. The growth potential is surprisingly not limited to emerging markets but also present in advanced markets such as New York and Milan. Luxury is not only about owning a Hermes bag, but also about experiences. Given the disruptive forces of technology and the evolving nature of consumers, Abheek Singhi, senior partner and director at Boston Consulting Group, talked about the less-known facts of luxury at the Mint Luxury Conference in Mumbai on Friday.
On the luxury consumer
The luxury market caters to 354 million top, highly educated, high-income people across the world. In India, the context is similar. It caters to the top 4-6% of the population.
On the luxury market
Globally, the luxury market is at $1.5 trillion. If we consider gadgets, mobile phones and cars, it’s even larger at $1.7 trillion. India’s luxury market accounts for 1-1.5% of the global market at $15-20 billion. In comparison, the Chinese account for $100 billion.
On the evolving nature of the luxury consumer
The luxury consumer whose first experience of buying luxury products like a bag and shoe, say, over 20 years ago has over the years moved to buying luxury products across different categories like apparel and lifestyle. This consumer is changing. Luxury is no longer about owning, but instead it is about having an experience. It is about being.
On its implications for the luxury market
The conventional luxury products market is $420 billion, which is much smaller than the experiential or services market of $600 billion.
On the growth potential of the luxury market
The growth is actually scattered. It is not only in the emerging markets or in the developed markets. About 40% of the growth over the last five years came from like-to-like growth.
And about 60% came from retail expansion. Of this, 35% growth came from emerging markets and 25% from developed markets. So while it’s a given that the emerging markets and China are driving the growth of luxury markets, there is also potential to grow in cities like Milan and New York, which are still underserved, given the actual market potential of these markets. In India, all the major cities, including Mumbai, Delhi and Bangalore, are significantly under-penetrated and underserved today.
Three years ago, the belief was that luxury would be one of the least likely sectors to get disrupted by technology. That is changing. For the first time, in 2015, more origination came from online than from magazines. Nearly 49% of consumers selected the brand category combination due to something they saw online and this does not include the brand website. Sales from e-commerce have gone up from 1% to 5-10% in some categories and countries.
On the possibility of Uber-like disruptive forces in luxury
As the focus moves from owning to being and experiencing, they could be seen.