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India luxury
summit
2014
kpmg.com/in
Message - Ministry
I am delighted to know that the second India Luxury Summit is being organised by
ASSOCHAM with Spain as the Country Partner this year.
Organising the second India Luxury Summit - 2014 at this opportune time will certainly
provide a forum for the industry leaders from the luxury and retailsector for deciding on
new investments and the way forward.
I congratulate ASSOCHAM and KPMG in India for releasing this report, after a detailed
survey of Indian as well as several international brands.
I am sure that the industry will find this report useful in deciding their future
investment roadmap.
The youths of India is innovative and hardworking to address the market need. More
and more families in India want to be within this area of luxury market. India is
historically 'society of richness and luxury' in certain areas of living.
I convey my good wishes to ASSOCHAM, (India's Apex Chamber of Commerce and
Industry) for the success of the second India Luxury Summit - 2014.
Dr. E. M. Sudarsana Natchippan
Minister of State
Commerce & Industry, Department of Industrial Policy & Promotion
Government of India
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Message - ASSOCHAM
We are happy to announce the second India Luxury Summit on Friday, 7 February 2014,
in New Delhi. The presence of a high-powered Spanish business delegation at the
summit is indeed very significant and shall provide many business opportunities.
Needless to say, the luxury sector in India is poised to register a growth of 25 per cent
y-o-y, and we at ASSOCHAM are committed to providing an effective business forum
to Indian and global entrepreneurs.
Spain has emerged as one among the European countries that can boast of strong
global brands such as Zara and Lladro. These brands have become household names
for the quality, variety and exclusivity they offer.
I convey my best wishes for the success of the second India Luxury Summit - 2014
and thank all our stakeholders, including the Embassy of Spain and their Commercial
Office in India for their guidance and support in ensuring the success of the second
India Luxury Summit - 2014.
I would also like to take this opportunity to thank the teams at ASSOCHAM, KPMG in
India and YES BANK for preparing this report on the luxury sector, which I am sure, will
help the industry for a better understanding of the luxury sector in India.
D.S.Rawat
Secretary General
ASSOCHAM
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Foreword - KPMG in India
The year 2012 was dynamic for the luxury market in India, as it continued to grow
unabated despite weak consumer confidence and an economic slowdown. Nontraditional markets - regions beyond metros and tier one cities - and a growing number
of ‘HENRYs’ (High Earning Not Rich Yet individuals) spending on luxury goods are
largely responsible for the growth of this market.
In 2013, several players expanded their business in the Indian market and we expect
2014 to be equally - if not more - buoyant for the industry. We also expect competition
in the ‘bridge to luxury’ segment to intensify with increasing number of consumers
joining the luxury segment. While some of the foreseeable challenges include those
related to shortage of quality staff and real estate, the industry is already trying some
business models whose success is likely to overcome them. The sector has also
witnessed the emergence of Indian players who have risen to fame by capitalising on
traditional Indian strengths in areas such as arts, crafts and medicine.
These are exciting times for the luxury sector in India, which is buzzing with activity.
Players are increasingly walking the extra mile to overcome barriers typically
associated with operating in India. Traditional ‘definitions’ and ‘characteristics’ of luxury
consumers are evolving with increasing awareness among consumers; this is creating
a host of opportunities for the existing and new players.
KPMG in India is elated to be a part of the Second India Luxury Summit that provides
a common platform to various industry stakeholders to share leading practices, plan
the way forward and address the common challenges hampering the sector’s growth.
This report incorporates extensive discussions with senior stakeholders of the industry
and aims to present an all-encompassing view of the opportunities and issues present
before the sector. KPMG in India and ASSOCHAM acknowledge and appreciate
everyone who has contributed to this report.
Rajat Wahi
Partner
KPMG in India
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Table of content
Overview of the Indian luxury market4
–– The concept of luxury and the key trends
4
–– Emergence of Indian luxury
7
–– Key consumer segments
7
–– Luxury clusters in India
8
–– Challenges highlighted by luxury retailers in India
10
Success stories in luxury space14
–– Manufacturing success with luxury ayurveda: Forest Essentials
14
–– Crafting success: Goodearth
17
–– Driving to success: BMW India
20
Industry views on the Indian luxury market24
–– The way Ahead: Indian Luxury Brands Going Global
- by François Arpels
24
–– India's Luxury Retail Quotient
- by Research and REIS, Jones Lang LaSalle India
27
Note: Names of brands / companies used as
examples in this report are without any prejudice
to any specific brand / company
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
1 | India Luxury Summit 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 2
Section 1
Overview of the Indian
luxury market
The concept of luxury and the key trends
Emergence of Indian luxury
Key consumer segments
Luxury clusters in India
Challenges highlighted by luxury retailers in India
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
3 | India Luxury Summit 2014
The concept of luxury and the key trends
The global luxury market was buoyant
through 2012-13; a period characterised
by global economic recovery in
developed economies such as the
U.S. and positive recovery signals from
Europe. In consonance with this trend,
the wealth of the world’s richest grew by
17 per cent as 210 new entrants joined
the ever-increasing Forbes Billionaires
List1.
India continued to hold its position in the
global billionaire list with a contribution of
55 billionaires, accounting for a total net
worth of USD194 billion. This is a marked
improvement over 2004, when there
were just nine Indians in the list. The year
2013 was marked by a slowing Indian
economy and diminishing consumer
confidence, but it seemed to have little or
no impact on the growth of India’s luxury
market, with the country’s wealthiest
continuing to spend unabated on luxury
goods through the year.
Global billionaires' wealth
Source: http://forbesindia.com/article worlds billionaires-2013/forbes-billionaires-list-2013/34951/1,
accessed 14 January 2014
The Indian luxury market grew at a
healthy rate of 30 per cent in 2013 to
reach USD8.5 billion in 2013. It is likely
to continue growing at a healthy pace to
reach USD14 billion by 20162. The sector
includes luxury products such as apparel,
accessories, home decor, pens, watches,
wines and spirits, and jewelry; services
such as fine dining, concierge services,
travel, hotels and spas; as well as assets
such as fine art, yachts, and automobiles.
Growth was driven by lifestyle segments
such as fine dining, gadgets, hotels,
jewelry, personal care and wines;
growing at 30 to 35 per cent as the luxury
consumer refused to compromise on the ‘luxe' life.
1.“Forbes Billionaires List 2013,” Forbes website, http://
forbesindia.com/article worlds billionaires-2013/
forbes-billionaires-list-2013/34951/1, accessed 14
January 2014
2. India's luxury market up in 2013 and likely to break all
times record in 2014, http: www.assocham.org/prels/
shownews.php?id=4327, accessed 14 January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 4
Indian luxury market size (USD billion)
Source: ASSOCHAM website, http: www.assocham.org/prels/shownews.php?id=4327, accessed 14
January 2014
India’s luxury potential has attracted
several luxury players such as Damiani
and, Royce over the last few years, and
several others such as Godiva Chocolates
and Faberge Jewellery plan to enter the
Indian market. Additionally, brands such
as Geox Group and Villeroy & Boch, which
exited India previously, are now showing
renewed interest in the country’s luxury
market3.
