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Thesis Report on Luxury Brands

GIBM, PUNE Page 2

CERTIFICATE

This is to certify that Mr. / Miss. _____________________________________________ is a student of

the Genesis Institute of Business Management, Pune.

He / She in the partial fulfillment of the course has submitted to us a dissertation report titled

__________________________________________________________________ .

This work is original to the best of my knowledge and is therefore being submitted towards the partial

fulfillment of the course.

Dissertation Guide Director

VIVAVOCE RECORD

Roll No. ________________ Date _____________

Internal Examiner External Examiner


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AKNOWLEDGEMENT

No Project is ever a work of only one person and this one is no exception

This project is the product of many hands, and countless hours from many people. My thanks go out to all

those who helped, whether through their comments, feedback or suggestions.

It gives me immense pleasure to express my deep sense of gratitude to Mr. Rishabha Nayyar (Faculty

guide) for his valuable guidance, constant supervision and above all his continuous encouragement &

support during the tenure of this project.

I also thanks to my other faculty guide Ms. Madhu for their guidance and support during this project

tenure.

Sincere thanks to all the people who have worked under this project. Lastly, no words could adequately

convey my heart full thanks to the family members and friends who indirectly co operated with us. I

could not have done it without you all!

LIKENDRA VERMA

PGP -2


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EXECUTIVE SUMMARY

Around two decades ago no one could imagine that a luxury market would exist in India. But over the

years with the change in the demographics of the Indian consumer and with higher disposable income

available, the luxury market in India has indeed emerged as one of the fastest growing markets in the

retail segment. It was very interesting to study the luxury market in India because it is a new sector and

not much research has been carried out on the same. Through this report we have tried to give an estimate

of the luxury retail market in India, how much it has penetrated and also how much it is likely to grow.

Also we have tried to specify various factors which are crucial for the success of luxury brands in India.

While doing out research on this project we have come across many new findings. The role the Indian

market plays in the global scenario and the position of India vis--vis other countries. Also we learnt

about the duties and legal requirements for this segment. We have tried our best to cover the various

aspects that are involved in luxury retailing through this project and it has indeed been a great learning

experience.

OBJECTIVES OF THE PROJECT:

1. To study the future of luxury brands in a developing country like India.

2. To understand the customer psychology towards luxury brands and the changing

consumer behavior for an expensive product.

SCOPE OF THE STUDY:

My study includes understanding the consumer behavior and why a person will purchase a

lifestyle product. Which segment on basis of demographics and on basis of psychographics is

interested in buying a luxury brand? For this we framed schedules and also do qualitative study

like shadowing to understand the true behavior of the people.


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TABLE OF CONTENTS

1. Certificate

2. Acknowledgement

3. Executive Summary

4. What is luxury?

5. Introduction to luxury brand

6. Conceptual approach

7. Where to spend money?

8. Luxury boom in India9. Research measurement

10.Statistical analysis and findings

11.Conclusion

12.Supportive document

13.Bibliography


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WHAT IS LUXURY?

Luxury, derived from the Latin word luxus, means indulgence of the senses, regardless of cost.

Luxury denotes:

1. Something that is an indulgence rather than a necessity.

2. The quality possessed by something that is excessively expensive.

Luxury is something that everyone wants but nobody needs, its an area of huge comfort and the best of

the best. Luxury speaks a level of exclusivity, unusualness A luxury brand or prestige brand is a brand

for which a majority of its products are luxury goods. It may also include certain brands whose names are

associated with luxury, high price, or high quality, though few, if any, of their goods are currently

considered luxury goods. The luxury sector targets its products and services at consumers on the top-end

of the wealth spectrum. These self-selected elite are more or less price insensitive and choose to spend

their time and money on objects that are plainly opulence rather than necessities.

For these reasons, luxury and prestige brands have for centuries commanded an unwavering and often

illogical customer loyalty.


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INTRODUCTION TO LUXURY BRANDS

Luxury brands have often been associated with the core competencies of creativity, craftsmanship,

precision, high quality, innovation, & premium pricing. These product attributes give the consumers the

satisfaction of not only owning expensive items but the extra-added psychological benefits like the

esteem, prestige and a sense of a high status that reminds them and others that they belong to an exclusive

group of only a select few, who can afford the pricey items.

Luxury and prestige brands such as Rolex, Louis Vuitton & Cartier represent the highest form of

craftsmanship and command a staunch consumer loyalty that is not affected by brands. These brands

create and set the seasonal trends and are also capable to pulling all their consumers with them wherever

they go.

Premium brands are those brands like Polo Ralph Lauren, Calvin Klein and Tommy Hilfiger that aspire

to be luxury and prestige brands but their marketing mix strategies are more attuned to a mass market,

albeit a luxury mass market. They also termed as mass-premium brands or luxury brands.

