Time (and Luxury) come at a cost

I was intrigued when I saw this ad in the latest issue of Fortune magazine featuring a first of its kind Omega + Swatch Moonstar Speedmaster. Usually, the luxury brand Omega does not make references of its parent company SWATCH, which many common people around the world may not know about.

The luxury of Omega, combined with the affordable Swatch label, makes it an interesting combo after all to buy, which costs approximately USD 1,000. 

It is also that time of the year – September – when Apple launches its newest model and claims to be the best iPhone ever, with pricing starting at USD 1,000.

Apple aficionados queue up outside retail stores when the new smartphones launch, even as Android Warriors criticise the over-priced jewel, claiming several features are already on their devices.

While the Earth is divided between those who wish to take a bite of their beloved Apple, Economists and Financial Advisors – qualified specialists as well as self-learned ones offer unsolicited sermons all over social media, how investing INR 85,000 on a depreciating asset is such a waste.

In a way, yes. Especially, when youngsters as well as parents buy an iPhone on EMI, hoping on future earnings. Luxury comes at a cost, after all.

However, what we seldom correlate is the good-old Maslow’s Theory where consumers wish to seek higher-priced products as a way to celebrate their status – current as well as projected one. 

For Ex., someone in the media industry as a Creator or as an Influencer, would not just want to flaunt the latest iPhone that they use for their work, but may also put it to great use.

A friend of mine once told me, whether it is a Timex or a Rolex, they show the same time, however where and when they are used matters.

If an Alto and an Audi are just meant to transport people from one point to another, then the whole world would remain with just the basic necessities, with NO interest in “wants and desires”. For some, a new iPhone or a MoonSwatch could be a need, or a want or a desire.

Consumer brands always build aspirations in the mind of prospective buyers so they don’t just use the said product, rather live the product as well.

The entire argument of why to own expensive stuff, while people in countries like Japan and Germany are moving towards Minimalism, is quite true. However, the cost of luxury is embedded in the human psyche and only humans crave for a step-up.

One would rarely or rather never find a Tiger say, I wish to hunt for a premium variety of Deer! Call it the animal instinct or the feeling of “survival of the fittest."

Humans, read: Consumers, always wish to upgrade themselves and look younger, cooler and more desirable to their intended audience.

Another example is why most people in India “dye” their hair – pitch black, when half their hair on the head is grey (or even silky white). It is just the aspiration to look “not-so-old” and stay relevant to their friends, family members and colleagues at workplace.

Several brands have made a killing with this simple desire (or a basic need if you would call it so) to ensure the hair on their head looks pitch black.

Coming back to acquiring luxury – it is a sin to borrow money to buy such products, even though one may know reasonably that they can pay back their debts.

Dr. Vijay Mallya / Mr. Anil Ambani / Mr. Venugopal Dhoot are striking examples too. They simply tried every trick in the playbook that any other businessman would do. Just that they over-leveraged their future income over the present.

Reiterating the same point, Time and Luxury come at a cost. It is perfectly fine to spend using credit cards to acquire luxury, except that one should ensure they do not over-spend than they can ever pay. Or repay, rather.

Luxury Retailing - Retail 2020 (Article #3)

I started my career in Retail in 1997 scooping ice-cream at Baskin Robbins’ second outlet in India and first in Chennai (then, Madras). As the current decade comes to an end and an exciting one unfolds, I am writing a series of 20 articles over 20 days (10 in Dec ’19 starting 22/12 and 10 in Jan ’20) on the various Retail developments I have personally witnessed since 2001 onwards. Today, I have written about the Luxury Retailing Industry which is pegged at US $ 1.3 Trillion globally and growing at a CAGR of 12%.

Many years before when I was responsible for setting up India’s first ever retail arena at India’s first private airport at Bangalore in 2006, I had a special focus on creating a luxury retail zone. When I approached global brands like Apple, GAP, Omega and many others in India and abroad, they didn’t evince much interest. For India was not even a budding Luxury market then. Mont Blanc writing instruments, which is among the Top Brands sold across Airports worldwide didn’t have a presence in India at the time with a standalone store and we were keen to bring them on board at the Airport with an exclusive store, but the principals politely declined the offer. I have a long list of such disappointments from my tenure at BIAL. 

Today, things are different. The global luxury market is pegged at US $1.3 Trillion annually (including services such as Travel, Resorts and Hospitality) and India alone has an estimated market size of $6 billion growing at 9% CAGR since 2012 – across various categories ranging from Watches to Clothes, Automobiles to Cigars, Wines to Writing Instruments and so on. Incidentally, the Luxury Market size of China is pegged at $25 Billion and growing twice as fast as that of India. USA remains the largest contributor to global luxury retailing at over US $85 billion followed by Europe at an estimated US $65 billion. 

Much of the luxury consumption in India is attributed to two budding customer segments – HNIs and their families living in Tier 2/3 markets and HENRYs – High Earning Not Rich Yet Individuals. Apart from these, the core segment remains eminent business families, celebrities in Sports and Arts and professionals in Industries such as Banking, Manufacturing, etc. to name a few. A “Titan Watch” and a “Raymond” Suit were the preferred gifts for the bride and groom at most middleclass households (including yours truly) two decade back. But things are much different today. Most Indians who consume luxury brands neither have an idea why the brand is luxury (rather, priced so high) nor do they appreciate the craftsmanship of the product. As the saying goes – Aim for the sky and you would end up at the roof, I was eyeing a Patek Phillippe for over 3 years but finally ended up with a Longines Limited Edition a decade ago (which happens to be my last luxury catch @ Rs. 1.40 lakhs then!). It was a lot of hard-earned money coupled with dreams and ambitions built over time (Miles2Go). But when I see the GenZ & Millenials sporting luxury brands today, be it a shoulder bag from Prada or a pair of sneakers from Nike meant for trained athletes, they do not appreciate the purpose of the luxurious product beyond the “badge value” it adds to their self-esteem and prestige. 

Same is the case with electronic products, especially from brands like Apple or Bang & Olufsen. Apple fanboys (and fangirls) stand in Q all night to buy their coveted new launches since they mostly appreciate the features the product offers. Unlike in India, where the latest iPhone is more a symbol of prestige in the society and the associated benefits (like getting a table faster at a restaurant – I am not kidding!). While brands like Bose remained “luxury” and niche until a few years ago in India, thanks to deep discounting and presence on e-commerce websites, they are now competing with local and Chinese imports in their respective categories. 

Having said that, Luxury Retailing in India is still in its infancy. Even if the market grows at 10% CAGR for the next five years, we would still be less than 5-8% of the global market. No wonder Indian discerning consumers prefer to make a trip to Singapore or Dubai to shop for clothes and watches every few months. That they fly Business Class and stay at Mandarin Oriental or The Palms Jumeira is adding up to the global market size anyway.