Rethinking Luxury Retail in Emerging Markets
The luxury industry is trying to create value by moving forward in small steps. However, being successful in today’s changing landscape requires shaking up some preconceived notions. For instance, we need to update our estimates of the sheer size of emerging markets in terms of not only the geographical spread but also the size of the population. What this means from a marketing and sales perspective is that ‘there are a lot of needles (millionaires) and a lot of hay (geographical spread)’. To be successful in these markets, we need to learn ‘to search for needles in a haystack’.
A luxury brand in an emerging market like India has to face some unique challenges, which requires a different set of marketing tactics. Here are a few tips on luxury retail that can help marketers overcome these challenges.
- Most emerging market consumers believe in investing, not in consumption. Thus the dynamics of marketing for them are entirely different from those perceived by the developed nations such as France or Italy. Be ready with deep pockets and an investment cycle of at least 3-7 years. And be ready to face bureaucracy and compliance.
- The concept of luxury in emerging markets is different. It cannot be generalized. Each emerging market requires a dedicated approach. Be ready to spend time in educating your consumers.
- The core principle of luxury is about telling stories. Story-telling might be the best way to popularize a niche brand. The end consumer picks up a few points and has something to talk about to his/her friends.
- The Indian consumer, especially, is extremely value-conscious, and not necessarily price-conscious. Moreover, although fashion in the Western world is very different from the fashion in the Indian world, Indians eventually do catch up. Plenty of opportunities exist in India with consumers who are very young, probably very freshly employed at the entry stage of their career, and are willing to spend. The Indian market in that respect is very different. So, you need to have different, preferably new, ways of reaching out to these people.
- The role of social media is increasing significantly and should be considered a long-term strategy. Generating word-of-mouth conversation is only half the task. Communication should play an important role at every level of customer interaction.
- Brand experience is the key after creating the distribution channel. A retail outlet becomes the biggest brand builder of any product. The right mix of online and physical stores might be a successful recipe for enormous emerging markets.
The dynamic nature of emerging markets makes luxury retail a unique venture. To make a mark in these vast markets, there is no doubt that we need a rethink in emerging markets.
Written by – Prof Ashok Som and Prof Piyush Sinha
Manish Arora for Amrapali Jewels