How Luxury Brands Can Scale Up In India?

Kabir Kochhar May 18, 2021

We are all aware that consumption behaviour and disposable income is on the rise in India. Yet the rise or luxury brands have been plagued with fits and starts over the last two decades in India. We just have to look at the growth of luxury brands in China to realise the immense potential of this segment India. With an increase in 32 percent in its brand value to $2.1 billion (Deloitte Consumer Business Report 2019), India has moved up one position in the most-valued nation brands list. In Tier 1 cities like Mumbai where most HNIs are concentrated, the demand for luxury fashion is the highest, however opportunity is present even in Tier 2 & 3 cities, where luxury automobiles own the largest market share for eg. Ludhiana or Surat. While reams of text have been written on the opportunities, we’ll take this opportunities to address ways luxury brands can #SpeedScale in India.

1. Create a Sense of Exclusivity – Limited editions and ‘drops’ create scarcity demand. In this model a brand produces a limited quantity of an exclusively designed line that sells out in a very short period. Supreme has mastered this model - evident from its booming resale market. A legacy brand that successfully used this model to boost market value is Hermes for Birkin Bags which resell at even 200x of their original selling price. Designers collaborate with affordable brands to create such drop collections - this helps the brands develop exclusivity and the designer to acquire access to a larger audience which can convert to future customers. An example of such a collaboration would be Sabyasachi's collection with H&M.

2. The Power of Celebrity Investors – Getting a media personality onboard as an investor in your company can do wonders far beyond what you would pay for a celebrity endorsement. The relationship between the brands and the celebrity is no longer transactional. The celebrities become true evangelists and by putting their money where their mouth is, they ensure the brand gets airtime, not only across their own social handles but also when they speak to people in their own private circles. We observed one such example of this with Herringbone and Sui, the bespoke men’s brand. H & S had to adapt quickly in the pandemic as weddings, formal occasions and walk-ins slowed down. They did this by launching the now popular Pangolin masks. Now because Abhishek Bachchan and Rana Daggubati are investors in H & S, the brand was able to leverage these stars’ organic love for the brand to get tons of leverage. Abhishek gifted his father, Amitabh Bachchan a Pangolin mask. As the senior Bachchan enjoyed the product so much and wanted to stress the importance of wearing a mask, he shared an image of himself of Instagram wearing this mask. This one act led to exponential growth of the brand online and helped H & S not only navigate the pandemic but also uncover a whole new business unit.

3. Digital-First Sustained Push – This may sound obvious after even the most traditional of luxury brands have had to embrace digital during the pandemic, however there has to be a sustained and concerted effort for brands to focus both on performance marketing as well as brand building. Brands need to embrace the fast evolving digital landscape and push the boundaries of platform innovations. The key is to deploy a high frequency of multi-channel advertising to increase brand recall.

4. Nurturing True Evangelists – Evangelists believe. That’s what they do. We’re not talking about paid influencers here. If you find owners of your products who organically speak positively of your brand, then you need to nurture and pamper this customer set. Your evangelists are usually early adopters and will usually be the influencers in their private circles. You need to make them feel special – whether it’s something as simple as a personalised note or something more elaborate as a customized gift on new year’s or on their birthday. It’s not the value of what you give them, more the act of doing so.

5. Take Advantage of the Flash Value - Your customer is proud of her purchase and wants her friends to know. Indian luxury item buyers are particularly different from their western counterparts in the sense that their purchase is majorly driven by social gratification. Hence brands trying to sell luxury in India need to create products that can be clearly identified as premium by the onlooker such as Red bottoms on Louboutin shoes, the LV logo or the iconic three-pointed star for Mercedes.

6. Identify Your Customer Segment and go all out - Since selling luxury products is all about making the customer feel like they are getting an exclusive experience, it is extremely important to customise by identifying the right target group. Demand for international luxury brands is rising among young Indian consumers and platforms like Instagram democraticise exposure to global brands. Millennials and Gen Z constitute the largest user base of such platforms and have high discretionary incomes. Indian brands such as Pulp Cosmetics identified and exploited this by creating premium beauty products of international quality and variants yet maintaining a young and appealing brand language.

The opportunity in luxury markets lies in the high average order values that allows for higher revenue at lesser dollars spent acquiring each customer. This also allows for higher money to be deployed for performance marketing and other branding spends, creating a virtuous cycle of brand growth.

Despite the positive news, the fundamental barriers for luxury brands continue to exist. An all pervasive middle class value-conscious mentality, dependence on finding high quality retail outlets for customer experience are some of the factors. There are exciting companies in the digital realm, especially in the Social Commerce space working on overcoming physical barriers.

The author is Kabir Kochhar, Partner at Anthill.