In India Inc’s goodie bag

BINDU D. MENON Updated - March 12, 2018 at 01:53 PM.

There’s much to choose from if you are willing to spend

A major company wishing to consolidate its operations in India had a strange request from its lobby team. Its officials were informed that the most prized possession this Diwali was the just-launched iPhone 5 and they should make it available come hell or high water. Welcome to the world of luxury gifting – dry fruit, chocolate and even wine are passé.

So what qualifies as luxury? As famous fashion designer Gabrielle Coco Chanel said, luxury is a necessity that begins where necessity ends.

Just like other categories, the luxury corporate gifting business has entered India. With the aspiring middle class growing and the tribe of high net worth individuals (HNI) increasing, such gifts are in demand more than ever.

A recent Kotak Wealth Management and CRISIL report on ‘Top of the Pyramid’ estimates that notwithstanding the economic slowdown the number of Indian ultra HNIs is estimated to have grown by 30 per cent to around 81,000 in 2011-12, and is expected to grow to around 286,000 over the next five years.

Consequently, the net worth of ultra high net worth households is estimated to surge five-fold from an estimated $65 trillion in 2011-12, to $318 trillion by 2016-17. Over 50 per cent of them are in the four metros, and the next top six cities account for around 12 per cent.

Mukesh Agarwal, President, CRISIL Research, adds, “The fact that so many ultra HNls said that their spending habits have not changed due to the slowdown is an indication that they do not expect the slowdown to continue for long.”

Season’s gifting

But this Diwali, the lights are much dimmer for the luxury corporate gifting business. Almost all players in the high-end luxury gifting business unanimously agree that customers are tightening their purse strings.

Analysts note that Indian consumers are by nature value-driven. “Most business houses in India are still owned and controlled by families who are traditionally conservative. Also, in times of an economic slowdown, when companies are slashing jobs, such ostentation is rather done away with.”

The really high-value gifts are usually are patronised by film stars, industrialists, sports personalities and politicians among others costing upward of a few thousands and running to lakhs. Crystals, watches, vintage wines and accessories such as Alexander McQueen clutches and expensive pens are still hot picks.

High end crystal-maker Lalique & Daum, which set up its first exclusive ‘Art in Crystal’ boutique at Delhi’s uber luxury mall DLF Emporio in Delhi, notes that about 90 per cent of its clientele are HNIs. Says Suraj Mehra, Managing Director of Mehra’s Crystal Lifestyle which brought the brand to India, “Around 10 per cent are aspiring middle class who are taking steps towards collecting or gifting crystal art.” Lalique & Daum crystals are priced from Rs 75,000 to a few lakhs.

Mehra is still waiting for the pace of gifting to pick up. “So far, we haven’t felt a real buzz”.

This sentiment is echoed by Poonam Gupta, CEO, Brand Owner Alchemy De Luxe, a company that specialises in crafted silverware. “Budgets have come down drastically. Despite HNIs being our clientele, budgets are low.”

Industry chamber Assocham estimates that this festival season India Inc is severely cutting back its corporate gift budgets by a whopping 45-50 per cent as costs balloon, and earnings, along with profit margins shrink.

Assocham had carried out a survey in October to ascertain the ‘Diwali Gifting Intentions’ of India Inc. It interacted with about 150 different companies with an employee strength of 500 and above operating in the domains of pharma, BFSI (banking, financial services and insurance), auto, hospitality, FMCG, manufacturing, energy and infrastructure sectors in 10 cities – Ahmedabad, Bangalore, Chennai, Delhi-NCR, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai and Pune.

Assocham said that digital cameras, branded watches, pens, wallets, affordable tablet computers, chocolate and sweet gift hampers and smartphones have replaced the large dry fruit packs, luxury gift items and gold coins.

Pooja Jain, Executive Director, Luxor Writing Instruments, “This year the pace has been slow, but with better sentiments, the pace is gradually increasing and we hope to outnumber our volumes in comparison to last year. Parker’s Celebration range is made/customised only for gifting needs during the festive season. Also, the pen as a gifting option has picked up as people look for new options rather than the same traditional gifting ideas.”

Prateek Agarwal, Director, Buck's Luxury, which retails products such as wallets and bags among others says, “The volumes are not as high as other brands catering to masses but yes, we are growing with an annual percentage of 30 per cent. We don’t do bulk orders.”

Festival brouhaha versus Cash registers

Industry puts the share of the festival revenues to overall revenues of luxury goods sales in India to as much as 70 per cent. So does Diwali add to the topline as luxury gifting is still low-volume, high-margin? “Yes, between Diwali and New Year, our topline jumps nearly three times,” says Agarwal.

Luxor’s Payal Jain corroborates this saying that the festival season does add to the overall revenue stream.

But companies are facing a double-whammy. Despite sluggish demand, they have to keep their inventory up and ready.

Sumedh Singh Mandla, CEO, Aspri Wines and Spirits, says, “In India too the trend of gifting wines and spirits is catching up. Besides vintage products, wines and spirits in the Rs 10,000-15,000 band sell the fastest as people find it a good gifting choice.” While admitting that the season has been dull, he said brands are spending whopping amounts on packaging. “We also have special offers for corporates including gift hampers and bags,” he added.

Mandla says the company is keeping a war chest ready to meet the demand. “Sales can zoom at the last minute and we have to be prepared to meet it. This needs months of planning,” he added.

Demand pockets

So where are the rich and super rich? Though most brands agree that orders for high-end gifting are usually the largest from North India, even smaller but wealthy tier 1 and 2 cities are giving stiff competition to the urban buyers.

Lalique & Daum’s Mehra says, “Around 20 per cent are bulk orders, to put it roughly. Primarily, about 95 per cent are from two mega Indian cities and five per cent are from tier-2 and 3 cities surrounding Delhi and Mumbai”.

Buck’s Agarwal says the biggest purchasers of its products are from small cities in Rajasthan. “Demand is appreciable from tier 2 and 3 cities, especially since we have started shop.bucksluxury.com, which takes us across borders.”

K. C. Pandey, a professor in Haridwar, will vouch for this fact. A former student gifted Pandey a massage chair costing over Rs 1 lakh. An embarrassed and reluctant Pandey says, “Earlier the trends were of sweet boxes and chocolates but the trend has changed to need-based gifting.” The former student knew of his professor’s recurring back ailment and bought him the gift as ‘ guru dakshina ’.

Sales managers at Delhi’s elite Emporio mall says consumers from as far as Ludhiana and Amritsar come to shop for festival buying. “Purchases can go up to a few lakhs in a matter of minutes and most clients are repeat customers, because their first experience was good.”

Lovy Khosla, Director, Elvy Lifestyle, says, “A combination of aesthetic as well as utility items has hit the shelves to help companies strengthen their relationship with clients and employees without burning a hole in their pockets. Because this is the time when people buy lot of gifts for their loved ones where they don’t worry about the money, they just want to buy something which makes them happy.”

Published on November 8, 2012 15:21