Some hours later, a few kilometres away, Telco Chairman Ratan Tata and Mercedes Benz AG board member P. Fietzek are unveiling the Mercedes-Bent 5-220. The price for the 2.2-litre gasoline-engine car: Rs 20 lakh. Unconfirmed reports suggest that the price has been hiked from the originally-planned Rs 13 lakh because market research suggested that raising the price by Rs 7 lakh would make no difference to demand. Indeed, it may even end up attracting more buyers.
This is the world of hyperpremium marketing, in which the traditional value-for-money belief--that all things remaining equal, the lower the price, the higher the value derived by the customer--is neatly inverted. In the hypermart, the higher the price, the greater the value.
The concept, of course, is nothing new. The high end has always kept getting higher. Remember the Standard 2000 in the mid-1980s? Its Rs 2.5-lakh price tag had taken people's breath away at the time. Then in 1990 came the Maruti 1000, priced at an 'obscene' Rs 4.1 lakh and driven by Maruti Udyog's logic that since customers were willing to pay Rs 50,000 to Rs 60,000 as premium to brokers to get their hands on a Maruti 800, the company might as well make that extra buck. And now make room for the S-220.
What is new is that hyperpremium marketing is increasingly outgrowing its top-end small-numbers niche role and touching more Indian lives through a wider range of products than anyone would have imagined even a couple of years ago.
Call them the status-conscious utilitarians with the unbridled desire to possess anything, as long as the price is right. Like a Rs 4,000 designer candlestand or a Rs 80,000 salwar suit. According to a Hindustan Lever survey, there are 60,000 households in Bombay and about 45,000 in Delhi for whom the price is the least important factor while making a purchase.
Strangely it also means that for the marketer, the price is the most important product attribute to attract this class of customer. The price-indifferent buyer will always go for the highest-priced widget.
According to the National Council of Applied Economic Research (NCAER), around 4.45 lakh Indian households have an income of Rs 10 lakh plus per annum. And, no less than 50,000 earn over Rs 50 lakh a year. Titillating figures for the hyperpremium marketer.
Says David Abraham, a designer retailing at Ensemble in Bombay and Folio's in Bangalore: "In a booming economy, as a lot of new customers graduate to a higher income level, they take refuge in designer labels for the support and reassurance of their newfound status, economic prosperity and self-identity." This frenzied designer exhibitionism, says Abraham, reminds him of "the highflying 1980s in the West when status resided in glitzy designs and fancy labels like Armani, Versace and Gucci." Replace those names with Tarun Tahiliani and Rohit Bal, and you have a market that has gone swiftly from boutique to big biz.
The upside-down value-for-money equation is of course a godsend for profit margins. Says Meetakshi Arora, sales manager at Ogaan, a leading Delhi haute couture out? let: "Designers today operate at much higher margins than ever before, starting from 30 to 60 per cent for a newcomer and going up to more than 400 per cent and beyond for the established names." At Ogaan, a custom-made outfit could cost up to Rs 2.5 lakh. During the wedding season, an average of 10 outfits, priced between Rs 25,000 and Rs 30,000, are sold daily. The only constraint, complains Arora, is supply.
Of course, as Devangshu Dutta, consultant at Technopack Advisory Services says, corporatisation of the Indian fashion business is minuscule. The Indian hypermart remains to a very large extent the happy hunting grounds for the individual entrepreneur and the socialite-turned boutique-owner. But the scenario is changing with labels like Louis Feraud collaborating with JK Industries and brands like Marzotto, Missoni, Ferre and Principe being launched in the market through KB+T. Fabric firms like Dormeuil, Minova, Wulfing and Holland ST Sherry have launched their products in the market in association with VXL, JCT, Bhilwara and Uniworth respectively, at prices ranging up to Rs 60,000 for a suit length. Names like Gianni Versace, Giorgio Armani and Ralph Lauren are reportedly studying the Indian market with interest.