The Indian luxury consumer landscape
is experiencing strong evolutionary
undercurrents that are redefining the
consumer profile and how luxury players
operate in the space. A look at some of
the key trends reveals the opportunities
and challenges that the sector in India
currently presents.
An ever - increasing and ever-evolving base of consumers
The growth of the Indian luxury market
is driven by an ever-increasing base
of ultra high-net worth households
(HNHs), which is likely to grow at a
CAGR of 27 per cent through 2017-184.
The luxury space was once defined
and limited by the preferences of
these ultra HNHs, including only the
most elite and bespoke products and
services. However, in recent times,
rising income levels and aspirations have
led to a growing segment of potential
luxury buyers beyond traditional luxury
shoppers. These consumers are typically
upper middle class aspirers looking to
ascend the ‘consumption ladder’. An
increasing proportion of luxury demand
is likely to come from this segment,
which belongs to a larger group likely to
experience the highest income increase
in India5. Players have responded to
this potential by launching entry-level
luxury brands to help these consumers
trade up. They have also customised the
shopping experience and their services
significantly to cater to such buyers, who
often experience luxury for the first time.
This presents a significant opportunity for
players to establish a long-term connect
with the consumer and gain a first-mover
advantage.
Number of ultra high net households
3. KPMG in India analysis
4. Top of pyramid 2013, Kotak Wealth Management and
CRISIL Report, 2013, p10
5. “Living in India”,The Financial Express, 12 June 2011
Source: Kotak Wealth Management Report 2013
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5 | India Luxury Summit 2014
Luxury car maker BMW
launched the 1 series at an entry
price of INR 2,090,000,
(ex-showroom, India)
positioned at just 2 to 3 per
cent higher than the entry-level
variants of various premium
brands.
Mercedes-Benz launched its
'Proven Exclusivity' programme
in June 2010 to target
consumers interested in used
luxury cars, playing on the
legacy of the Mercedes brand
name and superior shopping
and service experience.
Hidesign is moving beyond the
traditional luxury consumer
and is increasingly positioning
its products for young
achievers with high incomes.
These are typically people who
are extremely status-conscious.
Source: Luxury carmakers change lanes to cruise in a slow market, Business Standard website, http://wap.business-standard.com/wapnew/storypage.
php?id=2&autono=113110200441, accessed 10 January 2014
Luxury car-makers set to double used auto sales this year, Indian Express website, accessed 10 January 2014
India shows Hidesign how to bag buyers, Business Standard website, http://www.business-standard.com/article/management/india-shows-hidesign-howto-bag-buyers-113082901082_1.html, accessed 10 January 2014
Urban India's average household income
Source: “Living in India”,The Financial Express, 12 June 2011
Growing focus beyond the metros and tier-I cities
Home to nearly half of the country’s ultra
HNHs, India’s non-metro regions offer
lucrative growth opportunities for luxury
segment players. Players with a longterm perspective have already started
investing in establishing a connection
with consumers in these areas.
Infrastructure, which includes a proper
retail environment, is a key challenge that
players in these regions face. Players
are overcoming this through innovative
models and local tie-ups in order to
optimise investments and minimise
risks. Such innovative means are gaining
popularity amid a thriving franchising
sector, stringent investment norms and
limited knowledge of local preferences.
Brands such as Judith Lieber are
reaching out to tier-II consumers through
local partners and exhibitors to build
awareness and to induce consumer trial6.
Players are also using these channels
to educate potential consumers about
luxury and thereby, position their brand
as relevant for the consumer.
Geographical spread of ultra HNHs in India
6. Luxury market to reach
$15 bn by 2015 in India,
marketers try new
ways to woo buyers in
non-metros, Economic
Times website, http://
articles.economictimes.
indiatimes.com/2013-03-21/
news/37903575_1_luxurymarket-brand-smaller-cities,
accessed 10 January 2014
7. Betting on India, Outlook
magazine website, _http://
business.outlookindia.com/
printarticle.aspx?288331,
accessed 10 January 2014
Around 70 per cent
of luxury handbag
player Judith Leiber‘s
customers now
come from tier-II and
tier-III cities without
depending on storebased expansion.
Its local partners
showcase select
products to potential
consumers through
exhibitions7.
Source: Kotak Wealth Management Report 2013
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India Luxury Summit 2014 | 6
Evolving channels and relationships
As the consumers evolve, so do these
channels; as a result, many luxury players
have ‘switched’ partners to suit specific
needs8. Examples include players such
as Corneliani, Villeroy & Boch, Versace
and Guess. At present, only a handful
of Indian companies continue to be
the preferred choice of luxury players,
primarily in segments such as clothes
and accessories. This trend is likely to
continue as luxury brands continue to
assess their strategy.
Highlighting the state of flux,
more than 150 international
fashion brands launched in
India during 2004-11 have either
changed partners or exited India9.
High degree of ‘Indianisation’ and ‘localisation’
‘Indianisation’ and ‘localisation’ are
increasingly becoming differentiators of
success with new consumers in new
markets. Luxury brands no longer deal
with just the elite and well-traveled
urbane customer. New segments with
varied profiles may now constitute
potential targets for luxury brands;
examples include segments such as
farmers selling their lands to developers
and entrepreneurs experiencing
windfall gains. Brands are responding by
introducing local, Indian elements to their
products - lifestyle brands are signing up
with Indian designers, hiring relationship
managers who speak local languages
and tweaking offerings for Indian
festivities, weddings, to name a few.
While several luxury players have
launched wedding ranges in India,
many are increasingly targeting
Indian weddings with custommade products such as handbags,
scarves, food hampers and liquor
for guests.
8.“‘Global luxury brands scout for new partners in India,”’
Fashion United website, www.fashionunited.com/
executive/management/global-luxury-brandsscout-for-new-partners-in-india-20122903488800,
accessed 15 January 2013
9. Twist in Tale: Global luxe brands scout for new
partners, Fashion United website, _http://
www.fashionunited.in/news/fashion/
twist-in-tale-global-luxe-brands-scout-fornew-partners-290320123357, accessed 10
January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
7 | India Luxury Summit 2014
Emergence of Indian luxury
In 2013, luxury champagne player Moet
Hennessy, who previously offered
only imported products, launched its
first Indian-made wine10. The strategy
is aimed at targeting a new breed of
consumers -urbane youth.
Similarly, brands such as Hidesign
thrive on situating their manufacturing
facilities in India while catering to the
market. These trends are indicative of
a growing comfort around the concept
and quality products being made in India.
This sentiment now extends beyond
entry-level shoppers and is shared by
traditional luxury shoppers as well10. This
augurs well for Indian luxury players. The
traditional Indian luxury shopper is now
more aware than before and is willing to
look beyond the geographic limitations
that once determined purchase
decisions. The traditional Indian luxury
consumer is also increasingly focussed
on multiple aspects such as cost, after
sales service, etc. while making the
choice.
