Home >Lounge >Features >Will revenge buying save the Indian luxury market?

In April, as the lockdown eased in Wuhan, China, and its citizens began to come out of isolation, market watchers noticed a curious phenomenon: Sales of luxury items were skyrocketing.

Within a few days of reopening on 7 April, French brand Hermès’ Guangzhou flagship store reported sales worth $2.7 million (around 20 crore now). Gucci, Prada, Louis Vuitton and Estee Lauder reported a similar trend from that country.

This behaviour, known as baofuxing xiaofei, or “revenge buying", has become a buzzword in the luxury segment. It goes back to the 1980s, when the “closed nation" that was China was demanding international goods. But it has acquired new meaning during the covid-19 pandemic.

At a time when a Boston Consulting Group forecast suggests the pandemic could see global luxury sales drop 25-35% in 2020 compared to 2019, could revenge buying save the day?

Cecilia Morelli Parikh, founder, Le Mill, a Mumbai-based luxury concept store, believes one of the reasons for the revenge buying phenomenon in China could be travel bans. “Fifty-sixty per cent of the luxury spending by Chinese consumers last year was made abroad. This year they aren’t travelling and that’s why the Chinese mainland stores are doing much better than ever," she says.

The India picture

In India, luxury is still a relatively nascent industry, going back to the mid-2000s. The market is much smaller than more mature markets like the US and China. According to an April report from statistics and market data portal Statista, India’s luxury goods market is expected to be worth $7,956 million in 2020 (after adjusting for potential covid-19 losses) and is projected to grow annually by 10.6% CAGR between 2020-23, with cosmetics and fragrances forming the largest segment (in comparison, projections for the US luxury goods market in the same period are $55,250 million).

Abhay Gupta, founder and CEO of Luxury Connect, a luxury brand management firm, and the Luxury Connect Business School, believes the Indian luxury market could take a bigger hit than the global average. “Indian industry insiders believe sales could drop by as much as 50%," he says. He hopes that by September, when the festive season starts, some amount of spending may begin in this segment.

Parikh believes the phenomenon of re- venge buying may play out in India too since consumers will not be able to travel for leisure—earlier, lower duties and taxes made purchases abroad attractive.

Gupta is more cautious. Not just will it play out differently, he believes it will have a different impact on different categories. “The beauty and wellness category will see the first surge as soon as lockdowns are relaxed," he says. This will be governed by the safety precautions in place. “People are used to the system of going to a salon for self-care and wellness and it has been missing for a while, so it will bounce back," he adds.

Within the apparel sector, people are likely to be more conscious of quality. Gupta believes a psychological shift is taking place—people are questioning how many clothes they need or whether they want to spend on something more durable. “There’s still a scare about buying fashion in brick-and-mortar set-ups, with valid concerns about hygiene," he says. First-time luxury buyers may not invest in fashion without a tactile experience. “The fear factor will set in over there too, and the luxury segment will face the situation of selling to a new buyer while stores are still shut or aren’t receiving customers," says Gupta.

Time for demure luxury

Parikh has an interesting take on the nuanced shift in luxury buying in China, something that could be seen in India too. “The Chinese are buying pieces that don’t need to be shown off to outsiders, such as logo-ware or ostentatious things, which have seen a decrease in sales. There is a demure, classic and refined trend which was popular in the last few seasons (such as during the Spring/Summer and Fall/Winter 2020 fashion weeks around the world) and that’s what the customers will go for this year because they might not have as much money and will think hard about what they want to buy," she says. Rather than flashy or ostentatious clothes, demure fashion will exhibit micro-trends such as neutral colours and smart silhouettes offered by brands such as Jil Sander, Loewe and, most memorably, Phoebe Philo, when she was creative director at Celine.

“Among the aspirational and affluent consumers, conspicuous consumption will be replaced by conscious consumption," says Gupta.

There is, they believe, a pent-up desire for some self-indulgence, especially among regular luxury consumers, but online shopping can satiate that desire. “Such consumers are fashion conscious and educated about brands and are accustomed to spending that kind of money on luxury. For them, there’s less of a need to go and see the item," says Parikh. This is where e-commerce comes in—and Parikh is prepared, with a website in the pipeline. “As a store, we have been doing 70% of sales through WhatsApp and home deliveries," she says.

A new shopping experience

Amit Pande, brand head for The Collective, one of India’s largest luxury retailers, is planning to implement safe shopping procedures. “For the first month and a half, we will ensure that our delivery staff doesn’t come in contact with our customer because we can’t control the exposure that either of them might have had," he says. The service will proceed via a contactless delivery system. The store might send out a trunk of selected items that customers can evaluate as they stay in touch with a relationship manager. While the system can be availed by everyone, it might work better for existing customers.

There are, of course, strict guidelines about every product being sanitized to mitigate chances of viral contamination.

Appointment-based shopping will be a new reality too. Parikh is already planning on implementing it once the lockdown is relaxed. “Only 50-60% staff will be present in a store on a given day and we need to function with a constant shuffle. There are also private lounges in most of our stores and that service might be used even more now," Pande says.

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

Close
×
My Reads Logout