Fashion brands on the other hand are those that address the masses.

LVMH (Louis Vuitton Moet Hennessy) is the largest luxury good producer in the world with over fifty

brands, including Louis Vuitton, the brand with the world's first designer label.

.


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CONCEPTUAL APPROACH

Luxury means different things to different people

Luxury has no certified origins. But luxury branding is said to have taken birth in the west with the

appearance of high-end brands.

Luxury is a product category in itself

This can be best explained by the fact that both an expensive watch and an artwork can be considered to

be luxury items. Therefore, all luxury marketers are not just competing in their technically defined

product categories (like manufacturers of refrigerators compete amongst themselves) but for the wallet

share of luxury goods in total.

The meaning of luxury had changed

Luxury has moved from its old meaning of ownership (also known as conspicuous consumption -

Conspicuous consumption is a term used to describe the lavish spending on goods and services that are

acquired mainly for the purpose of displaying income or wealth rather than to satisfy a real need of the

consumer.

Luxury is Reward

Consumers tend to be younger than the first group but older than the third. They use luxury goods as a

status symbol to say Ive made it! They are motivated by their desire to be successful and demonstrate

this to others. Luxury brands that have widespread recognition are popular, however they dont wish to

appear lavish or hedonistic in their appearance.

Luxury is Indulgence

This group is the smallest of the three and tends to include younger consumers and slightly more males

than the other two groups. Their purpose for luxury goods is to lavish themselves in self-indulgence.

Customer loyalty is more important that brand awareness

Rather than focus on measuring the brand awareness of a luxury company, measuring customer loyalty is

far more significant a metric regarding the success or failure of corporate strategy to connect with the

luxury consumer.


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WHERE TO SPEND MONEY?

There were around 62000 ultra high net worth individuals in India in 2010-11 whose net worth

households in India in 2010-11 whose net worth is more than rs. 25 crore, it is projected to be 219000

households.

- Holyday packages

- Jwellaery/ precious stones

- Luxury watches

- Household electronics

- Apparel accessories

- Home dcor/ crystals

- Luxury pens

- Vintage spirits

- Art/artefacts

11.10%

10%

44.30%

18.40%

16.20%

Luxury market 2007

Accessories

Home and

others

fashion and

clothing

fragrance and

cosmetics

watches and

jewellery

12.10%

10%

41.90%

17.70%

18.20%

Luxury market 2012

Accessories

Home and

others


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LUXURY BOOM IN INDIA

The luxury goods market in India is one of the worlds most diverse and exciting and a challenging one

for brands seeking to gain a presence there. Brands and retailers that want to capture a share of this fast-

paced business need to learn and adapt, or risk missing one of the great untapped opportunities for the

luxury business.

USD $ 975 billion to its economy and shall add twice as much, USD $ 1811 billion, over the next

decade to grow to the current size of a United Kingdom, France or Italy by 2020.

This past transformational decade has fuelled the increase in the number of millionaires across

India; owing to the robust economy, resurgent stock market and keen entrepreneurial drive; and

the next 10 years will only augment this growth. The drivers of the world economy are

increasingly polarizing towards the BRIC countries.

The net worth of Indias rich- including professionals, inheritors and the self madecould increase five

times by 2015. From an estimated rs 45 lakh crore now, it is expected to reach rs 235 lakh crore.

THE LUXURY CONSUMER IN PROFILE

Profile of the Indian luxury consumer, leaning on the latest study by research group KSA Tecnopak: _

Primarily resident in urban India Lives in a household earning more than about INR800,000 (US$18,000)

a year, where the chief wage earner is male, average age 3637 Owns a premium/luxury saloon car such

as a HondaAccord, a Vectra, a Skoda Octavia etc . Among women consumers, 65% are housewives.

85

Figures in $ billion

2007 2008 2009 2012 2015

Product 3.66 4.39 4.75 8.21 14.73

Services 1.04 1.28 1.53 2.85 5.38

Assets 1.76 2.26 2.45 4.31 7.90


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RESEARCH MEASUREMENTS

Research Methodology

Project has information gathered from both from primary and secondary sources, the primary

sources will be survey done with schedules and through interviewing employees of the company

and luxury retail outlets. The secondary information was gathered through internet, brochures

and through old research papers etc. The sample size was 30 respondents of company employees ,their

selection will be totally based on the non probability sampling.

The main body of the questionnaire included 12 questions are useful to get the information . Use was

made of a five-point Likert scale. Structured questionnaires are very useful to get information about the

scope of luxury brands in India.

SAMPLES:

Sample Size: 30

Sample Frame: Pune City

Sample Unit: working professionals of Pune

Sampling Method: Simple Random Sampling

Constraints: Time, No. of Respondents

Survey: Questionnaire


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STATISTICAL ANALYSIS & FINDINGS

1.Does purchase of Luxury is directly related to income level?