Homegrown players have capitalised on
traditional Indian strengths in areas such
as textiles, leather, jewelry and personal
care to gain popularity both in India
and abroad. These players have often
capitalised on aspects such as traditional
craftsmanship, unique aesthetics
or heritage value to identify with
consumers. The international presence
and popularity of these brands have only
reinforced their position in the luxury
market in India. Examples include fashion
designers such as Ritu Kumar and
Sabyasachi; high-end ayurvedic personal
care company Forest Essentials; and
hospitality players such as Taj, Oberoi and
ITC.
Luxury consumers preferring to shop in India over abroad (%)
Source: Kotak Wealth Management Report 2012
10.French champagne group Moet Hennessy
launches ‘made in India’ bubbly, Mint website,
http://www.livemint.com/Companies/
t9oWBhX504U3gpRHIu83JL/French-champagnegroup-Moet-Hennessy-launches-made-in-India.html,
accessed 10 January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 8
Key consumer segments
The moneyed class in India has always
had exposure to luxury brands through
imports or overseas travel. In addition,
economic growth of the country has
created a new generation of consumers
as diverse as senior corporate
professionals, young working women
who live with their families and are liberal
spenders, successful entrepreneurs,
and farmers who have sold their land
to developers. The word ‘luxury’ itself
has different shades of meaning for
each segment (as depicted in the
figure below). Each of these segments
constitutes a potential luxury consumer
group with distinctive behavioral
characteristics.
Source: KPMG in India analysis as on 17 January 2014
Thus, owing to India’s consumer diversity, luxury players eyeing this market need to
apply a segmented approach and sharpen their brand strategies.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
9 | India Luxury Summit 2014
Luxury clusters in India
Indian luxury consumption constitutes
only 1to 2 per cent of the global luxury
market11. However, with significant
increase in the HNI population, the
overall rise in disposable income
places India among the leading global
destinations for luxury brands.
Currently, luxury consumption in India
is concentrated in Delhi, Mumbai and
Bengaluru, with the preference for luxury
goods growing across the country’s top
10 cities. DLF Emporio in Delhi, Palladium
in Mumbai and UB City in Bengaluru are
some of the luxury malls in India12.
South India has emerged as a primary
driver of India’s luxury market. In this
region, the population tends to be highly
receptive to new products and flavors as
compared to other regions of the country.
In North India, the demand for premium
and imported goods has witnessed a
boom in the metros as well as tier-1
and tier-2 cities12. In the last few years,
cities such as Surat, Jaipur, Lucknow,
Nagpur, Coimbatore and Kanpur have
witnessed prominent growth in income
distribution. The number of high-income
households in these cities is estimated
to grow at around 20 per cent annually,
as against 13.7 per cent in metropolitan
cities13. Considering this strong growth
momentum will continue in coming
years, luxury brands have been evolving
rapidly and expanding their footprint in
high streets in the top 10 cities, luxury
hotels and high-end residential areas.
Retailers are thinking out of the box to
capture the fragmented Indian consumer
through different strategies.
Source: "India's Luxury Retail Quotient", Jones Lang LaSalle India Report, 7 January 2014, p1.
11.Fake luxury market to double by ’15, The Statesman
website, _www.thestatesman.net/news/34458fake-luxury-market-to-double-by-15.html, accessed 16
January 2014
12.The Luxe Choice: Homes Over Malls, Businessworld
website, http://www.businessworld.in/news/finance/
markets/the-luxe-choice-homes-over-malls/1158604/
page-1.html, accessed 10 January 2014
13.Luxury brands target India’s conservative markets,
FashionUnited website, www.fashionunited.in/news/
fashion/luxury-brands-target-indias-conservativemarkets-160820124057, accessed on 27 January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 10
Challenges highlighted by luxury
retailers in India
Lack of quality luxury space and environment
The presence of luxury brands in India is
primarily restricted to malls, high streets
and countable luxurious hotels. While
there are limited luxury malls (only three UB City, DLF Emporio, and Palladium) in
India at present, setting up stores in high
streets affects retailers’ profitability due
to sky-rocketing rental costs. Moreover,
high streets such as Churchgate (Colaba,
Mumbai) are very cluttered and crowded
and are unsuitable due to the absence
of the exclusive ambience that luxury
retail demands. Thus, there is a dire need
for modernised and dedicated luxury
retail areas in protected vicinities such as
airports.
Despite this challenge, multiple luxury
retailers have successfully established
in India, with out-of-box marketing
strategies and innovative ideas that
capture the potential luxury customer.
Hermes was among the first
brands to move beyond luxury
malls and hotels and to Mumbai’s
Horniman Circle, creating a high
street in India, and has been
performing well since 200914.
Fragmented and diversified consumer base
Indian HNI consumers are highly
fragmented and, thus, are not easy to
reach. Further, this HNI consumer class
can be classified into three different
categories - the inheritors (traditionally
wealthy) who are habitual spenders; the
professional elite who are discerning
spenders; a large segment of business
giants (entrepreneurs, owners of small
and medium enterprises) who have
the money but lack appreciation for
fine luxury goods because of no prior
exposure to such products.
Luxury brands need to strategically
design their growth plans to tap demand
across these three categories. This not
only necessitates expansion in the type
and nature of product offerings of brands,
but also calls for increasingly innovative
marketing plans to tap rapidly evolving
consumer behavioral trends.
Most international luxury brands need
products that are tailor-made to suit the
whims and fancies of Indian customers.
Lacking policy support
14.Hermès Opens in Horniman Circle, Mumbai Boss
website, _http://mumbaiboss.com/tag/bertrandmichaud/, accessed 10 January 2014
15.The Ascent of Money, India Today, http://indiatoday.
intoday.in/story/luxury-market-in-india-luxury-goodsproducts/1/228450.html, accessed on 16 January 2014
16.Believe in the India Luxury Market, Sharnoff’s Global
News, www.sharnoffsglobalviews.com/luxurymarket-india-181/, accessed 16 January 2014
Despite strong demand momentum,
Indian luxury market has not been
viewed as policies and regulations
friendly for the luxury retailers. Import
duties (20–150 per cent) are relatively
higher in India15. This is considered as
a key apprehension factor among the
international players, who may resist
them to frame aggressive growth plans
for India.
An announcement on liberalised FDI
policy in luxury retail was considered
as a welcome move for the industry
in November 2013. However, some of
the clauses such as — 100 per cent
FDI in both single and multi-brand retail
requires 30 per cent of local sourcing,
could be difficult for the international
luxury players to comply with.16
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11 | India Luxury Summit 2014
Countering the counterfeits
Sised at around INR25 billion,
counterfeits constitute a considerable 5
per cent of the Indian luxury market17. The
counterfeit market has been growing at
a rate almost double to that of genuine
products. Most of these products belong
to segments such as apparel, perfumes
and accessories, which are usually lower
ticket items and can be easily placed in
gray channels. Luxury players in India
continue to face supply side issues
such as legal loopholes pertaining to
intellectual property rights, inadequate
means to monitor various emerging
channels, and a growing number of online
portals, among other factors. However,
much needs to be done at the consumer
end as well to create awareness about
genuine products. This is even more
important as a large number of aspirers
with diverse backgrounds and limited
knowledge of products become potential
consumers. Only a handful of players
have effectively engaged the consumer
in education and communication on the
brand. A collective, industry wide effort
is likely to have a far-reaching impact
in dealing with the issue - as seen in
other industries such as films and music.
