No Small Matter
The future of luxury in India depends on how fast it can penetrate the hinterland. The good news is that small-town consumers are no longer afraid to flaunt their dough
- Sep 16, 2016,
- Updated Dec 8, 2016 12:06 PM IST
Fifty-two-year-old Sanjay Ghodawat is a household name in Kolhapur. Starting out as a humble gutkha (chewing tobacco) seller in 1988, traversing the dusty villages and small towns of Karnataka, Maharashtra and Goa on a burly Tempo Traveller, Ghodawats business empire today is worth over Rs 1,000 crore, and spans sectors like wind power, agriculture, chemicals, packaging, edible oils, real estate, heavy engineering, textile and FMCG and, of course, the tobacco business. That transformation has also brought about a change in his transport - he now owns more than 100 luxury cars including his favourite Rolls-Royce, Ferrari, vintage Plymouth and Bentley. His fetish for cars is such that he has a 3,000-sq. ft service workshop at home that can cater to 15-20 cars at a time. And when the road ends, he also has a Eurocopter chopper at his disposal. "I have been hugely fond of bikes and cars," says Ghodawat. "My childhood collection of all sorts of high-end bikes and cars has now turned into one of real ones."
Ghodawat is a perfect brand ambassador of how luxury has seeped into even the smallest of cities in India. And of course, he, and Kolhapur, aren't the only ones. Right in the middle of the festive season in 2010, Aurangabad emerged as the luxury destination of the country. The small industrial town in Maharashtra, known for its acute water shortage, and the Ajanta and Ellora caves, witnessed a bulk deal of 150 high-end imported cars worth Rs 65 crore, with the who's who of the luxury industry seeking directions to the city. The event, in fact, heralded the trend of bulk luxury deals in India.
The Aurangabad Group, as they came to be known, comprising doctors, builders, industrialists and professionals from other fields, bought 13 top-of-the-line Mercedes-Benz S Class saloons, 74 E Class sedans, 39 C Class, and 6 GL and 18 ML Class SUVs. The one-day blitzkrieg was not a coincidence. The buyers, in fact, wanted to draw investors' attention to the city and the bulk deal was one of the ways to do it. "The idea behind placing this large order was to bring Aurangabad on the global investment map," said industrialist Atul Save, one of the participants.
It is close to six years since the Aurangabad deal, and the appetite for luxury consumption in small towns has grown manifold since then. Despite limited presence of luxury brands at the retail level, a significant 45 per cent of all spending on luxury items comes from those residing outside the four metropolitan cities. From Surat or Vadodara in the West, and Jamshedpur and Ranchi in the East, to Ludhiana and Chandigarh in the North, and Coimbatore and Kochi in the South, there are many takers for the uber luxury spread in India.
The biggest challenges in any luxury business in India are high rentals and low conversion rates. The most appropriate place to set up a luxury store is always the most expensive plot of real estate. And, in an emerging economy like India, it puts businesses on shaky ground. Delhi's Khan Market, Connaught Place, Select City Walk or Mumbai's Peddar Road, Fort Fountain and Lower Parel that host most of the luxury stores, figure in the list of most expensive retail spaces across the world. The demand in just one city, howsoever big, rarely justifies that.
"Most people started getting aware of luxury around 2008 and, even then, the retailers had realised that a large part of the population interested in such items was from small towns and cities. In North, you had people from Ludhiana, Lucknow and Patiala, and later from Gwalior, Kanpur and Indore, frequenting luxury stores in metros. There were a handful of people who had the money but were in the closet," says Gupta of Luxury Connect, adding: "When the emporios started opening up, it became a shopping destination for them and slowly became a pattern. Retailers started organising shopping trips, bringing bus loads of customers from Ludhiana for shopping because, right from the start, it was a challenge to bring relevant people to the showrooms as the rentals were really high."
A 2012 McKinsey Global Institute study on cities around the world had estimated that 36 cities from India would find a place in the top 600 cities that will contribute 60 per cent to global gross domestic product (GDP) by 2025. The report also said that 20 Indian cities, including Ludhiana, Surat, Vijaywada, Vizag, Kochi, Coimbatore, Indore and Raipur, among others, would register GDP growth higher than New Delhi, Mumbai, Chennai or Kolkata by 2025.
Yet, not everything is hunky-dory with luxury consumption in tier II cities. While a metropolis displays appetite for all kinds of luxury - from watches and apparels to cars, bikes and hotels - small towns often have a particular preference while remaining dispassionate about other forms of luxury. In the case of Aurangabad, the automobile extravaganza led to a rush of other luxury brands in the city. But, not all of them created a flutter.
"We have done some dumb things along with our smart moves. One of our bad decisions was to get into cities like Aurangabad, where 150 Mercedes were bought at one go. We went in without verifying (conducting a market survey of the luxury watches on offer) and had to shut the store within 18 months," says Yash Saboo, Founder, Ethos Watch Boutiques.