Answer No. of Respondence

yes 27

no 3

ANALYSIS

The result was totally skewed to one side and respondents agree that Purchase of Luxury Products istotally related to the Income level of an Individual which is 90%.Income usually affects the lifestyle and attitude of individuals which might shape choice of the productsyou buy.

2. Rank the following parameters on your purchase preference ?

Answer No. of RespondencePrice 8

Quality 10

Availability 6

Involvement 4

Recommendation 2

90%

10%

NO.Of Respondence

yes

no


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ANALYSISMost of the respondents prefer quality followed by price and availability. Thisresponse shows that customers are ready to pay of quality.People purchase products because they find some sort of value in it. If the benefitis more than the purchasing price the product is beneficial for them

3.Why does one person purchase a Luxury Brand?

Value No. of Respondents

Quality 4

Flaunt Value 12

Interested in art 5

Exclusivity 9

0 2 4 6 8 10

Price

Quality

Availability

Involvement

Recommendation

No. of respondence

No. of respondence


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ANALYSE

In opinion of Respondents, majority of People buy luxury product because they want to flaunttheir superiority over others. Followed by those people who really have taste of art andexclusiveness of the luxury that is around 30%. Always customers are looking for quality in productsthats why they go forshopping of luxury products.

4.Quality of Luxury brands are more superior then others?

Answers no. of respondanceStrongly Agree 8

Agree 13

Neutral 5

Disagree 3

Strongly Disagree 1

0

2

4

6

8

10

12

14

Quality Flaunt Value Interested in

art

Exclusivity

No. of Respondents

No. of Respondents


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ANALYSIS

About 70% of the respondents are of the view that service quality in luxury brands is moresuperior then other brands.Generaly people believe that luxury items are for high income group, to know more aboutfollowing question was asked to the respondents.

5.Services provided by luxury brands is better then others ?

Answers No. of Respondance

Strongly Agree 7

Agree 14

Neutral 5

Disagree 3

Strongly Disagree 1

27%

43%

17%

10%

3%

No. of respondance

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree


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ANALYSIS

About 70% of the respondents are of the view that service quality in luxury brands is moresuperior then other brands.Generaly people believe that luxury items are for high income group, to know more aboutfollowing question was asked to the respondents.

6.Luxury brands are prefer by high income groups ?

No. of Respondance

Strongly Agree 7

Agree 14

Neutral 5

Disagree 3

Strongly Disagree 1

0

5

10

15

Strongly

Agree

Agree Neutral Disagree Strongly

Disagree

No. of respondance

No. of respondance

0 5 10 15

Strongly Agree

Agree

Neutral

Disagree

Strongly Disagree

No. of respondance

No. of respondance


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ANALYSISHere we can see that most of the responses are in favour of our assumption that main targetcustomers for luxury brands are high income group. About 70% believe that luxury brand is forhigh income group people.There are various factors which affect the luxury market in both ways either positive or

negative. To understand which factor affect most, the following information was gathered

7.Rank the following Socio Economic factors which affect the Luxury market?

Socio economic factors No.of respondent

Change in lifestyle (like household patterns) 9

Retail boom 7

Working women 6

Rise in living standards 8

ANALYSIS

Change in lifestyle is the factor which affects the luxury sales most, followed by the Rise inliving standards and Retail boom. These factors are very less skewed that shows all the factorsaffect the sale of luxury goods almost at the same level.

8.Which brands you prefer to shop ?Answer No.of Respondent

local brand 11

luxury brand 13

International brand 6

02468

10

Change in

lifestyle

(likehousehold

patterns)

Retail

boom

Working

women

Rise in

living

standards

No.of respondent

No.of respondent


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ANALYSIS:

Here we can see that now a days most of the people prefer to shop luxury brands. A major partpurchase luxury brand followed by local brands. International brand has least share.Following question is frame to find out the impact of real estate (commercial), retail i.e mallconcept on the sale of luxury product, like from where actualy customers prefer to shop?

9.Where do you prefer to shop?

Answer No.of Respondent

local market 8

malls 14

Brand outlet 6

others 2

37%

43%

20%

No.of respondent

local brand

luxury brand

International brand

0

5

10

15

local market malls Brand outlet others

No.of respondent

No.of respondent


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ANALYSISMost of the people like to purchase from Malls followed by local market and brand outlets. Thisshows that real estate (commercial) mall concept have such a high impact on the sale of luxuryitems.India being a developing country is not an attractive hub for luxury brands till recent yearsbut now the scenario seems to be changing

10. How often they indulge in luxury in their lifestyles as opposed to buying the ordinary brand?

Time duration

No. of

Respondence

once in a month 2

once in a 6 month 6

once in year 8

once in a 5 year 8

once in a 10 year 5once in a lifetime 1

ANALYSIS

The above diagram depicts that there are most number of people who buy luxury brands once ina year followed by those who buy once in five year and by those who buy once in a 6 month.The GDP is growing and the Number of HNIs are also growing at a very high rate, still thereare some reasons because of which luxury sales are not able to take a flight in India. Tounderstand those reasons lets see the following result:

0 2 4 6 8 10

once in a 6 month

once in year

once in a 5 year

once in a 10 year

once in a lifetime

No. of respondence

No. of respondence


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11.What are the problems because of which luxury brands are not able to take a flight in India?