Awareness and collaboration also needs
to be built with authorities, who have
experienced major revenue losses due to
loss of taxes and duties, on how to deal
with counterfeits.
Proportion of counterfiets in the luxury market
Under French law18, purchasing
fake products may incur a fine
of up to EUR300,000 or three
years imprisonment.The French
Government also launched
an innovative campaign with
industry players against fakes,
with taglines such as ‘Buy a fake
Cartier, get a genuine criminal
record’ and ‘Real ladies don’t like
fake’.
Source: ASSOCHAM-Yes Bank Report 2014
Lack of trained staff
17.Fake luxury market to double by ’15, The Statesman
website, www.thestatesman.net/news/34458-fakeluxury-market-to-double-by-15.html, accessed 16
January 2014
18. Fake goods are fine, says EU study, Telegraph website,
_http://www.telegraph.co.uk/finance/newsbysector/
retailandconsumer/7969335/Fake-goods-are-finesays-EU-study.html, accessed 10 January 2014
19.KPMG in India analysis as on 30 January 2014
Lack of trained staff is a wellacknowledged challenge that the Indian
retail industry faces. The problem
intensifies when it comes to the
luxury sector, which requires greater
discretion and knowledge on the part of a
salesperson. Several luxury players have
cited ‘excluding’ potential customers
as a key risk to their business. Most
brands have in-house training systems to
train staff on aspects such as etiquette,
visual merchandizing and knowledge.
Elements for such training often borrow
heavily from those of their global parents.
Recently, with the local market evolving,
several luxury brands have ‘Indianised’
their pitch to suit shoppers. This includes
focusing on educating shoppers who
are new to luxury and speaking in local
dialects to make the customers feel
comfortable, separate rooms for closed
door selling, etc.
Luxury players are likely to remain
convinced about India’s demand story.
As growth in large markets continues
to saturate, the BRIC countries (Brazil,
Russia, India and China) are poised to be
the next major growth engines19.
Cardinal sins while selling luxury:
–– Stereotyping consumers
based on appearances or the
way they talk
–– Excluding the addressable
market, appearing
unapproachable to potential
shoppers
–– Trying the same pitch for all
luxury shoppers.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 12
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13 | India Luxury Summit 2014
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India Luxury Summit 2014 | 14
Section 2
Success stories in the
luxury space
- Case studies
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
15 | India Luxury Summit 2014
Case Study - I
Manufacturing success with luxury ayurveda:
Forest Essentials
Forest Essentials (FE) was
established with an aim to
promote traditional cosmetics
in a modern way. While various
other ayurvedic products were
available when it was launched,
there was a need for ensuring
quality by sourcing ingredients
in an appropriate manner. It was
also believed to be important to
position ayurvedic products as
utilitarian and easy to use - the
lack of it was hampering their
sale, especially among high-end
consumers.
FE’s model based on ayurveda
and the absence of any Indian
brand in this ‘prestige space’
acted as a catalyst for its entry
in the country. The company
started by offering soaps
and oils with high-end global
packaging, which instantly
struck a chord with consumers.
Company overview
Established in 2000, FE is a leading Indian player in the high-end personal care
segment. Its key products include a wide range of ayurvedic skin care, body care, hair
care and wellness products.
The company’s manufacturing facility is in Uttarakhand and it sells products through
exclusive retail stores and institutional players (including luxury hotels and spas).
Key facts
Year started
2000
Founder
Mira Kulkarni
Key brands
Forest Essentials
Presence
30 cities, including non-metros such as Jaipur, Ludhiana and
Chandigarh
No. of stores
26 exclusive stores
Factories
Two - Haridwar and Lodsi in Uttarakhand
Revenue
-
The journey so far (key milestones)
Source: KPMG in India analysis as on 30 January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 16
Understanding key success factors
FACTOR 1 — well-defined positioning to target the ‘white spaces’ in the market
FE positioned itself as a ‘prestige’ or ‘bridge to luxury’ brand. The aim was to
gradually upgrade consumers from the ‘masstige’ segment in the consumption
ladder by creating aspirational value for
high quality products. This segment is a
high growth segment due to increasing
incomes and growing number of
youngsters, who are typically more
receptive to trying new products.
Since this space was largely unexplored,
the company chose to enter through the
shop-in-shops model to build awareness
and promote trials. A growing luxury
market and evolving consumers have
helped the company establish exclusive
stores and increasingly offer more
personalised services.
Forest Essentials positioning
Source: KPMG in India analysis as on 24 January 2014
FACTOR 2 — incorporating global operating standards while operating in the
Indian environment
Evolving consumer preferences have
shifted focus from packaging to the
quality and ingredients of products. FE is
aware of this shift and has consistently
invested in infrastructure while
establishing a backend system in sync
with the growing demand.
The company has its own workshops
in Uttarakhand and in-house doctors,
experts and technicians. FE’s partnership
with Estee Lauder (EL) in 2008 has
significantly helped the former upgrade
its processes and facilities to match
global standards. Constant collaboration
and factory visits from EL’s teams
have helped FE improve several of
its processes, such as quality control,
vendor development and packaging and
introducing sustainable initiatives. These
initiatives have enabled FE to leverage ‘quality’ and ‘ingredients’ as unique
selling proposition, while targeting the
prestige segment.
There was a need to
showcase the effectiveness
of ayurveda to represent
India.
- Samrath Bedi,
ED, Forest Essentials
Source: KPMG in India analysis as on 30 January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
17 | India Luxury Summit 2014
FACTOR 3 — focussing on ‘experiential marketing’ through stores
A significant per centage of FE’s BTL
marketing is done through word-ofmouth publicity instead of forced selling.
The company uses store environment
as an important marketing tool to
induce trial and repeat purchase by
closely managing ambience elements
such as lighting, scents and product
display. Additionally, store staff is trained
to provide expert advice and cater to
specific requirements of consumers.
FE’s made-to-order solutions are
positioned in such a way that they aim
to induce repeat purchase and ensure
consumers stay loyal the brand. To avoid
excessive pressure on existing channels,
FE has a separate back end team catering
to customised solutions.
Increasing use of ayurvedic products, as
preventive remedies rather than curative
treatments, has reinvigorated interest
among consumers. FE has capitalised on
this trend by increasingly engaging with
consumers on social media platforms
and making their products more relevant
to consumers.
In terms of ATL activities, FE has been
selective while choosing popular TV
shows - which reach a certain audience
or while launching TV commercials - and
has carefully planned limited period
campaigns primarily to generate
awareness and credibility.
FACTOR 4 — a company-owned model of expansion
Forest Essentials follows a companyowned model and operates through
its own standalone stores and shop-inshops in large format stores in India. This
model helps the organisation maintain
absolute control over its merchandise,
supplier’s network and store staff
and facilitates direct contact with end
consumers.
