Vespa: Style over mileage

In a market where one doesn't typically associate the word 'premium' with scooters, we look at Piaggio's Vespa, the premium scooter.

Originally launched in 1946, Piaggio's Vespa has ventured onto Indian roads with local partners in the past, most memorably with Bajaj Auto in the 1960s, and later with LML (Lohia Machines) in the 1980s. It's been over a year since Vespa was re-launched in India, after a 13-year gap, this time on its own.

Priced at a 40-45 per cent premium vis-à-vis the average scooter brand in India, the Italian scooter brand has sold around 50,000 units in its first year of operations. Speaking of sales, here's an interesting fact: close to 30 per cent of Vespa's sales come from its shocking yellow scooter!

While the re-launch campaign drew heavily on the heritage value of the brand, its latest print campaign is more of a personality statement. "During the re-launch, we brought in the retro angle to leverage the lineage of Vespa," MV Krishna, marketing head, 2W, Piaggio Vehicles India, tells afaqs!. "But, you can't harp on heritage beyond a point. Now we're focusing on defining what Vespa stands for," he adds.

And, sure enough, the 'Life by Vespa' campaign (created by Soho Square Mumbai) for the Vespa VX tells consumers what the brand is and is not:

It is: an up-market scooter brand for the style conscious.

It's not: a 'commuter scooter'.

Style First

Vespa is not addressing the large, utility-driven consumer base. Even so, isn't talking about style over mileage a risky stance in a volume-obsessed scooter market? Krishna, who has worked with companies like Castrol and TVS before joining Vespa, explains, "Over 95 per cent of the two-wheeler business in India is for commuting. We've opened up a new 'lifestyle segment' in the scooter space. A person buys a Vespa not for 'that additional mileage' or 'utility value'. The Indian consumer is fixated on mileage as are consumers in big Southeast Asian markets like Indonesia. But we're offering a new perspective to the idea of buying a scooter. We're talking to an 'evolved' consumer."

By that he means someone who has gone beyond the idea of 'I can carry more luggage on my scooter', or 'I can get more mileage out of my scooter' or 'I can find more service centres to repair my scooter'.

Vespa markets to the 'aspirational Indian' -- a fashion conscious scooter buyer, from SEC A, between 18 and 30 years of age -- although, currently around 40-45 per cent of Vespa's sales come from the 30+ age group. The Vespa consumer is well-educated, well-off and possibly already owns a scooter and a car, and is looking to buy a two-wheeler to make a statement. Geographically, the brand is focused on all the large metros (where its dealership networks are present) and mini-metros. Going forward, plans to expand into smaller cities are on the cards. In fact, Vespa is already present in places like Vijayawada, Hubli, Nashik and Kolhapur. "It's not right to say our 'evolved' consumer is not present in these smaller cities," says Krishna.

Ready for niche?

Is there a market for niche products in the Indian auto space? According to Yaresh Kothari, research analyst, automobile, Angel Broking, there certainly is. However, he cautions, "The main purpose of two-wheelers in India is the convenience of day to day commuting. Consumers prefer products that offer value," 'value' being low cost/km or high fuel efficiency. "Having said that," he adds, "consumers are ready to pay a premium if the product is appealing. Piaggio has done well so far."

From an engine capacity perspective, Kothari cites Access and Swish from Suzuki and Duro, Rodeo and Flyte from Mahindra as viable competition for Vespa in India.

Abdul Majeed, leader, automotive, PwC India, concurs, "As people migrate from the higher middle to the rich class, the demand for premium auto products will rise. Though it's small, the premium scooter segment has gradually started gaining traction."

According to Vespa's Krishna, the market is maturing and the Indian consumer is seeking 'higher order' values. "Today, there are sub-segments and premium bikes. People are willing to pay more than five lakh for a motorcycle. A brand like Harley Davidson has a market in this country," he argues.

Interestingly, he wouldn't go as far as to call Vespa a 'cult' brand like Harley. "Cult is a bit extreme," he explains, "The moment you say 'cult' you're talking about consumers who're willing to tattoo a brand logo on their arms; people who're attached enough to a brand to say it's in their blood! We're not a cult brand. That's more in the motorcycle territory."

Like all global brands, Vespa too has tweaked its offering to better suit local requirements. For example, technological tweaks to suit Indian roads and physical changes like the height level of the scooter/seat to suit the physical profile of the Indian consumer. However, when it comes to the positioning, the approach was slightly different. "When you go too much into consumer insights, you tend to do what everyone else is doing. There are certain things consumers know and they keep repeating that. For example, if you ask them 'What sort of scooter do you want?', they'll say 'Style hona chahiye, mileage hona chahiye, we need space to carry goods, we need retail value'. You need to understand your consumer, yes, but when you're creating something new and different, merely drawing on consumer insights doesn't really work."

Operating in a self-created segment can't be easy. Going forward, what is the biggest challenge for brand Vespa? "When you're talking about premium positioning, it takes a while to get consumers to move into this space in larger numbers. It's not easy to just come into a market like India and start at 45 per cent premium. Here people don't just flash money at labels without logical questioning and evaluation," says Krishna.

Did we hear larger numbers? One way of doing that is slashing the price. Of course, many argue that this is akin to a head-on collision with the 'price paradox'. According to Kothari of Angel Broking, while a high price helps maintain a brand's premium image, it could be a deterrent for potential buyers. "If the company decides to reduce the price of the scooter, it will certainly boost sales," he says.

However, according to PwC's Majeed, a price drop doesn't necessarily mean the 'premium-ness' will vanish. "Consider BMW," he says by way of example, "It is bringing in its affordable 1-series soon. You just need to carry forward the premium features and look of the product."