First, home textile retailing itself is still in its nascent stage. Sustainable luxury retail evolves from the saturation of the market for premium products. The opportunity for a market for luxury products is perceived when the aspirations of consumers are not satisfied by premium brands. As many luxury brands, particularly in the apparel segment have discovered, market dynamics are very different from markets statistics. They cannot be the basis to enter and build a sustaining market for luxury brands.
Second, the correlation between income and demand is much lower for luxury furnishing fabrics compared to apparel and accessories. Only a small segment of Indian customers, who can afford luxury products, are open to spending on luxury furnishing fabrics. Luxury apparel, accessories and automobiles offers them a superior platform to display their wealth.
Third, a study done by the Italian Trade Commission in 2009 estimates the size of Indian market for curtain fabrics to be about USD 340 million and that for upholstery fabrics to be USD 373 million. While this may be true from a macro perspective, the actual market size available for a luxury brand is unlikely to be more than USD 18 million which includes sales of imported fabrics accounting for about USD 5 million.
Roadblocks to Market Growth
Supply Issues
A dearth of Indian producers of the luxury furnishing fabrics forces Indian retailers to depend significantly on imports. Import duties are as high as 40 to 60 percent of the FOB value. Depending on the country of origin and the urgency of requirement, freight and allied charges could add upto 10% to FOB costs making these products even more expensive. Frequent and unexpected transit delays lead to customer dissatisfaction on account of non-adherence to committed deliveries
Demand Issues
The Indian consumer is very new to the idea of luxury furnishing fabics. Even a well-to-do customer is happy dabbling with low and medium priced products. She invests in an Italian sofa set. However, when it comes to curtains, she is not always as discerning. It’s only the very evolved consumer, with an income to match, who realizes the value of luxury furnishing fabrics and recognizes the difference it make to décor.
Luxury brands are bought by customers who can afford it and also by those who cannot. For the evolved customer, luxury is not about flaunting the logo. The number of customers who intrinsically understand luxury is small. For the nouveau rich, the logo is the luxury. This is the larger segment for luxury products. Luxury furnishing fabrics offers little scope for flaunting the brand thus cutting out a segment of the population which can afford the brand but trade cheaper in the absence of product branding.
Strategies for Market Growth
Centralized Store Locations
Luxury brands realise that physical presence in multiple cities may not necessarily convert into a larger customer base. In fact, infrastructure and operating costs could make a larger chain less profitable than a smaller retail chain. The best way to reach target markets is to set up stores only in key cities. The target audience for luxury products, from smaller cities, travel frequently to these key cities for several reasons. It makes perfect sense to have an impactful central presence instead of spreading resources thinly.
Educating Consumers
To generate greater demand in any luxury product segment, including furnishing fabrics, retailers need to familiarize the consumer with their products. Effective means of spreading awareness in these times are websites and virtual stores. While these cannot replace the touch and feel facility that physical stores offer and which is crucial for a luxury brand, these mediums are especially useful for customers who may not have easy access to stores. However, these need to be backed by efficient delivery and a customer complaint redressal system.
Avoiding Imports
Heavy duties imposed on imported fabrics do not add realizable value for the consumer. Therefore, it is very essential for the retailers to develop a vendor base of domestic manufacturers of luxury furnishing fabrics if they have to address the Indian market on a profitable basis.
Joint Generic Marketing
It is beyond the scope of a single company to expand the market size. Furniture and furnishing retailers should initiate joint action to expand the overall market size. Such alliances would not only create a better market but would also make shopping a more fulfilling experience. Both segments will equally benefit from the expanded market base.
Co-opetition*, not competition is required to address small market segments which have the potential to grow significantly.
* Cooperative competition as defined by Edward De Bono
1 comment:
This is so...IMPRESSIVE. I mean, it was so thoroughly thought out and backed up with facts, solutions. The economy is a tricky thing-like a web with many tangled/untangled threads. Break one, and eventually it will all collapse.
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