RULING THE ROOST

The four metro cities still account for more than half of luxury sales in India

We will be opening several of our stores there. At the moment, we also conduct a fair amount of home shopping for key clients outside the main metros. The teams fly in to service important clients, if they are unable to travel to our existing boutiques. Apart from that, the new wave will be the availability of luxury via e-commerce platforms,” he adds.

According to a 2015 CII-IMRB report on the luxury buying pattern in India, 35 per cent of sales come from Aurangabad, Ludhiana, Kochi and Bellary. It also says that the growth rate of luxury consumption and conversion ratio of walk-ins at most luxury or hybrid malls are higher in tier II and III cities. “It is a reality. We sold luxury bags in Hyderabad online. We have sales in Pune, Surat and Jharkhand,” says Priya Sachdev, Founder and CEO, RockNShop. “They buy everything – from accessories and ready- to- wears, to shoes and jewellery. Around 40 per cent of our sales are from tier II and III towns.” A separate survey conducted by industry body Assocham last year said the Indian luxury market is growing at a compounded annual growth rate of 25 per cent and is poised to cross $18.3 billion in value terms by 2016-end. The survey revealed that growth is being fuelled by the rise in disposable income, brand awareness among the youth and purchasing power of the upper class.

“Luxury jewellery, electronics, SUVs and fine dining have grown beyond expectations, while apparel, accessories, wines and spirits have continued their strong growth in 2016,” says D.S. Rawat, Secretary General, Assocham. “High Internet penetration across tier II and III cities, along with high disposable incomes shall lead to approximately 100 million transactions on the Internet by 2020. As a result, luxury consumption is going to increase manifold in the country.”

Gods of Small Towns

The biggest challenges in any luxury business in India are high rentals and low conversion rates. The most appropriate place to set up a luxury store is always the most expensive plot of real estate. And, in an emerging economy like India, it puts businesses on shaky ground. Delhi’s Khan Market, Connaught Place, Select City Walk or Mumbai’s Peddar Road, Fort Fountain and Lower Parel that host most of the luxury stores, figure in the list of most expensive retail spaces across the world. The demand in just one city, howsoever big, rarely justifies that.

“Most people started getting aware of luxury around 2008 and, even then, the retailers had realised that a large part of the population interested in such items was from small towns and cities. In North, you had people from Ludhiana, Lucknow and Patiala, and later from Gwalior, Kanpur and Indore, frequenting luxury stores in metros. There were a handful of people who had the money but were in the closet,” says Gupta of Luxury Connect, adding: “When the emporios started opening up, it became a shopping destination for them and slowly became a pattern. Retailers started organising shopping trips, bringing bus loads of customers from Ludhiana for shopping because, right from the start, it was a challenge to bring relevant people to the showrooms as the rentals were really high.” A 2012 McKinsey Global Institute study on cities around the world had estimated that 36 cities from India would find a place in the top 600 cities that will contribute 60 per cent to global gross domestic product ( GDP) by 2025. The report also said that 20 Indian cities, including Ludhiana, Surat, Vijaywada, Vizag, Kochi, Coimbatore, Indore and Raipur, among others, would register GDP growth higher than New Delhi, Mumbai, Chennai or Kolkata by 2025.

Yet, not everything is hunky-dory with luxury consumption in tier II cities. While a metropolis displays appetite for all kinds of luxury – from watches and apparels to cars, bikes and hotels – small towns often have a particular preference while remaining dispassionate about other forms of luxury. In the case of Aurangabad, the automobile extravaganza led to a rush of other luxury brands in the city. But, not all of them created a flutter.

“We have done some dumb things along with our smart moves. One of our bad decisions was to get into cities like Aurangabad, where 150 Mercedes were bought at one go. We went in without verifying (conducting a market survey of the luxury watches on offer) and had to shut the store within 18 months,” says Yash Saboo, Founder, Ethos Watch Boutiques.

One size, truly, does not fit all. ~