Reason

No. of

Respondenceconservative thinking 6

lack of organized retailing 9

high rentals 5

high taxation 10

ANALYSISAccording to the respondents high import duty is main reason why sales of luxury brands in nottaking flight. The import duty on premium cars, for example, stood at 205% while wines &spirits invite 185% customs levy, followed by the lack of serious organized retailing.Due to less sales luxury brands generally fall into trap of discounting and that goes very truein case of a developing country like India. To understand this question following information is gathered.

0 2 4 6 8 10

conservative thinking

lack of organized retailing

high rentals

high taxation

No. of respondence

No. of respondence


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12.What should International Luxury Brands do to woo Indian consumers?

Technique

No.of

Respondence

Sensory gratification 5

celebrity endorsement 11

word of mouth 7

public relation 7

13. Say something about grey market of luxury goods in India.

No. of respondence

Sensory gratification

celebrity endorsement

word of mouth

public relation


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CONCLUSION

There are many multinational luxury brands which are entering in India with their full pace like Jimmy

Choo, Gucci, Christian Dior, Louis Vuitton, Cartier, Piaget, Tiffany, Moschino, Prada, Fendi and others.

More than 200 luxury brands are present or in line of opening their shop in India. All this rush is

registered due to highest growth in HNIs which is around 25% per year and growing GDP. There are

many other reasons because of which market size of luxury brands is also boosting which are Change in

lifestyle (like household patterns), Retail boom, Working women, Rise in living standards. Luxury brands

can also increase their brand awareness and sales through celebrity endorsements. The things which are

hampering the growth of luxury market is high import duty, lack of organized retailing, Chinese

counterfeit products. By keeping the above points in mind we can conclude despite being few difficulties

luxury Brands have a great future ahead in India.

In 2011 recovery in the luxury goods market has continued with retail expenditure on branded luxury

products forecast to expand by 17.3% in dollar terms year-on-year. Asia Pacific is at the forefront of

growth and China remains the key growth generator in the region, but new demand from other markets

such as South Korea, Taiwan and to a lesser extent India, is also contributing to strong performance.

India has over 2.0 million households earning USD $ 100,000 or more annually and these households are

expected to grow at a 13% rate over the coming years. The segment geared to show tremendous promise

over the next few years is number of households earning between USD $ 50,000 to $ 100,000 annually.


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SUPPORTIVEDOCUMENTSQuestionnaire

1.Does purchase of Luxury is directly related to income level?

Yes____

No____

2. How often do you go for shopping?

within a week__ within a month__

within 6 months__ within a year__

3. Where do you prefer to shop?

Local market___ Malls__

Brand outlets___ Others__

4. Which brands you prefer to shop?

local brands

Luxury brand

International Brands

5. On what parameters you select brands?

Price____ Quality___

Availability___ Involvement___

Recommendation___

6.Services provided by luxury brands is better then others ?

Strongly agree

Agree

Neutral

Disagree

Strongly disagree


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7.Quality of Luxury brands are more superior then others?

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

8. Why does one person purchase a Luxury Brand?

Quality

flaunt value

Interested in art exclusivity

9. Rank the following Socio Economic factors which affect the Luxury market?

Change in lifestyle (like household patterns)

Retail boom

Working women

Rise in living standards

10. What are the problems because of which luxury brands are not able to take a flight in India?

Conservative Thinking__ High Rentals__

Lack of Organized Retailing__ High Taxation__

11. What should International Luxury Brands do to woo Indian consumers?

Sensory Gratification__ Word of Mouth__

Celebrity Endorsement__ Public Relations__

12. Say something about grey market of luxury goods in India ___________________________.


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BIBLIOGRAPHY

THE CULT OF LUXURY MAGAZINE- BUSINESS WORLD 2011

REPORT OF TECHNOPARK REPORT 2011

WWW.MEDIALINE.DE

HTTP://ZENITHRESEARCH.ORG.IN

Hindustan times .com

Brand channel.com

Wikipedia.com

Eluxury.com

Luxury marketing/India.com
http://www.medialine.de/http://www.medialine.de/http://zenithresearch.org.in/http://zenithresearch.org.in/http://zenithresearch.org.in/http://www.medialine.de/

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