Considering all the advantages, the
company has adopted a focussed
expansion strategy to establish new
company-operated stores. It has
optimally leveraged its partnership with
EL to select store locations, train staff
members as per international standards,
manage inventory and develop impactful
relationships with customers.
FACTOR 5 — extensive training programs
The Indian luxury retail market has
faced significant manpower shortage,
especially for the front-end staff, which
interacts directly with customers. Hence,
FE has made significant investments
toward the training and development
of its human resource. Its store
staff, including managers and brand
ambassadors, have to attend extensive
training sessions and conduct virtual
store visits. These sessions are designed
to train employees on all forward and
backward operations of the company.
Key achievements and plans
Concluding remarks
A good mix of traditional and
modern can lead to a symbiotic
relationship, which could be the key
to overcoming challenges inherent
in the Indian retail environment.
Organisations such as FE
demonstrate how global standards
of operating, modern packaging
and retailing can be merged with
traditional Indian strengths.
Source: KPMG in India analysis as on 30 January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 18
Case Study - II
Crafting success: Goodearth
GE entered the market in
1996 when there was a huge
demand-supply gap in terms
of quality home products. The
segment suffered from less
product innovation despite
being an integral constituent of
the consumption basket. Only
a few players had envisaged
success for ‘export quality’
products in the domestic
market.
Company overview
Established in 1996, Goodearth (GE) is a leading Indian luxury player that offers a wide
range of products in segments such as home accessories, wellness, skin care, bed
linen, glassware, textiles, crockery, candle lights, gift items and kids collection. GE’s
values and offerings are based on the themes of nature and sustainability.
Its first store was established in Kemps Corner in Mumbai and GE currently operates
through nine stores across five cities.
The well-travelled Indian
luxury consumer was seeking
products that appealed to his
aesthetic sense, sold in an
environment that offered both
uniqueness and exclusivity.
Key facts
Year started
1996
Founder
Anita Lal
Key brands
Goodearth
Presence
Five cities - Mumbai, Delhi, Chennai, Bangalore and Hyderabad
No. of stores
Nine exclusive stores
Factories
1996
Revenue
-
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
19 | India Luxury Summit 2014
The journey so far (key milestones)
Source: KPMG in India analysis, as on 28 January 2014
Understanding key success factors
FACTOR 1 – suiting the Indian aesthetics
Goodearth’s unique selling proposition
is its design that appeals to the modern
Indian aesthetic taste. It adapts
traditional designs to suit contemporary
tastes primarily through its in-house
design team; additionally, GE also
collaborates with several traditional
craftsmen for product development. The
company’s team of designers collects
natural fabrics from multiple regional
craft communities and gives them a
fashionable look. Handwoven textiles
such as chanderi, mul and khadi are some
traditional and eco-friendly products that
the company uses extensively.
Goodearth designs are
original, contemporary,
whimsical, yet rooted in
heritage.
- Simran Lal,
CEO, Goodearth
FACTOR 2 – offering a unique and exclusive retail experience
GE has introduced several innovative
concepts for retailing its products.
One example is that of establishing
restaurants in its stores to provide
a ‘wholesome’ retail experience and
thereby, making people spend more time
in the stores.
Such initiatives are complemented by
steps to create a unique ambience, such
as playing soothing music and putting
relevant product assortment on display.
This has helped GE in creating an ‘excitement factor’ around its stores.
FACTOR 3 – minding the backend
GE works closely with craftsmen and
various local vendors; hence, managing
supply chain is essential to deliver on the
‘quality proposition’ as well as the timely
processing of orders.
GE maintains a close relationship with
different partners such as craftsmen,
small workshops and factories, and
collaborates with them for day-to-day
delivery schedules as well as for
long-term growth strategy. This has
enabled GE to put in place strong quality
standards and efficient production and
delivery systems that has helped it to
scale up rapidly in the past few years.
We are working closely with
our partners to ensure all
of us are in sync with our
growth projections.
- Simran Lal,
CEO, Goodearth
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 20
FACTOR 4 — focussing on marketing strategy
Developing and managing a luxury
brand requires constant innovation and
an integrated marketing strategy. Like
several successful luxury brands in India,
GE has also balanced its emphasis on
India’s rich artisanal history and traditions
with contemporary design and styling.
Every year, it launches a designer
collection that is based on some tradition
or culture. For example:
• 2013 - GE launched the ‘Ratnakara’20
designs collection, which focussed on
the lush beauty of the islands of the
Indian Ocean.
• 2012 - GE introduced the ‘Farah Baksh’
design collection based on the beauty
of the Kashmir valley.
• 2011 - To promote the cultural values
and the crafts of Golkonda during the
reign of Tipu Sultan, GE launched its ‘Golkonda’ designs collection.
• 2010 - GE introduced its collection ‘Lotus Feet' that was influenced by
the use of lotus in Budhhist art and
architecture.
FACTOR 5 — understand the importance of digital strategy
Online sales can offer better increased
comfort and convenience to techsavvy consumer, thereby, providing
better shopping experience than
brick-and-mortar stores. Keeping
this in mind, Goodearth has also
made significant investments in
technology. Through its digital strategy,
it manages its merchandise on the
website to accommodate international
requirements. Its digital presence helps
it to provide more personalised and
excellent customer service online and
augments brand visibility internationally.
Key achievements and plans
Source: KPMG in India analysis as on 28 January 2014
Concluding remarks
20.Goodearth website, http://www.goodearth.in/OurCompany/Design-Stories/Ratnakara-2013, accessed
on 31 January 2014
A unique product proposition should be accompanied with key growth enablers
at the front end as well as back end. As the number of players in the luxury
market increases, creating a unique retail experience can help a brand stand
out. It is equally important to sync one’s growth with that of vendors and
partners. Establishing quality standards and processes may be a difficult task in
some cases in India and it can potentially make or break an organisation.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
21 | India Luxury Summit 2014
Case Study - III
Driving to success: BMW India
BMW entered the Indian luxury
car market in 2006, when the
segment and luxury market
were still in a very nascent
stage in India. The market was
only around 3000 cars and
primarily catered to the urban
consumer, the super luxury
segment – businessmen,
C-level executives and top notch
professionals – with very few
options below the INR5 million
price points.
BMW started off by
establishing a strong foothold in
the high-end segment, creating
a strong aspirational value for
the entry segment. BMW’s key
offering included young sporty
looking cars – a major deviation
from the then industry trend.
Note: The information for this case is collected
through secondary research
Company overview
Established in 2006, BMW India Pvt. Ltd., a subsidiary of BMW Group, is one of
the well known players in the luxury car segment in India. Its key products include
passenger cars, multi-purpose vehicles and utility vehicles. The company has
its manufacturing facility in Chennai and cars are sold mainly through exclusive
dealerships.
