By Soumitra Sharma
Luxury demand is fast spreading beyond Tier-I cities - Guess what, consumers in cities such as Ranchi, Patna, Gorakhpur, Coimbatore and Jammu are increasingly aspiring to carry a Jimmy Choo bag and wear a Bvlgari fragrance. They are as exposed to global trends as their counterparts in bigger cities, courtesy of the deep reach of television and the Internet. An economy steadily growing at more than 8% annual average has also ensured that disposable incomes are increasing across the country. This has created a vast Indian consumer section that has deep pent up demand for luxury goods.
With offline penetration of luxury brands still minimal in non-metro parts of the country, e-commerce is the only economically viable way to reach this target segment. This has already been witnessed by existing e-commerce companies such as Myntra.com and Fashion and You. In several cases, more than 50-60% of sales tend to be from outside the metro cities. A consumer in Jammu aspires to wear Adidas shoes but doesn’t have easy offline access to them. So he logs in to Myntra.com instead. Very soon, the same consumer would want to graduate to a Jimmy Choo shoe, and since he or she is already comfortable with online purchasing, luxury e-commerce will be that much more intuitive. And therein is the value proposition of luxury brands going online.
The Internet overpowers intimidation by offline stores - How many times have you hesitated before entering a high-end luxury store? Daunted by the glitzy glasswork and intimidating sales people, the average Indian consumer is unaware of the spectrum of price points that even the most luxurious brands offer. You can’t blame the brands for opening such swanky stores – it’s an integral part of their branding message and indirectly conveys the experience that their product will offer. But in a nascent market like India, these brands still need to go through consumer sensitization, which can only happen through increased footfalls. But the very design of their stores makes them non-conducive to large footfalls. The inherent Catch-22 is perfectly clear.
The e-commerce route is well-poised to resolve this. A swanky website with video tours, beautiful models and breathtaking graphics still communicates a very strong branding message of luxury for a brand, while maintaining a zero entry barrier for any consumer to explore a complete product range. While online selling can help sensitize a vast base of consumers towards a brand, it also ensures that visitors can check out the entire product catalogue across price ranges, and eventually turn the “virtual footfall” into a “buy” with very high probability. As mentioned earlier, a well-crafted luxury e-commerce strategy can then be supported by a network of limited brick-and-mortar showrooms at select locations.
As technology venture capital investors, we see the above trends at play real-time, and expect this to result in luxury being the next wave of e-commerce in India. What’s heartening is that these trends are very organic, tangible, visible and here to stay. So, to all budding Indian e-commerce entrepreneurs out there, get luxurious!
Soumitra Sharma is part of the Investments Team at IDG Ventures India, a venture capital fund focused on investing in Indian technology and technology-enabled businesses. The views expressed in this article are his own. Mr. Sharma can be reached at soumitra_sharma@idgvcindia.com, and you can also follow him on Twitter @soumitra_sharma.
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