Earlier, luxury was about being seen in the ‘It’ Prada dress, but the rich are now looking beyond mass-marketed luxury. As the number of super-wealthy Indians grows, “luxury experience” is emerging as an area of opportunity for entrepreneurs.
Last year, Delhi-based entrepreneur Annika Talwar got a request from a young industrialist who was getting married. He wanted to gift his wife-to-be a rare 16-carat heart shaped pink diamond. The price tag: a few crores of rupees.
Requests like these are par for course for 33-year-old Talwar, who founded The Only Network, along with Rudranshu Nautiyal, in 2010. Talwar organises high-end events for corporates such as the Swatch Group and Bacardi, but a growing part of her business is aimed at making the dreams of India’s rich come true.
“The top-end is looking for ultimate luxury, which is highly customised and personalised. There is an opportunity for those who can provide this for them,” says Neelesh Hundekari, principal and head of luxury and lifestyle practice, AT Kearney India.
The Indian luxury market is thriving; in 2011 it was worth $5.8 billion ( Rs 32,126 crore) and is projected to reach $14.7 billion ( Rs 81,423 crore) in 2015, according to a CII-AT Kearney report on Indian Luxury. Hundekari says that a bulk of this market is still buying branded products to show them off. “But once they have the clothes and the gadgets that money can buy, it is unique and customised experiences that the rich want,” he adds. Travel, luxury concierge services, weddings, automobile-based experiences and art are some of the hot sectors in luxury-as-an experience. The target ultra-rich market is itself quite big and is growing. The number of Ultra High Net Worth Households, or households with a minimum net worth of Rs 25 crore, is expected to triple to over two lakhs and their net worth is expected to grow five times to Rs 23,500,000 crore ( Rs 235 trillion) by FY 2015-16, according to a report published by by Kotak Wealth and CRISIL Research.
Ventures like The Only Network and Spiritual Luxury Living are targeting this rarefied segment.
Arora founded Spiritual Living, a pun on ‘Spirits’ and ‘Rituals’, in 2003 and began selling high-end whisky, worth around Rs 10-16 lakh a bottle, to hotel groups the Taj Group and ITC. In 2007 he brought the concept of private label to India. A client can get a cask of whisky specially made in his name. A cask of 250-300 bottles that are of 18-25 years of age can go for Rs 50 lakh to Rs 15 crore.
New customer base
The customer base is also growing, as even the not-so-rich are demanding tailor-made services. “Earlier, business owners formed a bulk of our clients,” says Taruna Seth, who founded Pearl-Luxe, a bespoke travel venture, in 2009. Now, Seth says, young double-income-no-kids (DINK) couples in middle to senior management roles are approaching her for personalised travel packages.
“Their budget may not be too high but these individuals are willing to spend their savings for a customised experience,” says Seth, whose family runs Pearl International Tours and Travels, which focuses on corporate travel. While typical 10-15 day packages range between Rs 15-20 lakh for a couple, Seth has put together trips for over Rs 60 lakh. One such was a five-week honeymoon to the Caribbean, where the couple island-hopped on private planes. “They wanted a once-in-a-lifetime experience and we put it together for them,” says Seth.
The advent of online commerce has also given a new avenue for many luxury entrepreneurs. One start-up that is leveraging the online medium is Excluzen, founded in January 2011by Uravshi Bahuguna Sahay, who is on a sabbatical from Singapore’s Singtel, where she is Senior Director.
The company provides a mix of online and offline concierge services. The online part offers an exhaustive list of products and services ranging from apparel to events and holidays. “Luxury cannot be compartmentalised, so I wanted this to be a one-stop destination for luxury,” explains Sahay. Prices range from Rs 970 for a Korean nail paint set to over Rs 10 lakh for a gold chain and earring set.
The offline division puts together customised experiences, mostly travel-related, for clients. They have had around 700 transactions so far. Celebrity stylist Pernia Qureshi is also leveraging the online medium. Qureshi, who has worked with designers like Tarun Tahiliani and was also the stylist for the Sonam Kapoor-starrer Aisha, launched an online fashion store in April that stocks creations by South Asian designers. Pernia’s Pop-Up Shop, her online venture, stocks apparel and accessories that are priced from as low as 3,000 and can go up to Rs 1 lakh.
AT Kearney’s Hundekari says the segment is characterised by low volumes and high margins. Entrepreneurs say margins could go up to 60-80%, depending on the product and service and the amount of customisation and expertise required. The Only Network’s Talwar charges between 1% and 15% commission for the concierge service. The company made Rs 5 crore in the first year of operations and has doubled its revenues this year. Talwar expects growth to stabilise at around 30% year-on-year. The three-year-old Pearl-Luxe clocked in Rs 15 crore revenue in fiscal year 2011-12 and is expecting growth rates of 30-35% over the next three years.
Risks and challenges
Entrepreneurs say barriers to entry are technically low, but creating an exhaustive list of suppliers you can rely upon is very important. “It really helps if you are part of the ‘It’ crowd, because most of your clients and even suppliers belong to this group,” says Seth, who adds that luxury is mostly a recession proof business. Seth and other entrepreneurs also admit that expenses can be high. Entrepreneurs need to attend international luxury conferences and exhibitions such as the invitation-only International Luxury Travel Mart to be held in Shanghai in June to build their brand among suppliers. “You will need to wine and dine many of the service providers and that does not come cheap either,” says Talwar.
Hundekari of AT Kearney also says the market is growing, but is still quite limited and volumes tend to be small. It is no wonder then that most of the entrepreneurs are diversifying and are attempting to offer a wider variety of luxury experiences. Spiritual Luxury’s Arora has started setting up personalised bars for connoisseurs for around Rs 25-40 lakhs and is also launching luxury whisky holidays in September this year.
Only Network’s Talwar, who gets requests ranging from Rs 35 lakh to Rs 1 crore, is setting up a business vertical focused on just weddings. But the biggest challenge is to stay ahead of the curve.
“What is unique today will be the norm tomorrow. We need to keep providing more and more unique experiences to our clients,” says Seth. Hundekari says only those entrepreneurs will survive who can keep surprising the growing ranks of the super rich with ever newer experiences and services.