Key facts
Year started
2006
President
Philipp von Sahr
Key brands
BMW
Presence
35 cities, including small cities such as Kanpur, Raipur, Noida,
Lucknow and Faridabad
No. of stores
37 dealership stores
Sales
7,327 units in 2013
The journey so far (key milestones)
Source: BMW case study, http://www.bmw.in/in/en/, accessed on 16 January 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 22
Understanding key success factors
FACTOR 1 – understand the ‘new’ dimensions of the consumer landscape
The entry level luxury segment driven by
a growing number of high earning young
professionals, is adding a new dimension
to the luxury consumer landscape. BMW
launched the one series at an entry
price of INR2,090,000 (ex-showroom,
India) positioned just 2-3 per cent higher
than the entry-level variants of various
premium brands.21
BMW India has also increased potential
consumer base by the used car space
through ‘Premium Selection’ offering in
2011. It is also offering finance options
to the customers (BMW India Financial
Services Pvt. Ltd.) to aid purchase. It
currently has 10 showrooms offering this
service; the vehicles sold are under five
years old and have a mileage of less than
120,000 km.22 Key differentiators over the
unorganised used car market also include
adherence to defined BMW product
standards and high-end purchase and
service experience.
FACTOR 2 – Establishing long term consumer connect and ‘educating’ the
consumer
BMW launched Mobile Showrooms
in 2012 to help people in small cities
such as Karnal, Agra, Dehradun,
Nashik, Kottayam and Jamshedpur get
familiarised and test-drive its products23.
Typical high-end urbane shopping
experience is replicated through airconditioned weather proof buildings. This
strategy has helped BMW overcome
typical infrastructure challenges
associated with marketing products
in small Indian cities, while preparing
ground for BMW’s entry in the future.
Target cities have been identified after
detailed demand analysis andhas been
mapped to BMW’s capacity to service
these markets.
Another example of BMW’s long-term
strategy to establish consumer connect
is its organizing student connect
programmes in small cities such as Agra,
Meerut and Faridabad through its dealers
to familiarise ‘future consumers’ with the
brand.
How did BMW adapt to India?
21.Luxury carmakers change lanes to cruise in a
slow market, Business Standard website, http://
wap.business-standard.com/wapnew/storypage.
php?id=2&autono=113110200441, accessed 10
January 2014
22.Luxury car-makers set to double used auto sales
this year, Indian express website, http://www.
newindianexpress.com/thesundaystandard/
Luxury-car-makers-set-to-double-used-auto-sales-thisyear/2013/06/09/article1626502.ece?service=print,
accessed 10 January 2014
23.BMW launches a mobile showroom to reach the
emerging markets in India, Economic Times website,
http://articles.economictimes.indiatimes.com/201208-23/news/33342336_1_bmw-india-bmw-x1-germanauto-major-bmw, accessed 10 January 2014
To enter India, BMW made several
technical modifications to its
products. This included raising
suspension systems, changing
engine and filter systems, adapting
its air-conditioning systems to the
Indian environment and introducing
heavy-duty horns.
It focussed on local assembly
or the ‘complete knockdown
approach’ in its Chennai plant right
from the beginning in India. It
was a tax-efficient approach that
helped the company offer products
at competitive prices to cover
different sub-segments of the luxury
consumer domain and gain market
share quickly. Several models such as
1 Series, 3 Series, 5 Series, X1 and
X3 are assembled in India and the
plant capacity has been ramped up
from 3,000 cars per year in 2007 to
11,000 in 2013.
To induce purchase, BMW also
launched its in-house financing arm
in India in 2010. This has helped the
company facilitate easy financing
of its cars at competitive rates.
BMW has also developed various
customised offers for customers including competitive interest rates
and discounts. About 80 per cent of
BMW’s clientele used this scheme
as on March 2012.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
23 | India Luxury Summit 2014
Key achievements and plans24
Source: KPMG in India analysis as on 29 January 2014
Concluding remarks
Indian luxury consumers are evolving rapidly and with new consumers joining
the segment or becoming ‘addressable’, players would be required to modify
their strategies accordingly. ‘Indianising’ products alone is no longer enough players must aim to Indianise their entire strategy to increase sales. As metro
cities reach a saturation level with an increasing number of luxury brands,
mastering low-cost models would be a key to success beyond metros.
24.Discount policies will distroy brands in the long term,
Economic Times website, http://m.economictimes.
com/opinion/interviews/rivals-are-undercutting-themarket-philipp-von-sahr-bmw/articleshow/23784070.
cms
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 24
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
25 | India Luxury Summit 2014
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 26
Section 3
Industry views on the
Indian luxury market
The way forward: Indian luxury brands going global
- By François Arpels
India's luxury retail quotient
- By Research and REIS, Jones Lang LaSalle India
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
27 | India Luxury Summit 2014
The way Ahead:
Indian Luxury Brands Going Global
- by François Arpels
The Author
Indian history is filled with stories of the
love for fine things, especially the nobility
and royalty: threads of gold, ornate
hand-carved furniture, richly embroidered
clothes, exquisitely carved accessories,
and, of course the jewelry.
Throughout its civilisation, India has been
a showcase for unprecedented levels
of refinement and has a deep tradition
of luxury that can be seen in its crafts,
architecture, rituals, festivals; and a
strong gifting culture through the ages,
as can often be seen at weddings.
François Arpels is the co-founder and
Managing Partner of IndEU Capital,
a fund dedicated to investments in
the entire value chain of the branded
premium and luxury goods industry
in India, which he has witnessed
changing since 1995 when he
begun being actively involved in the
country. He has built considerable
experience and has acquired an
intimate understanding of the
fashion and luxury industry thanks
to more than 25 years of experience
as an investment banker, strategic
consultant, and former shareholder
and member of the executive
committee of his family owned
jewelry company Van Cleef & Arpels.
François advises and is on the
Board of several fashion and luxury
companies in Europe and India. He
is a regular contributor to the media,
a guest speaker at conferences, and
co-founder of The LyFe (The Luxury
Future), a think tank on the future of
the luxury industry.
As a result, India has a large pool of
skilled craftsmen, artisans and designers
from different states, skilled in producing
cultural and handmade luxury products.
It is no secret that most luxury and
fashion houses have been relying on
India for their quest for beautiful fabrics,
their access to unique handcrafting
techniques, their embroidery
requirements and their supply of
precious stones, etc. India has been
inspiring the luxury and fashion industry
for years. For example, the paisley, which
has contributed to Etro’s success and
is widely used today, originated in India.
Another illustration is found in some
of Hermes’ and Guerlain’s bestselling
perfumes that have been inspired by
colors, spices and fragrances from India.
Yet another illustration of India’s influence
is visible in recent advertising films such
as Guerlain’s ‘La Légende de Shalimar’
which presents the beautiful landscapes
of India and shows the mogul empress
Mumtaz Mahal in her palace surrounded
by the Shalimar gardens; or in ‘Odyssée
de Cartier’s’ epic commercial boasting
depictions of sumptuous iconic locations,
including the Taj Mahal.
It is, therefore, surprising that despite
its luxury heritage, talent and knowhow,
there are no globally recognised luxury
brands that have emerged from India.
The current state of development of
India’s luxury brands, save for the
hospitality industry, can be compared to
that of Europe during the 1950s when
the likes of Vuitton, Cartier, Van Cleef
& Arpels, Chanel, and Gucci were still
promoter-owned and mostly sold locally
in addition to a handful of international
capitals.
