Sunday, August 26, 2007

The Luxe Attack for India

More on emerging trends in India (By the way, I read an interview with the Channel V CEO who stated that the Get Gorgeous show from my last post was an example of a blogumentary and user-generated content. Who knew!)

Anyway, so apparently there's some sort of Daily Candy clone e-newsletter in India called Trendy. For those who don't know Daily Candy, it's a daily e-newsletter that provides information on fashion, beauty, food and other stuff tailored to the specific city you live in. Over at the Jezebel website, the Daily Candy newsletter is regularly skewered for it's derivative Sex and the City inspired relentless consumerism and the message that all women have to do to be fabulous is buy a pair of expensive shoes or knock back overpriced martinis.

Our homegrown version is also adept at recommending mediocre restaurants that serve a smorgasbord of faux Thai-Chinese-Lebanese-whatnot food with cocktails that have astonishing mark-ups (how much do you think a shot of vodka and canned fruit juice cost?), spa treatments that will cost the equivalent of six months' rent and "beauty treatments" that are addressed more to your inner insecurities than anything on the outside.

It's the latter that prompted this post, as well as the fact that I've been reflecting on the magnitude and trend in India's economic growth and the discussion I had yesterday with Em about the consumerist surge in India and China that will grow exponentially the next few years.

Here's a post from the Trendy Bombay beauty section about the La Prairie Pure Gold serum, that is an emulsion of 24 karat gold particles that purportedly lifts, firms, resurfaces the skin, making it look younger. This one ounce bottle has a price tag of $525, or Rs. 27,000 in Indian rupees. It's available at La Prairie counters at the Shoppers Stop chain in Bangalore, Delhi and Mumbai.

Let's discuss the absurdity of the product for a minute, and here's a perfectly succinct argument that comes from a comment on a post on the La Prairie serum on the Luxist website:

24K gold can do do nothing for you in this aplication. Gold is a nonreactive substance which provides no chemical or other benefit - the precise reason why it is used for jewelry. It is there merely for exclusivity and marketing for those who are cost indifferent enough to pay for it. This is like adding gold dust to champange[sic] to make it taste better. It might sparkle but it won't taste like much.

This would be blatantly obvious to anyone with even the most elementary knowledge of properties of metals and characteristics of skin. But the marketing departments at these skincare companies think nothing of trying to insult the intelligence of ordinary women with such ridiculous concoctions.

So who exactly are these cost indifferent enough people who are keeping La Prairie counters in India in business, a brand where almost every product is priced several times higher than any competing product in the market? And these counters are not located in exclusive beauty stores in 5 star hotel shopping arcades (the usual home of overpriced merchandise in India), but in Shoppers' Stop, a chain that aims roughly at the upper-middle class to fairly affluent people in India.

Let me guess. Well first are the usual suspects. The wives of top tier businessmen and Indian and expat wives for top management executives in Indian and multinational firms. Women who themselves are successful business-owners and professionals earning very high salaries and not averse to spending it. Mistresses and girlfriends of the rich and profligate. But then, it is possible that there is another category of spenders, the ones who have been responsible for revolutionizing the business of luxury goods and fashion in the US and Japan (don't know enough about the European scenario to comment).

These are middle-class women, single or married who may earn their own money or be supported by an allowance by their husbands. These women have aspirations to a life of luxury, and who have been sold an image of a fabulous city girl life Sex and the City style that they can acquire by proxy by wearing the right shoes, carrying the right bags, eating at the right restaurants (whatever ladies-who-lunch spot is trendy right now), drinking the right drink.

These are just the kind of women who are responsible for Japan becoming the number one luxury goods market in the world. As my Japanese-American physiotherapist told me, he was shocked that the women in a buying frenzy in the Louis Vuitton store in Ginza, Tokyo looked like young, middle-class women who clearly were sacrificing a large chunk of their income to own a piece of what to them was an exclusive luxury item.

Japan is an extreme case though, a country that accounts for nearly half of all Louis Vuitton products sold worldwide. But it is true that luxe products are increasingly marketed to middle-class audiences, and the big luxe conglomerates are hoping that even a fraction of the Japanese success story can be duplicated in India and China.

Now when I first started reading reports about the development of the luxury fashion and beauty market in India and investments made by the big players, I was quite dismissive. I had always believed and still believe to an extent that Indians are will always prioritize price over marketing hype. That is, if they are able to find an equivalent un-branded product at a lesser price than the branded product, they would always go for the unbranded one. This was true of sneakers (Nike's presence and advertising actually benefitted local manufacturers) and cornflakes (as Kelloggs advertised Mohan Meakins rejoiced). And this I thought would also be true of luxury goods.

But now I think I need to revise my thoughts on the matter. For one luxury products are unlike sneakers and cornflakes. They rely on selling an entire lifestyle package where the product is not merely a silly cream with useless gold particles, but a veritable fountain of youth that is also luxurious and opulent.

