India: The Main Battleground Of Luxury Consumption In The Future

Because of the unique cultural and consumption environment in India, coupled with the major structural obstacles such as backward infrastructure in the country, reality has never been as good as expected.

Although some people are now observing the new potential of the India fashion market, the same as the harbinger of the growing strength of India models, there are still people wondering if this potential is enough to make India a real bright spot in the gloomy global economic landscape.

The fashion industry is optimistic about India.

The growth prospects of India have been active and have improved in recent years.

In the next ten years, the country's economy will grow at a rate of 8% to 9% years, with a conservative estimate that the GDP growth rate in India will linger around 7%.

In any case, India is still one of the most obvious growth opportunities in the current global economic environment. The current global economy is facing the slowdown in China, the economic crisis in Russia and Brazil, and the general economic uncertainty in other regions.

But investors are encouraged not only by the growth rate, but by the size of India's population.

A recent UN report shows that at present, India has a population of about 1 billion 300 million and will surpass China to become the world's most populous consumer market in 6 years.

But in order to get a return on the demographic dividend, India must also overcome the problems that have seriously hampered its development process in the long run: the general poverty situation of the public, the worrying number of unemployment figures, the unplanned urban development and the infrastructure to be considered for safety.

"India will not become the next China," said Darshan Mehta, chief executive of Reliance Brands. "China and India are very different in terms of social, economic and political frameworks. India can never copy the pace of growth and speed of China's growth."

Reliance Brands belongs to the India richest group, the industrial giant Mukesh Ambani (Mukesh Ambani) has great influence under the Reliance Industries, and Ermenegildo Zegna, Diesel and other international brands to develop the India market.

"India will go its own way," he said firmly, and compared India's market growth to the coming tide rather than waves: "India will steadily rise."

Of course, there will be one or two quarters of weak demand in the course of development.

But from a broad view, the coming wave will continue in the next few decades. "

Mehta is not the only person to be optimistic about the prospects of India, which has nothing to do with the long term.

In McKinsey's latest Quarterly Executive Survey in June this year, 84% of India executives said they were optimistic about the country's economy over the next 6 months.

This is two times the number of executives in other parts of Europe, North America and the Asia Pacific region.

Gradual growth or will become

The future of the industry, but the middle of the market and the most valuable endpoints are new and more dynamic to India.

McKinsey partners, leading India fashion, fashion,

Sahana Sarma, partner of the business, said: "in the past two years, important brands have entered the India market." she refers to the expansion of the high street brand chain, such as H&M, Forever 21, Gap and Massimo Dutti, such as Inditex group.

Since its opening in Delhi (Delhi) a year ago, H&M has opened 5 stores in the National Capital Region area of India, opened 1 branches in Bangalore (Bengaluru), and opened another 1 branches in Mohali (Mohali), which is adjacent to Chandigarh (Chandigarh).

The local people are also very excited about the arrival of fast fashion brands. In August this year, outside the first H&M store in High Street Phoenix of Mumbai shopping center, 1500 people queued up to wait in the shop, and some of them waited for more than 30 hours in order to get coupons that could be used in the H&M store.

It is reported that H&M will open 30 India stores in 5 years and invest about $130 million.

Zara is different from H&M, which is late and is more complicated because of its decision to build a wholly owned subsidiary in India.

6 years ago, Zara entered the India market for the first time in the form of a joint venture between the parent company Inditex group and the retail branch Trent company of Tata Group in India.

The India subsidiary of Zara, which owns less than 20 domestic stores, is reported to have more than $100 million in revenue last year. It is the latest record of India's fast fashion category.

This is no wonder.

From 2010 to 2015, sales of clothing and footwear in India increased by an average annual growth rate of 14.4%, according to Euromonitor International.

Today the India fashion market is valued at 67 billion US dollars, equivalent to the sum of the 15 largest countries in the Middle East, or 1/5 of the size of the US or Chinese market.

It should reach US $88 billion by 2020.

In the office of McKinsey Mumbai branch, Sarma said: "we are optimistic that the clothing market is expected to be better and faster than the overall economic growth.

In particular, she mentions that India consumers are well aware of Western brands, and that more people are aware of "willing to buy clothes outside the basic fund, suitable for more occasions", and the trend of "western style and casual style dress".

There has been a significant shift in consumer behavior in the country, because the "urbanized" India people are increasingly wearing Western-style rather than traditional India style clothing in daily life, though traditional clothing is still the default style for special occasions.

Therefore, similar to Pantaloons and India industrialist Kishore Biyani future group (Future Group)'s new brand Cover Story's local fast fashion brand, can also feel full of vitality and competitiveness.

A similar local brand has a better understanding of the local consumers' tastes, trends, ethnic costumes, and the classical style of traditional clothing in India.

In the next 5 years, the number of India consumers who can afford to buy branded fashion will increase by three times.

According to a report on the development of the global middle class by Ernst & Young, about 50 million Indians (5% of the country's total population) now earn 10 to 100 dollars per day.