Several factors can, at least in part,
explain the status of the luxury industry
in India.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 28
Business model
India has been relying on export and manufacturing business
models rather than on branding. As a result, local businesses
may have understood the technical aspects of market share and
competitiveness; leading to large independent family-owned
and managed companies that have been built and passed on
through several generations, but taking them to the formal level
of branding has eluded most of them.
Tradition
Rich Indian families have traditionally relied on their trusted
neighborhood shirt-maker, tailor and jeweler, as was the case 50
years ago in Italy.
Domestic market size
Indian brands have been constrained in their development due
to the lack of a large middle class.
Ecosystem
Emerging brands in India have limited financing facilities
due to the lack of interest from investors. In addition, lack of
professional management talent, due to weak educational
programmes dedicated to the industry, has led to several
players in the market being unawareness of international
standards by many players in the market resulting, among other
things, in nonexistent strategy towards building brand equity.
Finally, a number of inexperienced fashion journalists have
brought confusion to the market.
Infrastructure
It is noteworthy that India continues to lack adequate retail
and distribution channels, and logistics organizations that are
essential for consistent brand rollout.
Environment
Finally, brands are faced with challenges linked to the climate.
Insight
Emerging brands can neither rely on guidance from market
intelligence, which is nonexistent, nor on market studies, which
are inadequate.
Today, India can be said to have reached the turning point with
respect to the emergence of authentic India-influenced luxurylifestyle brands. Fueled by changing demographics, which
has provided greater access to this refined world, the Indian
consumer has become aware of the finer things in life.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
29 | India Luxury Summit 2014
So what’s the way forward for the Indian luxury brands going global?
A distinction must be made between ’going global‘ and ’luxury‘. Achieving both
status at the same time is very ambitious
and only a handful will succeed.
On the road to going global, Indian
brands should prioritise building brand
awareness at home, before looking to
expand internationally, thereby increasing
their probability of success. Which
known foreign brand has successfully
gone global - with more than a symbolic
international presence - without first
being able to rely on its domestic
market?
The good news is that a whole number
of brands should be able to prosper,
capitalizing on the boom of the middle
class in India and a mature perception of
luxury from the market, before venturing
abroad.
India has a domestic market and demand
worth millions. A significant proportion
of disposable income in India is spent on
luxury goods thanks to the rising number
of wealthy people, a growing middle
class, and affluent young consumers. It
is this market that everyone else is trying
to reach. Hence, Richemont has recently
applied to enter in the single brand retail
space with luxury brands Van Cleef &
Arpels and Cartier.
Luxury products don’t necessarily
make luxury brands. Brands that will
reach luxury status are even fewer and
so are those that will understand the
challenge of finding a balance between
being timeless thanks to a strong brand
concept and heritage, being relevant thanks to precise brand positioning - and
being innovative going forward.
On their journey to luxury, Indian brands
can rely on a wider sophisticated
audience. Only a few years ago, any
foreign brand coming into India
from France, Italy or Spain carried
connotations of luxury. There is now
a wider understanding, among the
entire value chain of the industry, from
designers to consumers, of what key
characteristics qualify companies for the
luxury category - heritage, quality, artisan
knowhow and selective distribution.
In this context, a new breed of
businesses are emerging with young
and talented designers at their helm.
They understand that managing a brand
effectively and helping it achieve the
luxury status is part of a painstakingly
long process. It requires a consistent
integrated strategy, innovative
techniques, strong marketing (with the
more obvious ones for clients being
coherent merchandizing and product mix,
differentiated advertising and impeccable
service), rigorous management control
and constant auditing.
There is a major opportunity in the
making and extraordinary potential for
companies that master the required
branding techniques and processes
to capture the ever-growing market of
consumers.
Only with the right financial support and
professional guidance will brands be able
to capitalise on the increasing prosperity
and a more savvy value chain in India.
The time is ripe to provide the necessary
financial and managerial support to the
current crop of talented designers to
ensure the optimisation of the unlimited
variety of resources offered by India - jewelry manufacturing, shawls and
sarees, silk weaving, tribal textiles,
embroideries (lace, Zardosi, Kashida,
Phulkari and Kathi, etc), block print,
leather goods and leather embroidery
and marble stonework - and proper
branding techniques to help them
become global.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 30
India's luxury retail quotient
- by Research and REIS, Jones Lang LaSalle India
India’s strong consumption story relies
on its demographic structure, which, at
this point in time, is highly favourable
compared to most other emerging
nations. As per the UN population
statistics, this favourable demographic
dividend will last for another 25–30
years. Before that, most other emerging
nations would have already begun to
witness a slowdown in the growth of
young (working-age) population.
The ensuing benefits with regard to the
rising income and household spending
would provide a significant boost to
the consumption-driven growth story
of India. A glimpse of the changing
pattern of India’s consumption is already
visible in the breakdown of private final
consumption spending data provided
by the government. There is a marked
increase in spending on lifestyle products
and services such as hotels, mobiles,
transportation and other miscellaneous
goods. As against that, spending on
essentials has only remained stable.
International retailers are well aware of
these benefits that the Indian economy
offers. Barring few legislative challenges
that could be tackled through the policy
reforms and opening up of the retail
sector, retailers have often expressed
their intention to enter and invest in
India’s attractive retail sector. This is very
well reflected in AT Kearney’s Global
Retail Development Index 2012, where
India ranks as the fifth most attractive
retail market for international retailers.
Luxury retail scenario in India
At present, India enjoys only 1 to 2 per
cent of the global luxury market. Luxury
retailers, both national and international,
are in the race to foray or expand their
footprint in India. The frequent foreign
travels of Indians have significantly
increased the brand awareness of India.
Along with this, the increasing uppermiddle class in India are the country’s
key drivers of luxury retail demand. Louis
Vuitton, Prada, Gucci and Jimmy Choo
are no more unknown brands to India.
In the last decade, luxury retail has
grown significantly and is growing at a
rate of almost about 20 per cent. From
luxury cars and apparels to furnishings,
are paving their way into the choices
of Indian consumers. The definition
of luxury is very relative and changes
from country to country and among
different income groups. However, most
households earning more than INR one
million or above annually opt for luxury
goods in India. With the significant
growth of this income group, luxury retail
in India is expected to witness steady
growth in the coming years.
In India, preference for luxury goods
is growing across all the metro cities,
although they are mostly concentrated
in Mumbai and Delhi. Luxury malls such
as DLF Emporio in Delhi, Palladium in
Mumbai and UB City in Bangalore are
already operational. However, luxury
retailers generally open their stores in
luxury hotels with increased preference
from consumers as they are expanding
their brand presence by starting their
stores in high-end malls and high
streets and sometimes opening their
flagship stores in high-end residential
neighbourhoods.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
31 | India Luxury Summit 2014
Ranking Of India's Leading Luxury Retail Cities
1
Delhi NCR
Delhi NCR tops most of the parameters on which we base our
retail attractiveness quotient. The city tops all real estate drivers
and also the socio-psychological parameters. As a result, Delhi
NCR stand first in rank and we can deduce that it has the most
enriching retail legacy among the Indian cities.
