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Driven By Desires
As long as consumers continue to seek glory and grandeur, luxury will be the most desirable commodity in the market
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Iconic french designer Christian Louboutin’s other love, after shoes, is India. He launched a limited edition collection of shoes for men and women in association with Indian haute couture designer Sabyasachi Mukherjee last week at Harrods in London. “Indian handicraft is the best of the best in the world. The luxuriance of Indian workmanship is at the maximum. I would love the world outside of India to love it as I do,” he says.
French luxury brand Longchamp recently introduced an India-inspired luxury collection line. The two bags, ‘India Vibrant’ and ‘Peacock the Majestic’, are artistic director Sophie Delafontaine’s vision of India.
Vacheron Constantin, the world’s oldest watchmaker with a legacy of more than 260 years, has unveiled a couple of watches dedicated to India and the Middle East. These are available exclusively in India and the Middle East.
Officine Panerai has also launched limited edition watches (only a 100 units will be available) exclusively for their Indian and Middle Eastern clients. Jimmy Choo, has just launched a limited edition collection, exclusively for India. It is inspired by Diwali, according to creative director Sandra Choi.
While in the past too, luxury brands launched products exclusively for India (Hermes launched a collection of saris, Canali, the Nawab jacket, Judith Leiber, the ‘Ganesha’ clutch), the frequency has gone up manifold with more and more brands starting to consider India as a serious luxury market.
The Indian luxury market grew 25 per cent from $14.7 billion in 2015 to $18.5 billion in 2016, according a CII-Kantar IMRB report. Thanks to an aspiring middle class with increasing disposable income (average disposable income rose 83 per cent over 2011-2016 as per Euromonitor) and global exposure, the market is expected to grow significantly in the future. In fact, as per NITI Aayog CEO Amitabh Kant, it has the potential to grow to $50 billion by 2020.
Demonetisation and GST
Like most other consumer sectors, the luxury market in India was also impacted in the immediate aftermath of demonetisation.
“Demonetisation impacted the sales of high-ticket purchase items such as jewellery, watches and bags. Plus now, PAN card identification has been made mandatory for transactions above Rs 2 lakh and a 1 per cent luxury tax is deducted at source for goods exceeding Rs 2 lakh. All these have impacted sales. But consequently sales of products such as eyewear, writing instruments and designer apparel have increased as these are below Rs 2 lakh,” explains Shreyansh Kocheri, senior research analyst at Euromonitor International. However, he adds that the impact will not be long term, “it impacted the performance of luxury goods for one to two quarters only”.
According to a survey carried out by luxury brand management consultancy Luxury Connect, 41 per cent of the business owners reported a sales dip in the range of 20-40 per cent in the immediate aftermath of demonetisation. However, they reckoned that there will be a positive impact in the longer run.
“We may face some short-term obstacles such as demonetisation and tax, but I’m extremely confident of India’s medium-to-long-term potential,” says Alexander Schmiedt, brand director for the Middle East at Vacheron Constantin.
Sanjay Kapoor, managing director of Genesis Group, responsible for bringing several luxury brands such as Michael Kors, Coach, Bottega Veneta into India believes the impact of demonetisation was more psychological. “Demonitisation had a temporary effect on spending that was more psychological than real. Most people who consume luxury goods do it as a lifestyle choice and not because they have spare cash, barring a few exceptions. Hence, most consumers are now back to luxury stores making their purchases.”
Kocheri believes GST will have a positive impact on the luxury market in the long run. It will make it easier for international luxury brands to operate in India. In terms of pricing, most luxury goods will not be impacted by GST as the new tax rates are in line with pre-GST rates. Except for luxury cars and watches, for which taxes are marginally higher than pre-GST rates.
“The concept of wealth is ever shifting. The old and new HNIs see wealth differently,” says Anshu Kapoor, head of Edelweiss Private Wealth Management. The wealthy today are more focused on experience rather than accumulation. “Consumption is becoming increasingly functional. It is less about accumulation and more related to an interest or hobby,” he adds. Hence, there is an increase in experiential travel, wellness holidays and adventure camps.
For a large number of consumers, luxury is all about being individualistic and different. Bespoke rules the roost. From monogrammed ties and bags to bespoke perfumes, luxury consumers are willing to spend on goods that are customised.
Notwithstanding the economic situation or evolving consumer taste, luxury is here to stay.