Ernst & Young also expects the number to reach 200 million by 2020 and 475 million before 2030.

However, for most people in India, the uneven distribution of social wealth is still serious.

About 90% of the adults live in the bottom of the wealth of Pyramid, earning less than $10000 a year, millions of people still on the edge of poverty. On the other hand, the global ranking of India's rich is also rising rapidly.

Globally, only 10 countries have more rich people than India (i.e. "high net worth"). Only 3 countries have more billionaires than India, namely the United States, China and the United Kingdom.

"India actually has many aspects," Alex Kuruvilla, chief executive of Cond Nast India, Kangtai, responded skillfully. "Such diversity also needs to be captured on all sides and reflected on all things, not only in retail, but also in editorial content." in fact, there are many aspects of India.

"Since we launched the India edition" Vogue "and the India edition" GQ ", the aim is to capture the fascinating diversity of our country and the taste of India consumers.

Editor's report must balance many factors, such as "old money class" and "new money class", young people and senior citizens, traditional and contemporary, Western and India, national and local, high fashion and high street fashion.

Our editorial content reflects these duality.

You need to be ambitious and get access at the same time, "he explained.

"For example, reporting on international fashion releases, we must interpret the trend reports for readers in India.

That's why 90% of our editorial content is locally produced.

Brands often need to create specific advertising series for India, using local models.

In India, you have to localize, localize, and localize.

Naturally, this extends to the level of design and product development.

A few years ago, Herm s provided customized sari, and Canali released the traditional India style Bandhgala collar suit, but the brand that could do so was just a drop in the ocean.

Few Western brands adjust their products and series according to the demand of India market, most of which are minor changes in the original series.

This explains why India designers such as Sabyasachi Mukherjee and Manish Malhotra can run a dynamic and lucrative business.

In special occasions such as weddings and festivals, traditional costumes of India must be worn by people.

At a more affordable market level, there is a lack of Western brands tailored to the India market, which are beneficial to other regions and experienced operators, such as Micky and Renuka Jagtiani in Dubai's Landmark Group, which enter the India subcontinent through Max, a price sensitive chain store.

Because of the continuing shortage of high-end retail space, global brands are also trying to keep up with the pace of India market.

Indeed, several famous shopping centers built in the past 18 months, such as VR Mall in Bangalore, Acropolis Mall in Calcutta, and DLF Mall of India covering an area of nearly 2 million square feet, are located in Noida (Noida) near Delhi.

But A.T. Kearney's retail experts estimate that although India's population is 4 times that of the United States, it has only 10% of the shopping space in the United States.

India's dynamic and progressive online fashion players can also explore gold opportunities here.

Physical stores and regular retail areas are developing slowly, and the demand for electricity providers in the market is more urgent.

Even with the right sales space, high rent and complex local regulations make the digital priority market more attractive.

Topshop finally entered India last year, and came to India with the local retail giant Jabong.com.

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"Jeff Bezos has committed to invest $5 billion, and India electric business players are also actively addressing this issue.

The result is a new ecosystem that will overcome many of the challenges that are perplex in the industry in the future, "Kuruvilla said. Amazon founder Jeff Bezos recently promised to further invest in India business.

Euro international expects that in the next ten years, the electricity supplier channel will become the sales growth of all fashion products distribution channels in India.

Last year, the total number of Internet users in India has reached 350 million, which accounts for only 30% of the total population of the country.

Also considering is that India surpasses the US, second only to China, and is the second largest smartphone market in the world.

At an industry event last year, Google Bawankule (Google India) and Nitin Bawankule, a director of online business, made a speech to describe the opportunity of the country, so that the presence of the audience was gratified.

"By the end of 2020, India is expected to create an online retail revenue equivalent to US $100 billion worth, of which $35 billion comes from the fashion business.

Online clothing sales will increase by four times in the next few years, "he said.

A few years ago, the ordinary consumer goods website and the vertical classification website of pure fashion products had already appeared in India, but after Flipkart acquired Myntra and Jabong, the industry experienced a huge reorganization and consolidation.

But how do we see recent reports suggest that India's online market is cooling due to cash deflation and valuation inflation?

Kuruvilla explained that "the reason for the current decline in valuation is more related to the overheating of the industry, but the electricity supplier will also be rooted in development in India and will change the way India consumers buy."

But there are also industry observers who are not very optimistic about the luxury market in India.

Bain consulting (Bain&Co) partner, annual luxury report partner Federica Levato, said most of the main

There are only five or six licensed stores in India, but only about 10 brands.

The luxury market in India will not be much better in 2016, because we have not seen any grand opening ceremony of any luxury new store, "she said, suggesting that the India market is also focused on the image.

"At present, most luxury goods markets in the world are showing moderate or no significant growth, and they have to focus the media on a few potential growth potential markets, such as India."

Tikka Shatrujit Singh, Asia's chief representative of LVMH, controls the operation of the group's brand in India. He also agrees with this view: "China's economic decline has triggered new interest in India market.

