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Luxury brands rethink India strategy

News, 14 August 2015

NEW DELHI: The potential market for luxury products in India is significant as the number of ultra-high-net-worth households continues to grow and international brands are now recalibrating their approach to better address local market conditions.

"India's luxury market is very shallow at the moment and brands cannot expect to play the volume game right now," Santosh Desai, a brand consultant and social commentator, told the Economic Times.

A number of international luxury brands are returning to the Indian market with more realistic expectations than they had first time around when they were blinded by the growing number of affluent consumers and failed to fully appreciate the difficulties of luxury marketing in a country lacking relevant infrastructure.

One such is automaker Maserati, which sold only 20 cars in two years in its first foray into India and found it had to fly technicians in from Italy to handle individual customer issues as its local partner offered no after-sales service.

That had damaged the brand's credibility, according to Umberto Cini, the marque's managing director for Middle East, India and Africa markets at Maserati. He added that the brand now has three distributors and that earlier mistakes would not be repeated.

Other brands, including lingerie maker La Perla, menswear label Alfred Dunhill and fashion house Versace, have also sought out new partners.

La Perla, for example, has tied up with Vikas Jain, co-founder of phone maker Micromax, who is taking a long-term view.

"Most brands currently work on a master franchise model in India. Rules of the game have to change if one has to make serious money here," he said.

"My plan is not to open a couple of stores, invest a few crores and make a few lakhs of profit. There is to be strategic level of investments and more serious commitment from both parties for a long term."

The outlook is bright for those brands which get it right. A new report from Kotak Wealth Management, reported by the Financial Express, revealed that the number of number of ultra-high-net-worth households has being growing at a compound annual growth rate of 22% over the past five years, while their combined net worth is projected to grow at a CAGR of 26% over the next five years.

And a new generation of young ecommerce entrepreneurs has lowered the average age of ultra-high-net-worth individuals, half of whom are under 40.

Data sourced from Economic Times, Financial Express; additional content by Warc staff