There are several reasons why India attracts these fashion giants. First, even with all the import duties, countervailing duty, freight charges and so on, the cost of imported fabrics, garments and fashion accessories works out to be only 30 to 40 per cent higher than international prices. The Indian status seeker is willing to shell out this much more if it smells global and means forex saving and customs untouched purchase.
Also, the high end just keeps getting higher. The Rs 500 plus Louis Philippe and Van Heusen shirts were considered expensive not long ago. Today, we have Zodiac launching men's underwear at around Rs 600 a piece. Revlon and Oriflame are about to take cosmetics prices much higher than Lakme had ever dared to. A CEO who launched an international apparel brand last year admits his pricing had little to do with costs. "I just wanted to make mine the most expensive brand, because that would get me more sales," he says. "There was no other reason for the price."
"In a new market," says Dutta, "buyers are constantly looking for upgradation of status that is continuously evolving as reference parameters keep going up." In other words, the auction is hardly over. The price tags are going to be hiked every year. The Rs 80,000 TV will soon be eclipsed, as will be the Rs 40 toilet soap.
Thirdly, luxury companies, whether they are in the business of fashion, watches, cars or scotch whisky are discovering that while western markets are plateauing, the Asian markets could not be churning out better business. Mercedes' non-Japanese Asian sales increased 350 per cent between 1991 and 1994. The Indian super-rich, till now were resigned to using the bulk of their black money caches only on trips abroad, are now hankering for the chance to blow their lollies at home.
A survey by market research agency Pathfinders of the automobile market in India reveals that while the growth rate in the economy car segment was 25 per cent per annum, the growth in the luxury segment was about 45 to 50 per cent. Of course, this higher growth rate is on a much smaller base, but this does not deter the purveyors of prestige from searching for emerging markets.
Titan's Tanishq range of jewellery watches, priced between Rs 20,000 and Rs 90,000, is doing well in the market; the company is now gearing up to launch gold jewellery. Sandeep Kapoor, a retailer at Delhi's upmarket South Extension market, says demand for foreign watch brands like Christian Bernard, Baume & Mercier, Cartier, Omega and Caran Jache has increased manifold. "People need special gifts for marriages, birthdays and anniversaries," he adds. As Manpriya Singh, who retails through her jewellery boutique Mon-Pri, puts it: "Jewellery sales are brisk because accumulation of wealth can never go out of fashion."
Says Prof. S Neelameghum of the Faculty of Management Studies at Delhi University: "The growth in the luxury industry can be attributed to an attitudinal change in the young consumers towards spending--a trend spurred by a credit card culture and peer pressure of looking and living better today in contrast to the earlier generation's attitude of saving for a better tomorrow Pathfinders' P-SNAP, a nationwide study of the values, attitudes and lifestyles of Indian women, found that between 1987 and 1993, while the seven identified clusters of women ranging from "gregarious hedonist" to "anxious homebody" remained the same, the size and nature of the clusters was changing dramatically. Indian women were more modern and western attitudes in terms of clothing, music, cosmetics, food and so on. "It is this change in psychology coupled with a rise in disposable income that comes with mutliple incomes which is fuelling the luxury industry," says Ajit Kekar, director of Pathfinders.
The end-result: luxury is suddenly Politically Correct. After all, has not the Government brought duties on products like cosmetics and air conditioners down by more than half in the last two budgets? Guilt is out, price tag as USP is in.
But surprisingly, hyperpremium marketers are the first to deny the basic principle of their trade. It's the quality which sells, they insist, not the price tag. Says Minnie Sodhi of Images, an exclusive furniture boutique: "My designer rejects six chairs to get a perfect piece. So naturally, furniture is expensive at our outlet but we never have to push sales. "Quality is the inherent and intrinsic prerequisite of high-priced products," says Dutta.
Certainly, but the definition of quality undergoes a subtle but significant change as the product moves up the price spiral. Quality here does not mean mere durability or comfort, it also includes the ability to satisfy ego-cravings. Just count the number of products whose advertising lines read: "You deserve a (XYZ brand name)." And this is the key irony of hyperpremium marketing: neither the triumphant seller nor the hypersatisfied buyer can come out into the open and say that the price tag is the USP in this trade.
