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BW Businessworld

Young, Affluent & Living It Up

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Last may, for their tenth anniversary, Anurag Singh, an investment banker with a leading financial house in Mumbai, bought his wife Somya, a Judith Lieber clutch for a little over Rs 1 lakh. She, in turn, gifted him a Louis Vuitton laptop bag, costing another lakh or so. They celebrated their anniversary at the Ritz Carlton, Langkawi.

Recently, for his parents’ 40th anniversary, 33-year-old Aditya Jain, a senior management executive with a multinational tech firm, booked a luxury cruise to Alaska at a cost of over Rs 10 lakh.

For Teacher’s Day, Riddhima Mehta, a class XII student at a leading public school in Delhi, had her mother buy her a Rohit Bal saree for Rs 45,000. It was the first time she was going to wear a saree to school and it had to be special.

Meet a whole new set of luxury consumers — young, upwardly mobile and aspirational. While some rake in profits from business, others draw astronomical salaries and even bigger bonuses. Still others have their parents to thank. Either way, they all spend lavishly on luxury.

The Indian luxury market grew at a healthy 30 per cent, to $8.5 billion in 2013. It is projected to close 2016 at $14 billion, according to the KPMG-Assocham India Luxury Summit 2014 report.

This growth is largely driven by a subtle — yet significant — change in the Indian luxury landscape. While a few years ago, the average age of a luxury consumer was above 50, today nearly 50 per cent of luxury consumers in the country are below 40 years, according to KPMG India’s internal analysis.

Wooing The Young
So whether it is luxury malls, automobile companies or hospitality chains, each of them is tweaking its marketing strategy to focus on the youth. Take Audi, for instance. India is its youngest market, with the average age of the Audi buyer being 30-35 years, while globally the average is 43-45 years. To connect with the youth, Audi has ventured into new areas, using music and brand channels like Audi YouTube and the Audi magazine. It’s also very active on social media, with over 3.6 million fans on Facebook. “Customer drive events like Ice Drive, Women’s Power Drive, Q Drive and the Sports Car Experience have helped us create a strong connect with our younger brand enthusiasts,” says Joe King, head of Audi India.

When the Intercontinental Hotel Group (IHG), which has brands like Holiday Inn and Crowne Plaza, did a study on the next decade of consumers, it found that it would have to cater to a younger breed of “laptop and latte” workers. “To cater to these emerging sets of travellers who want consistent and innovative service, IHG’s Crowne Plaza brand is testing a series of new market-specific services and features ranging from in-room technology that ensures guests are always connected, to breakfast options available in easy ‘grab and go’ packaging,” says Gopal Rao, regional vice-president, Sales and Marketing, IHG South West Asia.

To attract younger customers, Vivanta By Taj is conducting a series of “experiences”, ranging from art and installation projects to music.  It also started music talent contests — especially for women performers — called Divas of Rock, for which it forged partnerships with Blue Frog and Sony Music.

DLF Emporio, Delhi’s only luxury mall, is very active on social media, with over two lakh followers on Facebook and several lakh on Pinterest and Instagram. Its Treasury of Trousseau event targets young brides and grooms. It also has its annual design awards where it gets entries from several design colleges. The jury selects the best, and the designer gets to sell his/her designs at the Emporio pop-up shop for a year and intern with a top designer.

Emporio is also launching a new app (for iPhone and Android) to provide information on offers, promotions and the latest collections of all brands under its roof.

Have Money, Will Buy

India is a young country, with two-thirds of the population below the age of 25. Also, several professionals and entrepreneurs earn between Rs 40 lakh and Rs 60 lakh per annum. “These are early adopters and have higher awareness and exposure levels to a globalised world — they are emerging as key drivers of the luxury market in India,” says P. Rashmi Upadhya, associate director, Strategy, PwC India. 

Moreover, there is a cultural shift. While previous generations saved, today’s youth wants to indulge without worrying too much about the future. Evidently, India’s household savings rate has fallen from a peak of nearly 37 per cent to under 30 per cent today. Sanjay Kapoor, managing director of Genesis Luxury, which brought brands such as Giorgio Armani, Jimmy Choo and Bottega Veneta to India, says: “Brands are recognising this phenomenon and, hence, there is great excitement to enter India and capture this young audience. China was at this point 15 years ago, but clearly the next big market is India.”

The young are also more self-assured. Says Dinaz Madhukar, senior vice-president of DLF Emporio: “The youth of today knows exactly what it wants. It’s not just parents’ money. People are buying from their own money. They are millionaires in their own right.”

The KPMG-Assocham report also states: “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 from the upper middle class, 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 India.”

To tap this segment, companies are doing everything possible — from introducing products specific to Indian youth such as Canali’s Nawab jacket, to promoting entry-level offerings. Take, for instance, the iPad and iPhone cases that nearly all luxury brands offer with their logos embossed. These are typically priced below Rs 15,000 and hence accessible to a large number of young customers for whom the iPad and the iPhone are anyway an extension of themselves. Says Rajat Wahi, partner, Management Consulting, KPMG: “There is a lot of desire to attract consumers at an early age. Get them involved with the brand and then watch them grow.” Entry-level products like eyewear, ties and belts ensure that the brand experience is enjoyed by a larger audience. “The experimentation begins across these products and loyalty builds. This happens even as career growth is achieved by the young,” says Abhay Gupta, founder of Luxury Connect, an agency that trains staff for luxury companies.

Celebrating Life
According to the Kotak Wealth Management Top of the Pyramid 2014 report, younger, self-made ultra high net worth individuals (HNI) are more inclined to celebrate personal occasions and success. “Ultra HNIs, especially young entrepreneurs, show more interest in creating an unforgettable experience to celebrate their success or to establish their identity. For example, a Delhi-based ultra HNI recently booked a trip to the North Pole to celebrate his fortieth birthday,” says the report.

Also, while Delhi and Mumbai continue to be the biggest markets, a large number of consumers of luxury live in the non-metros. This is not surprising considering 45 per cent of the 1,17,000 ultra high net worth households (those having a minimum net worth of Rs 25 crore, mapped over 10 years) are in the non-metros, according to the Kotak report.

The youth have always aimed high. With increasing incomes and easy availability of luxury, they are making their dreams come true.

[email protected] @smitabw

(With inputs from Chitra Narayanan)

(This story was published in BW | Businessworld Issue Dated 15-12-2014)