Hitting the tip of the ice-berg

- Narayan K T(Mumbai)

Intro: A niche market, high volumes from the Indian elite class keep the momentum on

The luxury liner of the yesteryears – Titanic – sank after hitting the tip of the ice-berg… but we are talking about a totally different ice-berg here – the Indian elite class. A niche segment growing gradually, this set of Indian population has off-late started garnering a lot of attention from international players in the luxury and lifestyle segments.

Be it hospitality; luxury liners; automobiles; apparels; lifestyle products like personal accessories; writing instruments; watch; footwear; health and fitness services; and consumer durables, etc every one is trying their best to woo them.

Why? I would say for two reasons.

One – though big, the western markets like the US and Europe amongst others have reached stagnation and most of the companies aren’t seeing any growth happening in these markets. Hence, they are developing new markets to increase business. And India and China are the only tow countries which promise double-digit growth for all these companies in the coming years.

Two - because the Indian consumer market, in the last few years, has undergone a significant change in terms of the number of Indians travelling overseas, exposure to the developed countries and high quality premium products, increase in the number of households in the upper middle and affluent class groups and increasing disposable incomes.

Elucidating the growth potential is the NCAER-Edelweiss research which claims that of the over 1 billion Indian population, the percentage increase in the upper middle and affluent class of households since 2001-02 to 2005-06 has been 3% and 2.2% respectively.

And by 2010, it estimates the upper middle and affluent class of Indian households to grow to 17.5% and 9% from its current levels of 13.8% and 5.6% respectively – a considerable increase of 3.8% and 3.4% respectively.

An Edelweiss Securities’ report estimates the current size of luxury and lifestyle good and services in India to be around Rs 828 billion. But what’s further interesting is the fact that this market is expected to triple by 2010 to Rs 2,594 billion, says the report.

Deepankar Sanwalka, National Industry Director-Consumer Markets, KPMG, feels that the spending capacity in this category of Indian population is increasing by the day as every member of the household has and will have a considerable amount of disposable income to spend on luxuries.

“Almost 70% of Indian population is in the age group between 21 to 40 and urban India accounts for nearly 30% of this burgeoning young population. And factors like globalisation, increased disposable income and changing lifestyles have brought a major shift in the consumption pattern of these urban liberalised Indian consumers,” said Sanwalka.

Keeping a close watch on these consumer segments and envisaging the present and future business potential they offer, existing players like Marks & Spencer, Hugo Boss, Mont Blanc, DaimlerChrysler’s Maybach, Porsche, ECCO, Gold’s Gym, Swatch, Star Cruise etc have started enhancing their market presence in the country.

Marks & Spencer which entered the Indian market in 2001 with its outlet at Crossroads Haji Ali in Mumbai has expanded to eight outlets at present. Average foot falls at their stores is in the range of 300 to 350 with a conversion rate of 35% with a minimum spent of Rs 6,000.

Said Raziq Vakil, operations manager of Marks & Spencer, “With products across the categories including apparels, cosmetics, accessories, etc, we are gearing to make our stores a destination place for lifestyle and luxury goods.” The company is also looking at spreading its wings in other cities like Pune, Ahmedabad and a few others in the north India besides another one in Mumbai.

Last year, DaimlerChrysler India sold the first Maybach, the country's most expensive car to Pan Masala tycoon Rasiklal Manikchand Dhariwal. Priced at Rs 5 crore (Rs 50 million) the luxury carmaker intended to sell seven to eight units of Maybach annually. According to market sources, about 15 top Indian billionaires had pledged Rs 75 crore (Rs 750 million) for buying Maybach.

Following the trend, Bentley lined up its Arnage R and Continental GT models, which will cost Rs 3 crore (Rs 30 million) and Rs 1.6 crore (Rs 16 million) respectively. Not to be left behind, BMW is believed to be toying with the idea of charming the Indian elite class with its super luxury saloon 7-Series. The super luxury sedan will be imported as completely built units.

Porsche AG, the German sports-car maker launched its India operations in 2004, with the intention of catering to the need for speed class of Indian sports car freaks. Porsche India claims that the current car park for its sports cars in the country is the range of 160 to 170. To further boost business by targeting the Indian elite class, the sports car specialist recently announced the launch of its Carrera 4 and Carrera 4S models in the country. The list prices in India are $1,65,390 (Rs 75 lakh) for the Carrera 4 and $1,84,760 (Rs 83 lakh) for the Carrera 4S (subject to vehicle specifications and including value added tax and country specific requirements).

“Though a pre-mature market we are very optimistic about the demand in the coming years. We will be setting up more Porsche centres in cities like New Delhi, Bangalore, Hyderabad and Chennai to cater to our customers who appreciate sports cars,” said Ashish Chordia, CEO, Shreyans Motors Pvt Ltd – the authorised Porsche centre in Mumbai.

With an average spend per person of around Rs 1 lakh, the German fashion group Hugo Boss is enhancing its presence in India by opening another two boutiques taking the total number of outlets to five before the end of this fiscal.

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