Filthy Rich
The age of India's maharajahs may have ended years ago, but if you thought people who spend huge amounts to indulge in their every whim have disappeared from the country, you could not be more mistaken.
Say hello to India's new-age maharajahs, all 50,000 (and more) of them. According to the Merrill Lynch and Cap Gemini Ernst and Young World Wealth Report 2003, there are 50,000 Indians worth over $1 million. With India having a distinct and pronounced underground economy of black money, there are undoubtedly many more. Yet, this may seem insignificant compared to the estimated 2,000,000 millionaires in the USA, but consider that India is a poor Third World country with a per capita income of a mere $444. Yet, in this morass of poverty, there are people who do not bat an eyelid at spending $3,000 on a travel bag or $425,000 on a luxury car.
"The upward mobility of the top income classes is the key driver of this evolution," says Hamendra Mathur, Head, Retail Practices at KSA Technopak, the Indian subsidiary of Kurt Salmon Associates, a global management consultancy firm. KSA Technopak recently carried out a survey which found that there is a huge market for high-end luxury products in India now.
"The number of households in India having an annual income of over $110,000 is likely to double in the next five years," says Mathur. Perhaps that is what inspired Louis Vuitton to come to the country with its range of high-end travel bags which start at $1,020 and can go up to $3,000, which is about the annual income of an average lower middle class Indian family. At the time of the brand's launch in India a few months ago, Louis Vuitton's president Yves Carcelle had said in a press release: "India offers huge potential. With its contrast of poverty and prosperity, it is quietly undergoing an irrevocable change."
The company's India business head, Prasanna Bhaskar, admits that she was a little nervous about selling luggage that cost so much. But the response to Louis Vuitton's first Indian store in New Delhi has pleasantly surprised her. The demand has been staggering. A batch of 300 bags from the company's Suhali range shipped to India in June was sold out two months in advance. Over 30 Eye Love bags - each costing $2,700 - have already been sold, an astounding figure even by European standards. Says Bhaskar, "The Indian store sells more bags of some limited editions than many European stores."
So what is responsible for this craze for expensive products? "Marketers are driving this hedonism to some extent," opines Mathur. Increased exposure to media and more international travel are other factors, he feels. Sunil Grover, Corum Watches' sales and marketing manager for the Indian sub-continent, has another take on the matter. "High-end customers are coming of age. They want to associate with a super high-end brand," he says.
Grover should know. Of the 15 to 20 watches his company sells in India every month, six cost more than $5,300. Several of them are pre-sold. Even one of the company's showpieces - the Admiral's Cup watch costing $26,600 - has been picked up. The customers are not limited to the big metropolitan cities. Ajay Rastogi, a businessman from the industrial city of Kanpur in Uttar Pradesh, owns eight of Corum's Bubble range of watches - each piece costs $3,750.
And it is not just Corum that is having it so good. Louis Vuitton pre-sold 90 % of its Tambour range of watches - priced at $4,020 - even before they were launched in India. The KSA Technopak survey estimates that of the total watch market of 22 million units, TAG Heuer, Longines, Christian Dior and Rado account for about 5 to 10 % of the sales. TAG Heuer and Chrisrian Dior are also from the stable of LVMH, Louis Vuitton's parent company. "We expect to sell about 3,000 to 4,000 TAG Heuer watches and 4,000 to 5,000 Christian Dior watches this year," says an executive with LVMH Watch and Jewelry. "After that, we expect to grow at 20 % every year."
If expensive luggage and watches are selling like hot cakes, can luxury cars - the ultimate symbol of wealth and power in India - be far behind? Nearly 10,000 premium cars, each costing over $20,000, are sold every year in the country. When DaimlerChrysler introduced the Mercedes S-Class, priced at $132,000, two years ago, there were many who doubted whether the company would find enough buyers to make profits.
Eighty cars were sold in the first month after launch and even today, the company is selling 75 units every year, says Suhas Kadlaskar, head of finance, DaimlerChrysler. Last year, 15 Roadstars - the salon-cum-sports luxury vehicle priced at $180,190 - were sold. Little wonder, then, that the company now plans to roll out its $638,300 Maybach on Indian roads. The price includes the over 100 % import duty. Company executives say they have already received positive feelers from customers, but decline to divulge figures.
Not to be left behind, Bentley will soon introduce its $425,000 Arnage R to be followed by its $850,000 Limousine. Says Rahul Grover of Exclusive Motors, the Bentley franchise in New Delhi, "We already have four confirmed bookings for the Arnage R and expect to sell around 15 of these every year."
The buyers for these cars range from film stars such as Sunny Deol and Hrithik Roshan to politicians like Amar Singh to businessmen like Lalit Suri. Says Suri, head of Bharat Hotels who also likes to spend on watches and pens, "You are only as rich as you spend. Money in the bank is like paper; it is worth nothing. I buy expensive items for the passion and also because I can afford them."
There are many others who share his feelings. Mont Blanc's range of pens, which cost between $320 and $6,400, has been selling very well in the company's seven showrooms across the country. "The entire limited-edition Writers Series, consisting of 100 pens priced at $750 each was sold out within days of being launched," says retail manager Rashmi Asrani.
It is not just collectibles that India's rich elite seem interested in. They are willing to spend huge amounts on entertainment. Last year, a Delhi-based businessman flew in most of the props, d�cor and equipment of a New York nightclub to recreate it for one night at his farmhouse near Delhi. Total shipping charges - $6,400, and that does not include the DJ's airfare! Theme parties that can cost thousands of dollars are becoming the rage. Meher Sarid of Events and Weddings says she has organized several Arabian Nights theme parties for which dancers and apple-flavored tobacco in hookahs have been shipped in from Dubai. Some clients have even flown in flamenco dancers from Las Vegas and Paris.
When the Athena restaurant opened in Mumbai some time ago, it priced entry membership at $640, $1,100 and $2,100 to ensure exclusivity. The restaurant charges $450 for a bottle of 1994 Chateau Petrus plus 20 % taxes. A Dom Perignon bottle is $210 and wines can cost up to $960, yet there is a queue of customers outside the establishment on most nights.
"Young people have more spending power now and they want to have fun instead of fattening their bank accounts," he adds. The rich Indian who lived a spartan life while maintaining a huge bank balance seems to be extinct. Multinational companies have already recognized this trend and are trooping into the country, despite strict regulations which dictate that foreign goods have to be sold only through an Indian partner. Hugo Boss recently opened a store in New Delhi where most of its international range is available. Georgio Armani and Italian high-end jewelry maker Bvlgari are also likely to set up shop soon, market watchers say. For the filthy rich in India, ?third world' and ?poverty' are words that don't exist.
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