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The Small Industry with Huge Potential – India’s Luxury E-Commerce Market

In a country in the midst of an economic and social ascend, luxury e-commerce is fast turning into the new major trend. To tap into its exhilarating potential, however, India’s online retailers have to first overcome the segment’s innate ordeals and boost its inherent boons

The numbers: 402 million, 306 million and 50 million. 

The explanation: India – boasting the second largest population in the world of a little over 1 billion, is home to 402 million internet users. Additional 60 million – roughly matching the whole populace of the UK – are expected to join the web in less than a year. Some 306 million log on to the net on their mobile devices – a number, estimated to grow by a fourth by 2017. Last year, 50 million Indians shopped online. In a year’s time, more than 100 million of their compatriots will join them. 

The implication: The ever-swelling figures, coming from a recent report by A.T. Kearney, a leading global management consulting firm, cue to the tech-savviness and connectivity of the South Asian country. “E-commerce has offered a very convenient and attractively priced alternative to traditional trade and hence appeals to large part of the population,” says Neelesh Hundekari, with A.T. Kearney India. 

A tiny stream of that exhilarating growth trickles from luxury e-retail, which Euromonitor International currently places at a mere 1% of total sales in the country. It is still a sliver compared to the global high-end digital commerce, which topped $25 billion in 2015. 

Estimated to reach 2% by 2020, however, India’s luxury online shopping will spike at $80 million, according to the Euromonitor International Luxury Outlook for 2016 report. While the US still boasts, by far, the largest luxury market and China sustains its high-end sector despite an overall slowing economy, India, the report states, experiences the most rapid growth in percentage terms.   

Contributing to that rapid advance, the country’s luxury e-commerce holds a great potential for development and diversification. It invites innovative businesses to carve a niche for themselves. It presents a chance to quickly reach India’s sophisticated, loyal, middle-class Indian customers as well as its high net worth individuals.  

Benefitting from a broad variety of payment options – from credit cards to cash on delivery to equated monthly installments, online luxury retail constitutes a premium market, in which apparel and accessories – predominantly watches – lodge the most sales, according to Euromonitor International. It is an industry that a few forward-thinking, ingenious players are already charting, wrangling alongside the big labels, whose Indian website feature the miniscule cart button. 

Many of the non-designer-exclusive e-retailers face similar predicaments. Seeking to differentiate themselves, they all resort to disparate approaches to tackle the challenges inherent to luxury e-commerce. LuxuryFacts talked to three of them to find out how they navigate the alluring yet treacherous terrain of online high-end shopping.       

Is that Christian Dior purse authentic? 
A scroll through India’s luxury online stores giddies. The array of options – catering to a variety of tastes and preferences – covers anything from jewelry and apparel to automobiles and yachts to skin care and perfumes. Some of the brand names include Louis Vuitton, Chanel, Michael Kors, Dior, Maserati, Victoria Beckham, Saint Laurent, Diane Von Furstenberg and Dolce & Gabbana among regional giants such as Rohit Gandhi + Rahul Khanna, Shift by Nimish and Urvashi Joneja. 

All that diversity, suddenly, raises a single pressing question – is it all truly authentic? 

Counterfeits plague the global luxury online retail. India provides no reprieve – a fact that gnaws at customers’ trust and loyalty. Fake items lurking among otherwise genuine products might shrivel to a modest concern, compared to the myriad bogus websites – replete with faux luxury offerings and employing sophisticated digital marketing models. screenshot March 2016

Rigorous authentication techniques draw the line between reputable e-retailers and their cheating counterparts. Luxepolis, a website that offers both new and pre-loved luxury goods, often turns to the brands themselves to assist in weeding out the fakes. Still a fledgling in the industry, it also boasts a cohort of authenticators, including local gemologists and horologists. 

“Luxepolis’s global authentication team inspects all goods for appropriate product material, hardware, zipper quality and make, leather trimming, seam line stitch consistencies, brand markings and logo printing and embossing, date codes or serial tags and hologram stickers,” says Vijay KG, founder of the online retailer. 

To forgo authenticators but still uphold credibility may sound paradoxical. RockNShop, one of the pioneers in the luxury e-commerce segment, however, proves the opposite. Both a luxury e-zine and a digital shopping platform, it gathers an online community of fashion boutiques that collectively retail over 100 high-end labels to ensure the authenticity of its exclusive offerings. 

“When you order through RockNShop your order is delivered from the boutique, brand or designer straight to your door,” says Priya Sachdev, CEO of RockNShop and its physical archetype, the multi-brand concept store Kitsch. 

The most secure way to shun counterfeits, nevertheless, is to simply refrain from direct online luxury retail. Zokudo, an e-gifting platform, has found a way to do just that by proffering vouchers that cover a wide range of choices – from garments to experiences to charity donation to home décor. It’s a business model that also heeds India’s time-honored custom of comity.

“I want [Zokudo] to be synonymous with luxury gifting in India,” says founder and CEO, Yash Mehta. “I want people to come to my website and say, ‘OK, I can get almost anything here.’” And surely all the offers are fake-proof.   

