What's luxury for the Indian consumer?

Havas Media's Anita Nayyar presents the changing paradigm of luxury in India.

What is luxury? And how does a brand deliver its luxury message to the probable consumer? Before even deciding on the messaging it's important to understand 'luxury' from the POV of Indian consumers. Anita Nayyar, chief executive officer India and South East Asia at Havas Media Group in her presentation 'Reaching the well-heeled Indian' at afaqs!' Great Lifestyle Brands conference sheds light on luxury in India and the evolving communication around the segment.

Nayyar starts with, “In India it (luxury) is more about the process than the product, meaning while in the West, luxury is about the attributes of a product/brand, in India it is more about the customisation of the service and experience that is being provided. It is more about lifestyle.”

But Indians have snob value too. Nayyar explains that in India, anything premium or expensive is also considered luxury. What is considered luxurious and expensive is also subjective to perception. Nayyar pulls up an example — a Coach handbag may mean pricey and luxurious to one, it might be Louis Vuitton for another.

Nayyar points out the difference between the Indian and Chinese markets in terms of luxury.

“While China is a mature market, India is an evolving one. Affluent Indians measure quality of life by a life free of financial worries and having the spending power to afford a lavish lifestyle. But the Chinese associate luxury with high quality and high-end products. The clear difference is between owning and experiencing. India is experiencing a demand for luxury brands from tier 1 and 2 cities,” she says.

Luxury Facts:

• Luxury consumers make up four per cent of the population, which is not a small number given the huge population of India.

• Has potential to grow from the current value of $10 million to $26 million by 2025

• $2.3 trillion worth of HNI wealth by 2020 and has the 4th largest population of millionaires in APAC.

• Mumbai and Delhi are the richest cities

• Growing purchasing power and awareness in tier 2 and 3 cities fuelling growth

• Only 56 per cent of luxury market revenue is contributed by metros

• HNI spend 40 per cent of monthly income for luxury while middle income groups spend only 8-10 per cent.

Trends:

• Delhi, Mumbai, Ahmedabad, Pune and Bengaluru are high spenders

• Tier 2 and 3 cities are high spenders in categories such as auto, women apparel and accessories.

• Image conscious population keen to display their wealth or social status.

• Second-hand markets for luxury leather goods and clothing growing faster

• Media, PR and special events play significant role.

• Focus on newly affluent consumers with limited knowledge of products.

• Spending on luxury cars to grow 18-20 per cent over next three years driven by demand from smaller towns.

• Luxury space in retail increased from one per cent to 1.44 per cent and growing, meaning there is scope for showcasing luxury brands.

In terms of expenditure, watches and jewellery take the lion's share followed by technology, cars, vacations, food and wine, apparel, accessories, etc.

The luxury consumer:

Nayyar mentions that the democratisation of luxury and the changing psychographics of consumers provides a lethal combo, which broadens the base of luxury in India. “It is becoming broad based with demand coming in from tier 2 and 3 cities. The growth is fuelled by urbanisation, disposable income, youth, and a general increase in the purchasing power of the middle class. It is also creating a new consumer segment — the first time luxury buyer,” she says.

There is micro segmentation, meaning it's not just the rich but ones who aspire to buy luxury. Nayyar reveals that 45 per cent of UHNI (Ultra High Networth Individual) reside in tier 1 and 2 cities requiring a push beyond the metros.

The HENRY factor:

Nayyar mentions that power resides in the hands of millennials. She reminds us of the acronym HENRY – High Earners but Not Rich Yet. A term referring to millennials who are earning a high pay package and have influence and the propensity to buy but are not yet rich.

Indians want the experience of luxury. That is, to buy an expensive car they want the car to be sent home for a test drive. Also, personalisation and customisation is key, that is, a brand talking to individuals is important. Nayyar highlights the presence of luxury brands such as Burberry on e-commerce platforms such as Amazon making them more accessible.

Media preferences for luxury brands:

Luxury brands prefer English language channels. There is a preference for news based programming especially to target males. In print, city supplements in newspapers and in-flight magazines are the choice. There is decent presence on FM radio driven by high drive time in cities. This is followed by digital presence, recommendations and word-of-mouth (especially among women).

The brand's presence has to be a combination of stores, digital experiences/engagements and social media. Luxury brands, even the likes of Prada are engaging audiences digitally.

Nayyar shares the example of Kohler, a premium American bathroom fittings brand, which started out with print ads and gradually moved to video. The brand even resorted to using an influencer in the form of Bollywood actor Twinkle Khanna, an interior designer herself. The brand also introduced India-specific offerings titled 'Inspired by India’.

She also mentions Swarovski's brand video content, which was created in partnership with Culture Machine. The right way in Nayyar's books is to let the story ride the content leaving a small share for the brand.