And second and more importantly, middle class women seem more and more willing to save up and lavish money on Holy Grail products that they feel would bring a slice of luxury into their lives. And if the second is true, and there are more and more such middle class women in India, then perhaps the outlook for luxury goods in India is way more optimistic than I thought. Because a multi-national luxury conglomerate cannot rely on the super-rich alone for revenues.

The Indian market does share one crucial similarity with the Japanese market. In Japan, the prohibitive cost of renting or ownership as well as people getting married later and later in life has created an entire generation of young men and women who live with their families well into their 20s and 30s. These people, rather derogatorily called "parasite singles" ("parasaito shinguru" in Japanese, seriously!) do not have to pay for rent and food and thus have a substantial chunk of disposable income for discretionary spending.

In India, apart from the expensive renting and homeowning situation, social norms also dictate that men and women stay with their families till they get married. There are though an increasing number of young men and women who move to other cities for work and live on their own - however the living with parents category is a fairly large proportion of the total employed youth.

I've already been reading a fair bit about the growing spendthrifty habits of the young with disposable income. I saw some of this on my recent visit to India - all anecdotal evidence. A cousin's friend operating several successful businesses in a small town in Bengal, but blowing away most of his income in restaurants, drinks at bars, and luxury purchases. A cousin who shops frequently at Shopper's Stop where two outfits can cost the equivalent of her month's salary (she has to rely on parents to cover the deficit between earning and spending). Another cousin who doesn't save even a single rupee of his income even though he stays at home and his meals are all provided for.

All this is good news for conglomerates that manufacture discretionary spending goods with lots of brand differentiation. If I was an investor, I'd be looking to develop a high-end clothing and accessories brand in India with Western collaboration right now (incredibly, that's what decidedly middle-range handbag manufacturer Hidesign managed to pursuade Louis Vuitton to do).


Anonymous harman said...

Thanks for the analysis. Nice post.

11:02 PM  
Anonymous Anonymous said...

Great post, I thought I was the only one appalled at this state of things. I just came back from settling my daughter in residence at McGill university in Montreal for undergrad studies. There were a few students and parents from India in her building who we met. These girls were all decked out in designer goods right down to their room furnishings. We were a bit stunned, the girls including the parents seemed totally oblivious, all they wanted to talk about was where the Gucci store was and how they were going to the Chanel store to buy clothes for school and where would be the best place to buy a Blackberry. My poor kid, who received a fair amount of scholarships, just worked all last year while going to school to pay for her living expenses. My husband and I told our kids that they can stay at home and go to school and take advantage of the tuition fee reduction that children of profs get or if they want to go away they pay for it themselves, its that simple. I am bengali, born in India raised here, my parents are well off but always stressed the importance of taking responsibility of ourselves. We all worked and supported ourselves thru school and we also knew that our parents will help us if we needed. This was a really bizarre experience, making me wonder if we would behave the same way if we earned the king of money they obviously do. I would like to think not.

10:30 AM  
Blogger Well Heeled said...

such an interesting and informative post!!
Am really suprised over the hidesign and LV collaboration!

10:40 PM  
Blogger Apoplexy said...

eta besh bhalo likhechen

12:05 AM  
Blogger Arthur Quiller Couch said...

Why waste so much time analysing morons? They exist, they breed, they moronise. Live with it.

7:16 PM  
Blogger Cheery Cynic said...

I would think though that one of the "spendy" women you mentioned ---women owning and operating their own businesses or e.g. management consultant from good schools would be averse to such spending...but then i thought of some of the people we talk about, and remembered some ppl from UG.... :( shoot man! suckee!

5:35 PM  
Blogger thalassa_mikra said...

Harman: thanks and welcome.

Anonymous: We've taken to consumerism with a vengeance and we really cannot be blamed, given what an oppressively restrictive socialist economy we grew up with. But in the process a lot of us are becoming very short-sighted about saving and investing.

Well-heeled: Thanks! Yeah, I wonder what the LV fellows were smoking when they teamed up with HiDesign (blatant rip-off artists).

Apoplexy: Dhonnobad. Abaar ashben.

Arthur: But morons are so fun to dissect :). And honestly, I'm not calling spendy, consumption oriented people morons - I have a bit of a shoe habit myself. I'm interested in this in terms of what the long-term implications in India for this consumerist wave are.

Cheery: Never underestimate the lure of pretty shiny things for even the most professionally successful women. Women look at these possessions like successful men see cars. You don't have to have a Porsche or a Maserati, but it makes them feel like they've arrived and accomplished.

Not just Russian mafia mistresses are keeping the Chanel and Hermes boutiques in Paris in business.

7:43 AM  
Blogger The_Girl_From_Ipanema said...

Just discovered your blog, love your style of writing! But but but i really like maggi even now! :)

7:08 PM  
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9:42 PM  

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