It's to make up for the shortage, "he said.

But to say that it is true to India.

People who understand the healthy development of the market will have to mention Sanjay Kapoor, the founder of Genesis Colors, a luxury group. The group owns the advanced Sari brand Paul Satya, and is responsible for the distribution of brands such as Giorgio Armani, Jimmy Choo, Michael Michael, etc. through more than 120 stores in India, multi brand stores and shop outlets.

"In the past ten years, our sales performance has been pretty good, and the same store sales have increased by about 15% to 20% over the past year," Kapoor said. He also said he believed that the introduction of the GST (goods and services tax) policy by India Prime Minister Modi (Narendra Modi) was a favorable economic policy for the fashion industry.

Singh, the chief representative of LVMH, admitted that the reform process of the government was slow, but it was only a matter of time. In the future, more decisive actions would be taken.

"Modi is in favor of business development, but I don't think he will give priority to development now.

The sector, because the industry does not really provide the work and scale needed by the government, "he said." but if you can say that you want to combat excessive bureaucracy, his government will accept it and implement reforms quickly.

The newly appointed ministers are more in recognition of progress.

The government's restrictions on foreign direct investment have always been a major obstacle to the luxury market in the country for many years.

"These restrictions are now open.

But 100% of the single brand retailing still has regulations and conditions, and the biggest influence is fashion.

Players, "Sarma, McKinsey consulting, said, explains why some foreign countries.

The card had to be forced to withdraw its expansion plan.

"According to regulations, foreign direct investment with a single brand needs more than 50% of MNCs, and more than 51% of them need to be purchased locally in India in proportion to 30%, preferably from the micro or small and medium enterprises, villages and household industries, and artisans," Sarma said.

But many multinationals do not like to establish joint ventures with India partners and have a minority stake in India subsidiaries. They prefer to establish 100% of the ownership enterprises without such restrictions.

This is not the only major obstacle facing foreign brands.

India is still regarded as one of the most difficult countries for overseas investors to carry out their business. Its economy lacks pparency in many areas and costs a lot to start.

But for Kapoor, the main drag on the industry is the lack of luxury retail infrastructure. This long-term problem is still not satisfactorily resolved.

"This is also the main obstacle for our investment portfolio in the current rapid expansion.

All other problems, such as foreign direct investment, import tariffs and local taxes, are all secondary, "he said.

Nevertheless, after accumulating the most important luxury market such as Delhi and Mumbai, Kapoor listed growth opportunities in Bangalore, Hyderabad, Calcutta and Chennai.

"Now these cities are ready to accept luxury brands, but there is still a lack of external infrastructure," he said, noting that Ludhiana, Pune, Ahmedabad, Su La, Kamper and Indore all belong to "feeder city".

"Many new developments are still waiting, and brands are seeking the next level of expansion.

Some of the key projects to be opened next year will be The Palladium in Chennai and the Reliance Mall shopping center in Mumbai, "he said.

According to Singh of Lu Wei Mo Xuan,

The reason for the shortage of space is that there are differences between foreign brands and India real estate developers in terms of regional division and construction expectations. "DLF Emporio shopping center in New Delhi has been able to get it, because it began to discuss with the brand in the design stage of shopping malls," he said.

Another obstacle is that foreign brands still regard the luxury market in India as a player in the field of accessories, and only a very small size of clothing products are located in the boutiques of the country.

"Yes, some brands used to invite rich India women to experience foreign fashion shows and show them how to do that, but young India women themselves are more adaptable to western style.

They also go to the gym. It's a different generation.

So no matter which brand investment is now, we must win their hearts, "he said.

"Rich Indians will buy a lot of things when they travel abroad. Besides price factors, choice is also very important.

Imagine, for example, if you organize 500 Indians to Vienna or Venice for a wedding.

They spend a lot of money on shopping abroad, "he added.

Indeed, Global Blue observed that the number of foreign duty-free shopping increased by 13% in June 2016, and 50 million tourists from India are expected to leave the country by 2020.

For Reliance Brands CEO Mehta,

Brand executives have no reason to blame others. They can only blame themselves for having little knowledge of the market.

He thinks that many people began to pay attention to the development of India market 7 years ago.

"Some brands have become the hottest ones, indicating the huge luxury consumption to come, but such prosperity is not reasonable," he said. "So those brands that have collapsed have just begun to say that India has problems after only 18 months."

Kapoor expressed disappointment at India's market performance in the past 10 years.

Enterprises need to look at the market from a long-term perspective.

Singh agrees: "to look at India in a long-term perspective, you can't expect short-term results.

India is a young market and the last luxury forwards.

But many brands in our industry have already avoided India, and the investment is not enough.

"So far, they have missed huge opportunities. Why? Because no top brand really understands India, and some people haven't even visited India to see for themselves.

Other brands rarely understand the local situation very well, "Sing regretted.

"This is an incredible market, where consumers are still waiting to be tempted, but now they are not awakened at home.

Once we wake up, it will be amazing.