2
Mumbai
With the highest in-migration and a large number of SEC A
and SEC B population, Mumbai has the highest retail demand
potential. However, a lack of availability of land parcels leading
to high rents in prime areas act as a dampener that causes
Mumbai to lag behind Delhi in terms of existing retail stock,
and also against other cities when compared to the upcoming
supply. The high propensity to consume creates an inherent
shopping culture, which helps sustain the rise in demand for
retailers.
3
6
Hyderabad
Hyderabad offers attractiveness in terms of affordable rents,
which is higher only to Pune among the Tier II cities. In addition,
a huge amount of upcoming supply in the next three years
would naturally keep the momentum in consumption alive in
the future. However, lesser household income and household
expenditure has ranked it lower.
7
Pune
Pune provides the most affordable rents in prime areas among
the Tier I and Tier II cities. The high migration rates will be
well supported or even enhanced in the future, given that the
city has a large office space supply per capita in the pipeline.
However, low household income and expenditure compared to
most other cities has ranked it the lowest.
Bangalore
Bangalore ranks high on the chart with its good retail
consciousness and the existing and upcoming supply. In
addition, affordable rents in the city - compared to other Tier
I and some Tier II cities - has helped retail to flourish here.
However, the city has lesser household expenditure even when
compared to Kolkata and Chennai.
4
Chennai
Chennai, with its affordable rents and good high street stock in
contrast to the organised retail stock, has received the fourth
rank. In addition, the large number of high and upper-mid
residential units launched in the last three years would be able
to create the retail demand. However, many from Chennai
migrate to other IT destinations such as Bangalore, Hyderabad
and Pune, as indicated by their low migration rates.
5
Kolkata
The best that Kolkata can offer to retailers is the attractive
household expenditure and an illustrious high-street variety
retailing. It has a fairly high concentration of SEC A and SEC B
households whose propensity to consume is usually higher
than others. However, rents in prime areas are not affordable
and the retail stock is also low, both of which make penetration
of the retailers difficult.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
India Luxury Summit 2014 | 32
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Acknowledgement
In order to provide a comprehensive industry
view in the study, we have interacted with various
representatives from the retailing community
including players in the industry, both domestic and
international, and industry experts. We would like
to thank the various industry participants, whose
invaluable contributions have made this study possible.
The support provided by the ASSOCHAM and Yes Bank
has been instrumental in providing us with a platform
to base our industry discussions.
We would also like to thank the various representatives
across companies / brands with whom we interacted
during the course of the study, for providing us with
valuable inputs on the luxury sector.
We would also like to acknowledge the core team from
KPMG in India who made this report possible:
Rajat Wahi, Gaurav Nayyar, Urvashi Gupta,
Puneet Luthra, Jiten Ganatra, Subashini Rajagopalan,
Rajesh Patel and Neelima Balchandran.
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
About ASSOCHAM
The knowledge architect of corporate India
Evolution of value creator
Members: Our strength
ASSOCHAM initiated its endeavor of value
creation for Indian industry in 1920. Having
in its fold more than 400 chambers and
trade associations, and serving more than
4,50,000 members from all over India,
it has witnessed upswings as well as
upheavals in the Indian economy, and has
played a catalytic role in shaping the trade,
commerce and industrial environment of
the country.
ASSOCHAM represents the interests of
more than 4, 50,000 direct and indirect
members across the country. Through its
heterogeneous membership, ASSOCHAM
combines the entrepreneurial spirit
and business acumen of owners with
management skills and expertise of
professionals to set itself apart as a
chamber with a difference.
Today, ASSOCHAM has emerged as the
fountainhead of knowledge for Indian
industry, which is all set to redefine the
dynamics of growth and development in
the technology driven cyber age of the
knowledge based economy. ASSOCHAM
is seen as a forceful, proactive, forwardlooking institution equipping itself to meet
the aspirations of corporate India in the new
world of business. It is working towards
creating an environment conducive for India
business to compete globally.
ASSOCHAM derives its strength from its
promoter chambers and other industry and
regional chambers and associations spread
all over the country.
Vision
Empower Indian enterprises by inculcating
knowledge that will be the catalyst of
growth in the barrierless technology driven
global market and help them upscale, align
and emerge as formidable players in their
respective business segments.
Mission
As a representative organ of corporate
India, ASSOCHAM articulates the genuine,
legitimate needs and interests of its
members. Its mission is to impact the
policy and legislative environment so as to
foster balanced economic, industrial and
social development. We believe education,
IT, BT, health, corporate social responsibility
and environment to be the critical success
factors.
of Commerce and Industry, Cochin; Indian
Merchant’s Chamber, Mumbai; Madras
Chamber of Commerce and Industry,
Chennai; PHD Chamber of Commerce and
Industry, New Delhi and has over 4 lakh
direct and indirect members. Together, we
can make a significant difference to the
burden that our nation carries and bring in a
bright, new tomorrow for our nation.
Currently, ASSOCHAM has more than 100
national councils covering the entire gamut
of economic activities in India. It has been
especially acknowledged as a significant
voice of Indian industry in the field of
corporate social responsibility, environment
and safety, HR and labour affairs, corporate
governance, information technology,
biotechnology, telecom, banking and
finance, company law, corporate finance,
economic and international affairs,
mergers and acquisitions, tourism, civil
aviation, infrastructure, energy and power,
education, legal reforms, real estate and
rural development, competency building
and skill development to mention a few.
Insight into new business models
ASSOCHAM has been a significant
contributory factor in the emergence of
new-age Indian corporates, characterised
by a new mindset and global ambition for
dominating international business. The
Chamber has addressed itself to key areas
such as India as an investment destination,
achieving international competitiveness,
promoting international trade, corporate
strategies for enhancing stakeholder value,
government policies in sustaining India’s
development, infrastructure development
for enhancing India’s competitiveness,
building Indian MNCs and the role of the
financial sector as the catalyst for India’s
transformation. ASSOCHAM derives its
strengths from the following promoter
chambers: Bombay Chamber of Commerce
and Industry, Mumbai; Cochin Chambers
D. S. Rawat
Secretary General
Email: [email protected]
The Associated Chambers of Commerce &
Industry of India
ASSOCHAM Corporate Office:
5, Sardar Patel Marg, Chanakyapuri, New
Delhi-110 021
Tel: 011-46550555 (Hunting Line)
Fax: 011-23017008 / 9
Website: www.assocham.org
© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG in India contacts:
ASSOCHAM contacts:
Dinesh Kanabar
D. S. Rawat
Deputy CEO - KPMG in India,
Chairman - Sales & Markets
T: +91 22 3090 1661
E: [email protected]
Secretary General
5, Sardar Patel Marg, Chanakyapuri,
New Delhi - 110 021
T: +91 11 46550555
E: [email protected]
Rajat Wahi
Head
Consumer Market
T: +91 124 307 5052
E: [email protected]
kpmg.com/in
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© 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated
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