Spend, spend, spend

Spend, spend, spend

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Spend, spend, spend

Back in economics class in the eighties, we didn’t think we’d see real-life examples of Thorstein Veblen’s Theory of the Leisure Class here in India. The 19th-century economist’s seminal proposition postulated that the accumulation of wealth following the second industrial revolution resulted in a new social class, the nouveau riche.

Pity we didn’t have a crystal ball. For not only can we now see this nouveau riche leapfrogging caste and class barriers all around us, but their impact is being felt as deeply as cut to the quick. As Veblen predicted, the results lie glittering in front of us, on the skyline, over the airwaves and in our supermarkets. Conspicuous consumption is here to stay.

If you’ve got it, flaunt it, goes the new thinking –  something that previous generations would never have felt comfortable doing. Let your imagination drift for one second: would Dhirubhai Ambani have built such a towering edifice to purchasing power as his son Mukesh has?

A recent survey from luxury property company Knight Frank and the global financial firm Citigroup, which represents 5,000 clients worth more than $100 million each, found that Indians are the most likely to flaunt their newly-acquired wealth – outdoing even Russia’s oligarchs, who prefer to focus on charitable giving. The study found that 93 per cent of Indians are happy to spend on big-ticket items such as yachts and private jets.

Everyone who can afford it is happy to flaunt their designer labels – whether clothes, accessories, holidays or even their very lifestyle.

From across the length and breadth of the country come stories of high-powered spending – crores’ worth of furniture shopping in Bangalore is topped only by the sale of new cars in Delhi.

And of course the brands are flocking to our shores. Only last week, British luxury sports car manufacturer Aston Martin announced its entry into India, bringing to our shores its most expensive model in the Rs 20 crore limited-edition two-door coupe ‘One77’ (Rs 25 crore if you add registration, insurance and local levies in a city like Mumbai).

Reliance Brands announced recently it plans to bring to India American shoe and accessories label Steve Madden, while it hopes to open four stores for Quiksilver, the American outdoor lifestyle brand, in 2011. Spanish designer label Adolfo Dominguez has recently launched in the capital and is already set to open two more stores in India’s key metros within its first year in partnership with Wadhawan Lifestyle Retail, which brought in the cult brands of Ed Hardy and Christian Audigier to the elite Indian consumers in 2007.  On the fine dining front, London-based Michelin-starred chef Vineet Bhatia has opened two restaurants in Mumbai now, and is expected to launch one in Delhi.

On the hotel front, several new chains want to make India their home. Dubai’s Emaar Hospitality is looking for partners to bring in its five-star hotel brand, The Address, with a first property projected for Delhi. MGM Hospitality, which also owns the Bellagio brand, has announced a luxury 480-room hotel for Gurgaon, and Starwood’s W Hotels has plans for a Mumbai property by 2015.

“Indian consumers continue to enjoy double digit growth in per capita income and have a higher propensity to spend on travel and recreation,” said Vasant Prabhu, Vice Chairman and Chief Financial Officer for Starwood, which will open its 50th hotel in India next year, doubling its footprint in the country in a span of two years.

“As domestic travel increases and Indian travellers continue to demand more sophistication in terms of both quality and experience, we have significant opportunity to grow our brands across the spectrum,” he adds.

Even the Indian brands are going hell for leather. The Oberoi has just opened a new hotel in Gurgaon, which has been called the most luxurious city hotel in the country. It is also one of the best places to shop; it boasts a luxury retail arcade with 13 premium boutiques, an international  salon and a contemporary Indian art gallery.

Fashion designer Neeta Lulla hopes to capitalise on this newfound appetite. She says she wants to open eight to ten exclusive brand outlets around India in the coming months. These will not showcase her pret line, but will focus on higher-end ranges.

Genesis Luxury Fashion, which distributes global brands such as Canali and Jimmy Choo, expects to open 35 new stores across India. Its Managing Director, Sanjay Kapoor, believes the right approach to the Indian luxury market is to be aggressive.

 “Can you make money in luxury in India? I hope so,” he told AFP. “That’s why we are all here.”

Everywhere you turn, it seems, there’s a new brand that could formerly only be bought when abroad – or a new arm of an old familiar.

Much of this comes down to skyrocketing growth and income levels. Shining India is a reality. The GDP growth rate over the last two years has been around seven per cent, with 2011 expected to do even better.

As a result, we’ve gotten richer than ever. India now accounts for a record number of 554 billionaires on the Forbes 2011 list, with seven in the top 100. Their combined wealth is $246.5 billion, much higher than last year’s total of $222.1 billion – and more than the combined GDPs of Pakistan and Sri Lanka.

And consulting firm McKinsey & Co expects young people to be at the centre of the luxury-buying trend. Forty million households or 200 million people that can afford branded lifestyle products will double over the next decade to 94 million households, it says.

“Indian consumers really care about brands. Almost 22 per cent of Indian consumers try foreign products and brands,” McKinsey Director Laxman Narasimhan said.
They’re also buying gold as they rush to show off what their money can do.

Demand for the precious metal is at an all-time high and the World Gold Council predicts that cumulative annual demand will be in excess of 1,200 tonnes by 2020, valued at about Rs 2,50,000 crore at current price levels, registering a growth of 33 per cent.

With Kerala, Andhra Pradesh and Tamil Nadu, Karnataka accounts for over 40 per cent of the country’s gold demand. 

The council says this demand will be driven by rapid GDP growth, urbanisation and rise in income and savings levels of the consumer.

“As seen in the last decade, Indian demand for gold will be driven by savings and real income levels, not by price,” Ajay Mitra, Managing Director, India and the Middle East, WGC, said.

Veblen would’ve had a field day with that.

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