I have wondered at the economics of several luxury stores in the large CR2 Mall in south Mumbai, most of which seem empty despite their obvious aesthetic appeal.

The purchase of brands at the very top end of the consumer spectrum usually requires some sort of suspension of reason, and certainly a suspension of the link between price and value. Five decades of frugality have etched a value-for-money culture so deep, even in the uppermost echelons of the class hierarchy, that even such brands are put to the paisa vasool test on which, almost by definition, they fail. This problem is accentuated by the high duties imposed on luxury goods which makes these products costlier in India. Given that luxury product buyers travel widely, there is little incentive for them to pay more for a product which they could acquire cheaper on their next overseas trip.

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Luxury is a holistic experience. Great cities globally have identified getaways exclusively for the super rich. Parts of Bond Street in London and 5th Avenue in New York cater to the rich in every form—in their architecture, surroundings and amenities. Many of the patrons of these stores never really need to move away from an extra special experience at any point in the purchase experience. It is, for instance, physically possible to spend an evening at LA’s famous Rodeo Drive, dine at the classy Mellisse on Wilshire Boulevard and simply drive up the hill to Bel Air without ever facing the world where ordinary people live. It would be somewhat difficult to conjure a luxury buying experience if the street on which the store is located is down market and if the way home requires one to pick one’s way through crowded bazaars—a situation faced by many in Mumbai. Unless this reality changes and luxury moves from just a purchase to an experience it looks like this market will remain peripheral to a critical mass of wealthy consumers and remain isolated in a few malls and five-star hotels.

Premium brands have had a rough ride in India, also in part because luxury is already defined in uniquely Indian ways. That there existed so many Indian versions of premium items has not helped global brands gain a foothold. That it is possible to buy outrageously expensive sarees, for example, has not necessarily helped the market for designer women’s wear. Shoppers at Benzer or Amarsons in Mumbai or Bangalore’s Nalli for sarees and Ganjam for diamonds, or the Alukka gold stores in Kerala, cannot be accused of any fundamental aversion to spending. The very existence of such ostentation has encouraged international marketeers. There has been a belief that those who pay through the roof for saffron would soon be willing to pay for Beluga caviar. This simplistic explanation overlooks the subtle distinction between luxury brands, which Indians appear doubtful of, and simply the ostentatiously expensive item for which there exists demand. Consumers seem happy to pay for either true tangible value or if they find no functional substitute. They seem prepared to pay for ostentation but not for a brand with a marginal addition in functionality.

Moreover, in India, at least for now, it appears possible to make strongly positive statements about oneself without needing to jump the chasm between super premium products and global luxury brands.

Harish Bhat, who has run both watchmaker Titan Industries Ltd and the Tanishq jewellery chain, points out how even the affluent can adequately satisfy their craving for recognition through the high-end products of Raymond over an Ermenegildo Zegna. My friends in the marketing profession have pinned their hopes on the youth, influenced by media and supported by higher incomes than a generation ago, to boost the luxury market. This argument may miss the fact that even the most modern Indian youth generally remain fixed in their extended families, and absorb the values of the older generation.

The attempt of this article is not to discourage world renowned brands. Indeed, as the financial crisis drags on in the West, luxury retailers should turn their eyes towards India. In doing so, it would be useful to recognize that the brand alone may not justify the huge premium pricing. The boards and management of these companies may want to ask their marketing colleagues to find products that gel with the Indian psyche, have few easily comparable substitutes, and also find a better price-to-value equation.

Govind Sankaranarayanan is CFO, Tata Capital Ltd. He writes every other Friday on issues related to governance. The views expressed here are personal. Write to him at ruleofthumb@livemint.com