One size, truly, does not fit all.
Fifty-two-year-old Sanjay Ghodawat is a household name in Kolhapur. Starting out as a humble gutkha (chewing tobacco) seller in 1988, traversing the dusty villages and small towns of Karnataka, Maharashtra and Goa on a burly Tempo Traveller, Ghodawats business empire today is worth over Rs 1,000 crore, and spans sectors like wind power, agriculture, chemicals, packaging, edible oils, real estate, heavy engineering, textile and FMCG and, of course, the tobacco business. That transformation has also brought about a change in his transport - he now owns more than 100 luxury cars including his favourite Rolls-Royce, Ferrari, vintage Plymouth and Bentley. His fetish for cars is such that he has a 3,000-sq. ft service workshop at home that can cater to 15-20 cars at a time. And when the road ends, he also has a Eurocopter chopper at his disposal. "I have been hugely fond of bikes and cars," says Ghodawat. "My childhood collection of all sorts of high-end bikes and cars has now turned into one of real ones."
Ghodawat is a perfect brand ambassador of how luxury has seeped into even the smallest of cities in India. And of course, he, and Kolhapur, aren't the only ones. Right in the middle of the festive season in 2010, Aurangabad emerged as the luxury destination of the country. The small industrial town in Maharashtra, known for its acute water shortage, and the Ajanta and Ellora caves, witnessed a bulk deal of 150 high-end imported cars worth Rs 65 crore, with the who's who of the luxury industry seeking directions to the city. The event, in fact, heralded the trend of bulk luxury deals in India.
The Aurangabad Group, as they came to be known, comprising doctors, builders, industrialists and professionals from other fields, bought 13 top-of-the-line Mercedes-Benz S Class saloons, 74 E Class sedans, 39 C Class, and 6 GL and 18 ML Class SUVs. The one-day blitzkrieg was not a coincidence. The buyers, in fact, wanted to draw investors' attention to the city and the bulk deal was one of the ways to do it. "The idea behind placing this large order was to bring Aurangabad on the global investment map," said industrialist Atul Save, one of the participants.
It is close to six years since the Aurangabad deal, and the appetite for luxury consumption in small towns has grown manifold since then. Despite limited presence of luxury brands at the retail level, a significant 45 per cent of all spending on luxury items comes from those residing outside the four metropolitan cities. From Surat or Vadodara in the West, and Jamshedpur and Ranchi in the East, to Ludhiana and Chandigarh in the North, and Coimbatore and Kochi in the South, there are many takers for the uber luxury spread in India.
The biggest challenges in any luxury business in India are high rentals and low conversion rates. The most appropriate place to set up a luxury store is always the most expensive plot of real estate. And, in an emerging economy like India, it puts businesses on shaky ground. Delhi's Khan Market, Connaught Place, Select City Walk or Mumbai's Peddar Road, Fort Fountain and Lower Parel that host most of the luxury stores, figure in the list of most expensive retail spaces across the world. The demand in just one city, howsoever big, rarely justifies that.
"Most people started getting aware of luxury around 2008 and, even then, the retailers had realised that a large part of the population interested in such items was from small towns and cities. In North, you had people from Ludhiana, Lucknow and Patiala, and later from Gwalior, Kanpur and Indore, frequenting luxury stores in metros. There were a handful of people who had the money but were in the closet," says Gupta of Luxury Connect, adding: "When the emporios started opening up, it became a shopping destination for them and slowly became a pattern. Retailers started organising shopping trips, bringing bus loads of customers from Ludhiana for shopping because, right from the start, it was a challenge to bring relevant people to the showrooms as the rentals were really high."
A 2012 McKinsey Global Institute study on cities around the world had estimated that 36 cities from India would find a place in the top 600 cities that will contribute 60 per cent to global gross domestic product (GDP) by 2025. The report also said that 20 Indian cities, including Ludhiana, Surat, Vijaywada, Vizag, Kochi, Coimbatore, Indore and Raipur, among others, would register GDP growth higher than New Delhi, Mumbai, Chennai or Kolkata by 2025.
Yet, not everything is hunky-dory with luxury consumption in tier II cities. While a metropolis displays appetite for all kinds of luxury - from watches and apparels to cars, bikes and hotels - small towns often have a particular preference while remaining dispassionate about other forms of luxury. In the case of Aurangabad, the automobile extravaganza led to a rush of other luxury brands in the city. But, not all of them created a flutter.
"We have done some dumb things along with our smart moves. One of our bad decisions was to get into cities like Aurangabad, where 150 Mercedes were bought at one go. We went in without verifying (conducting a market survey of the luxury watches on offer) and had to shut the store within 18 months," says Yash Saboo, Founder, Ethos Watch Boutiques.
One size, truly, does not fit all.