If it is original, then, may I have it at half the price?   
Internet commerce thrives on discounts, lulling shoppers to seek lucrative sales while still demanding quality. Its luxury segment, however, approaches markdowns with caution. Although price slashes inherently cleave from haute couture, they might be hard to avoid in a market so accustomed to them, Mr Mehta says. Hence, luxury e-retailers seem to have settled on a middle ground between labels’ aversion to price-cuts and customer’s expectation of them.

It appears that pre-loved items best accommodate that peculiarity. Only recently, a jet black Christian Dior purse – whose condition indicated “gently used’ – basked among its high-end kin on Luxepolis, flaunting a tag of INR 170,000 ($2,524) – a cut of 38% from its regular INR 286,000. Envoged, another shopping portal specializing in pre-loved women couture, also offers most of its stock at whopping price reductions. 

E-retailers of new products, however, would rarely allow for sweeping sales that go beyond the occasional holiday and end-of-season promotions. “We are not a discount site and don't believe in large discounts or offers,” says Ms Sachdev, echoing the industry-wide sentiment. “We see many players offering large discounts – this is not luxury. In fact, this makes the customer weary of the authenticity of the merchandise.” 

While clients seek the best value for their money, high-end online retailers clamber to offset the dearth of price reductions. A potent consolation is the distinctiveness of online shopping, which even if not an exact match to the in-store indulgences, retains its own allure. screenshot March 2016

May I add some pampering to the order, please?
High-end boutiques coddle their customers the moment they stride over the doorstep. From the undivided attention of experienced sales associates to personalized fitting rooms to lavish lounges that rival chic cafes – shopping offline focuses on the ritual just as much as on the purchase. Luxury e-retailers could not possibly beat the exquisiteness of brick-and-mortar stores, but they have found ways to compensate – even supplement – it. 

Targeting about 100 million Indians whose monthly earning amount to INR 100,000, Luxepolis treats its clients to several pampering courtesies – from luxurious packaging to express delivery to home-shopping, where customers select items for private viewing. RockNShop also features an array of personalized options, including the exclusive white glove service, which sends a personal stylist directly to the homes of its loyal customers – the majority of whom regularly spend around INR 50,000 on the website.

While many digital luxury retailers solely emphasize the ease and exclusivity of online shopping, Zokudo couples the distinct traits of e-commerce with the opulence of sight and touch offline stores foster. Gift cards, Mr Mehta says, constitute “the best of both worlds.” Add the opportunity to swap vouchers to cover for the unfortunate instances when the presented purchase does not match the recipient’s preferences, and Zokudo thrives on an inventive business model that customers appear to embrace. 

So, what do e-retailers have over physical luxury stores? 
While e-commerce portals hustle to atone for what might be a half-hearted, on-the-click splurge on luxury, they do hold a number of unique advantages over physical stores. From affordability to outreach, digital commerce appears to be attuned to the demographic and technological changes of the 21st century.  

Luxury e-retailers bypass the exorbitant real estate expenses that characterize India’s major hubs like New Delhi and Mumbai. In those megalopolises, brick-and-mortar boutiques maintain venues that accrue lofty costs. True, India’s tier-one cities see the highest per capita income and are yet to reach wealth saturation, which still offsets luxury brands’ property expenditure, Mr Hundekeri of AT Kearney India observes.         

Nevertheless, those financial strains may impede labels’ expansion into tier two and three towns, where the country’s growing middle class of aspirational luxury shoppers clusters. Here enter digital retailers, scraping premise and infrastructure considerations to cater to the evolving tastes of those 50 million Indians. The middle class – projected by Ernst & Young, a professional service firm, to grow to 200 million in five years and to more than double that figure by 2030 – is just beginning to steer the high-end retail segment; and online shopping platforms are the first to tap into that emerging shift.    

To further that leverage, many e-commerce portals expediently seek to transform themselves into m-commerce applications. “M” denotes mobile, where both businesses and clients are rapidly flocking to. According to AT Kearney, Indians spend an average of 169 minutes – over three hours – on their smartphones a day, communicating, browsing and shopping. It is the next frontier couture e-retailers hasten to conquer alongside optimizing their online presence with more intuitive and interactive websites that load in a single blink across a slew of devices. screenshot March 2016

“People are surfing on their phones and tablets and less and less on their PCs through an established internet connection,” says Mr Mehta of Zokudo. “So, when you are using a mobile internet connection, your speed is lost. You need to make sure that your website still performs at its optimum even on a mobile connection.” 

In an age when technology shrinks the world, providing customers with fast, easy and comfortable access to global premium brands, digital seems bound to turn into the new norm. It is a prospect online luxury retailers – as well as a slew of global consultancies – bet on. The early champions of India’s burgeoning high-end e-commerce are already staking their leading positions, hastening to resolve the segment’s innate challenges and differentiate themselves through innovate business propositions. They are, indeed, redefining couture shopping in a country, where an ever-expanding portion of the population pursues opulence.