The 2003 launch of Louis Vuitton in Delhi serves as a symbolic start of the luxury brand industry in India. A lot has happened in the eight years since. Most of the global heavyweights—besides Vuitton, the likes of Gucci, Hermès, Cartier, Armani, Burberry, all regulars on Interbrand’s Best Global Brands ranking—have set up store here. Luxury malls such as Emporio have opened their doors. Fashion glossies such as Vogue have taken root and are spreading the luxury gospel. The number of high networth individuals, or HNIs (with financial assets of over $1million, or Rs4.5 crore) has more than doubled—the 2003 World Wealth Report by Merrill Lynch Capgemini estimated that there were 50,000 HNIs in India, the 2010 report puts the number at 127,000. The luxury culture has spread among the elite—attend a kitty party in one of New Delhi’s swank restaurants and it will be a brave woman who will show up without her luxury bag in hand. Or check out men’s watches at a high-society party and chances are all of them are marking time on pricey Swiss tickers.

But here’s the twist—talk to the brands themselves and, barring the odd exception, there is a general sense of disappointment in the numbers that their businesses are delivering. Top lines have been extremely modest and bottom lines barely there. The hoopla around luxury brands has been high decibel, but profit and loss statements seem to be saying “yeh dil maange more". Everyone agrees that India has huge potential, but how do you unlock that potential? How do you translate it into a large enough business? How do you gather speed and scale?

Before we address that question, let’s get two quick points out of the way.

Watch out: (from right) Zenith’s new model, the Christophe Colomb chronometer, is priced at Rs98 lakh; Coco Mademoiselle, Chanel’s new perfume is priced under Rs20,000.

Two, the incidence of Indian tourists buying abroad has increased significantly. It is vexing when you see it from the lens of the Indian country managers—they prime the customer in India and the sale is consummated abroad—but pull back and put on a global lens and this is entirely good news. I would encourage it—a sale is a sale wherever in the world it happens—and find ways to capture and credit the India team. Again a comparison with China is useful. Today, a full 20 years after luxury brands entered China, when the Chinese consumer is already the biggest in the world for many brands, more than 50% of Chinese sales are captured overseas, including Hong Kong and Macau, for the simple reason that prices in China are higher. The point is the phenomenon of shopping abroad is always going to be a significant part of the game, so why complain about it—leverage it to the hilt instead, study Indian tourists’ needs and play to them.

Now to our central question of gaining scale for luxury in India. I have three points to make—one, go all out for the New Money consumer; two, go back to luxury brand building 101; and three, innovate for India. Let me build on these.

Target the New Money consumer

There is only one kind of money in an emerging economy—New Money—so it makes perfect business sense to give it a bear hug. Well, okay, India does have tiny pockets of old money—royal families and industrial dynasties—but their limited numbers aren’t going to help build scale.

Luxury gateway: Tod’s sunglasses are priced under Rs20,000; and shoes from Prada’s Made in India range.

Also Read Radha Chadha’s previous Lounge columns

Wealthy business families are scattered in Small Town India too—as so emphatically demonstrated by the recent Aurangabad 150-Mercedes-buying binge. Connecting with Small Town India needs innovative strategies—group buying a la Aurangabad may well be a model that luxury brands could consider. Luxury watches are striking a chord in smaller towns too—Omega and Tag Heuer are reportedly becoming must-haves for brides and grooms.

Professional India, whether working independently or in senior positions at corporate houses, is making hefty sums of new money. Chances are they grew up in hard-working government service families and still hold on to “good old middle-class" values—so prying their wallets open is harder than the free-spending business kind. Patience and persistence is key here—with time they will succumb to the luxury watch, the luxury car, the luxury suit, and before you know it, the missus needs a luxury handbag, and then there is no going back.

Young India can be groomed into luxury—they have the mindset anyway, and their means will increase as they go up the professional or entrepreneurial ladder. For example, my broker, in his early 30s, started from scratch in the real estate business, and now has an office with half a dozen people, and does 50-60 deals a year. Do the math—he is your New Money customer.

Having sharp strategies to generate trials among New Money is critical to building scale. For example, low-entry price points (for select products) is a tried-and-tested way to entice a larger audience, as has happened in the rest of Asia. What products would work for India? And how should they be priced? (The numbers tell an interesting story. As against aiming at the 127,000 HNIs and their ilk—even if you multiply them by 10, their potential is just a million and a quarter—if you aim instead at the top 25% of SEC A (a socio-economic classification of India, “A" has 34 million people), you are looking at a potential audience of eight million. Most of them may never buy a $2,000 handbag or a $4,000 jacket, but many could be persuaded to buy “entry-priced" watches, sunglasses, wallets, perfumes, lipsticks, and over time they will graduate to bigger ticket items).

Invest in brand building

Coveted: (above) Shoppers line up to enter a Gucci store on Canton Road in Hong Kong. Thomas Lee/Bloomberg

Vogue’s “School of Style" with young professionals—doctors, lawyers, executives, all subscribers of the magazine—is an example of a brand-building exercise that is a win-win-win. The young ladies gathered at the Oberoi over drinks—presumably after a hard day’s work—to hear the Vogue fashion team present ideas on how to dress for work. Alex Kuruvilla, managing director of Condé Nast India, says he was amazed by the questions the women asked. “It wasn’t frivolous stuff for them—this was serious, this was about how to dress better for success at work." Everyone wins—Vogue’s fashion authority goes up, it helps their advertisers, and the young professionals go back with a once-in-a-lifetime coaching session from the same team that styles the likes of Aishwarya Rai Bachchan and Deepika Padukone for photo shoots.

Luxury brands aren’t built on advertising alone—important as that is—their lifeline is “buzz" i.e., being talked about in circles that matter, being written about in the local media. Buzz jacks up their cachet and therefore it is crucial to have a line-up of buzz-generating activities—these could range from small coffee sessions where one-on-one relations are nurtured to high-profile parties with celebrities in attendance that get splashed in the media. Burberry creative head Christopher Bailey’s visit to India for the Mumbai store opening is an example—the select few (Bollywood, celebrities, socialites) get to party with him in person, the rest of us meet him between the sheets of a fashion magazine.

There is a silver lining here. India is still a relatively level playing field, and any brand could potentially capture Indian hearts—and wallets—if it moves swiftly on the brand-building front.

Innovate for India

India is a snakes and ladders game—there are challenges that can set you back by 40 squares; equally, there are unique opportunities that can take you right to the top of the heap. Dealing with India’s mix of challenges and opportunities needs a mix of flexibility and creativity—a sophisticated version of jugaad if you will, a readiness to experiment and innovate to meet dramatically different local needs—and that’s been hard for luxury brands as they are used to playing—and winning—by their script.

The DLF Emporio mall in New Delhi. Priyanka Parashar/Mint

Or take the huge opportunity that the Indian wedding presents—a one-time, all-out spending frenzy. Making your brand a part of it can quickly multiply sales. But to really harvest the wedding, luxury brands need to get to its heart—the clothes and the jewellery. Leave this sizeable fashion opportunity lying on the table? Or create specially for the Indian wedding market?

Or take India’s rich heritage of craftsmanship. That’s an opportunity right up their street, for what are luxury brands if not a recoding of heritage for modern times? Not sure how many Western brands would be willing to take the plunge into Indian culture, but I got a taste of how it might look: the Prada Made in India range of bags, shoes and dresses is a treat. I checked out the orange and black, woven leather handbag. It is just beautiful. The price? Upwards of $2,000 in New York. And worth every cent.

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.

Write to Radha at luxurycult@livemint.com

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