SMEs key to Indian luxury market

18 November 2014

NEW DELHI: Consumer confidence in India has grown in the wake of the election of a new government earlier this year, and while opinions are divided on what that means for the luxury sector, there is a greater consensus on the importance of small business owners.

"[Brands] are going out of their way to reach out to consumers who have the money but [are not familiar] with luxury products, such as SME owners," Neelesh Hundekari, partner at consultancy A.T. Kearney India, told Campaign Asia-Pacific.

"It is acknowledged by every [industry player] that SME owners are the segment with the highest potential, and all luxury products now target that segment," he added.

Hundekari further advised "micro-segmenting" that market, breaking down the owners by, for example, region and ethnicity, in order to more precisely target potential buyers.

Some observers regard the recent upbeat economic mood as being positive for the luxury sector, but others are more cautious.

A recent analysis by Euromonitor International, for example, noted long-standing issues around the availability of suitable retail space and skilled retail staff, as well as the high customs duties on imported products.

Many luxury consumers are value conscious and opt to shop overseas, according to Hundekari, with the result that the Indian luxury market will experience "explosive growth", of the sort seen in China until recently, unless customs duties are rationalised. Restrictions on foreign direct investment would also have to be eased.

That being the case, he suggested luxury brands needed to be "really sharp and smart" in their marketing and retail presence and to look to keep stores small, and not necessarily in luxury malls, in order to minimise overheads.

One example of a brand being smart in its marketing approach is TAG Heuer, the upmarket watchmaker. Puneet Sewra, marketing director for India explained to [Impact] that "breakthrough marketing helps when you have a small media budget".

When it announced film actor Ranbir Kapoor as a brand ambassador, the event took place at the home of the annual Formula One Grand Prix and featured stunt performances and the actor himself parachuting in.

"To create noise, you need to create talking points, something that people can remember and relate to," said Sewra. "We reach a selective audience and attempt to create a lasting memory by what we have done and not because they are seeing our ads 20 times a day."

Data sourced from Campaign Asia-Pacific, [Impact]; additional content by Warc staff