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Thesis Report on Luxury Brands
GIBM, PUNE Page 2
CERTIFICATE
This is to certify that Mr. / Miss. _____________________________________________ is a student of
the Genesis Institute of Business Management, Pune.
He / She in the partial fulfillment of the course has submitted to us a dissertation report titled
__________________________________________________________________ .
This work is original to the best of my knowledge and is therefore being submitted towards the partial
fulfillment of the course.
Dissertation Guide Director
VIVAVOCE RECORD
Roll No. ________________ Date _____________
Internal Examiner External Examiner
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AKNOWLEDGEMENT
No Project is ever a work of only one person and this one is no exception
This project is the product of many hands, and countless hours from many people. My thanks go out to all
those who helped, whether through their comments, feedback or suggestions.
It gives me immense pleasure to express my deep sense of gratitude to Mr. Rishabha Nayyar (Faculty
guide) for his valuable guidance, constant supervision and above all his continuous encouragement &
support during the tenure of this project.
I also thanks to my other faculty guide Ms. Madhu for their guidance and support during this project
tenure.
Sincere thanks to all the people who have worked under this project. Lastly, no words could adequately
convey my heart full thanks to the family members and friends who indirectly co operated with us. I
could not have done it without you all!
LIKENDRA VERMA
PGP -2
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EXECUTIVE SUMMARY
Around two decades ago no one could imagine that a luxury market would exist in India. But over the
years with the change in the demographics of the Indian consumer and with higher disposable income
available, the luxury market in India has indeed emerged as one of the fastest growing markets in the
retail segment. It was very interesting to study the luxury market in India because it is a new sector and
not much research has been carried out on the same. Through this report we have tried to give an estimate
of the luxury retail market in India, how much it has penetrated and also how much it is likely to grow.
Also we have tried to specify various factors which are crucial for the success of luxury brands in India.
While doing out research on this project we have come across many new findings. The role the Indian
market plays in the global scenario and the position of India vis--vis other countries. Also we learnt
about the duties and legal requirements for this segment. We have tried our best to cover the various
aspects that are involved in luxury retailing through this project and it has indeed been a great learning
experience.
OBJECTIVES OF THE PROJECT:
1. To study the future of luxury brands in a developing country like India.
2. To understand the customer psychology towards luxury brands and the changing
consumer behavior for an expensive product.
SCOPE OF THE STUDY:
My study includes understanding the consumer behavior and why a person will purchase a
lifestyle product. Which segment on basis of demographics and on basis of psychographics is
interested in buying a luxury brand? For this we framed schedules and also do qualitative study
like shadowing to understand the true behavior of the people.
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TABLE OF CONTENTS
1. Certificate
2. Acknowledgement
3. Executive Summary
4. What is luxury?
5. Introduction to luxury brand
6. Conceptual approach
7. Where to spend money?
8. Luxury boom in India9. Research measurement
10.Statistical analysis and findings
11.Conclusion
12.Supportive document
13.Bibliography
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WHAT IS LUXURY?
Luxury, derived from the Latin word luxus, means indulgence of the senses, regardless of cost.
Luxury denotes:
1. Something that is an indulgence rather than a necessity.
2. The quality possessed by something that is excessively expensive.
Luxury is something that everyone wants but nobody needs, its an area of huge comfort and the best of
the best. Luxury speaks a level of exclusivity, unusualness A luxury brand or prestige brand is a brand
for which a majority of its products are luxury goods. It may also include certain brands whose names are
associated with luxury, high price, or high quality, though few, if any, of their goods are currently
considered luxury goods. The luxury sector targets its products and services at consumers on the top-end
of the wealth spectrum. These self-selected elite are more or less price insensitive and choose to spend
their time and money on objects that are plainly opulence rather than necessities.
For these reasons, luxury and prestige brands have for centuries commanded an unwavering and often
illogical customer loyalty.
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INTRODUCTION TO LUXURY BRANDS
Luxury brands have often been associated with the core competencies of creativity, craftsmanship,
precision, high quality, innovation, & premium pricing. These product attributes give the consumers the
satisfaction of not only owning expensive items but the extra-added psychological benefits like the
esteem, prestige and a sense of a high status that reminds them and others that they belong to an exclusive
group of only a select few, who can afford the pricey items.
Luxury and prestige brands such as Rolex, Louis Vuitton & Cartier represent the highest form of
craftsmanship and command a staunch consumer loyalty that is not affected by brands. These brands
create and set the seasonal trends and are also capable to pulling all their consumers with them wherever
they go.
Premium brands are those brands like Polo Ralph Lauren, Calvin Klein and Tommy Hilfiger that aspire
to be luxury and prestige brands but their marketing mix strategies are more attuned to a mass market,
albeit a luxury mass market. They also termed as mass-premium brands or luxury brands.
Fashion brands on the other hand are those that address the masses.
LVMH (Louis Vuitton Moet Hennessy) is the largest luxury good producer in the world with over fifty
brands, including Louis Vuitton, the brand with the world's first designer label.
.
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CONCEPTUAL APPROACH
Luxury means different things to different people
Luxury has no certified origins. But luxury branding is said to have taken birth in the west with the
appearance of high-end brands.
Luxury is a product category in itself
This can be best explained by the fact that both an expensive watch and an artwork can be considered to
be luxury items. Therefore, all luxury marketers are not just competing in their technically defined
product categories (like manufacturers of refrigerators compete amongst themselves) but for the wallet
share of luxury goods in total.
The meaning of luxury had changed
Luxury has moved from its old meaning of ownership (also known as conspicuous consumption -
Conspicuous consumption is a term used to describe the lavish spending on goods and services that are
acquired mainly for the purpose of displaying income or wealth rather than to satisfy a real need of the
consumer.
Luxury is Reward
Consumers tend to be younger than the first group but older than the third. They use luxury goods as a
status symbol to say Ive made it! They are motivated by their desire to be successful and demonstrate
this to others. Luxury brands that have widespread recognition are popular, however they dont wish to
appear lavish or hedonistic in their appearance.
Luxury is Indulgence
This group is the smallest of the three and tends to include younger consumers and slightly more males
than the other two groups. Their purpose for luxury goods is to lavish themselves in self-indulgence.
Customer loyalty is more important that brand awareness
Rather than focus on measuring the brand awareness of a luxury company, measuring customer loyalty is
far more significant a metric regarding the success or failure of corporate strategy to connect with the
luxury consumer.
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WHERE TO SPEND MONEY?
There were around 62000 ultra high net worth individuals in India in 2010-11 whose net worth
households in India in 2010-11 whose net worth is more than rs. 25 crore, it is projected to be 219000
households.
- Holyday packages
- Jwellaery/ precious stones
- Luxury watches
- Household electronics
- Apparel accessories
- Home dcor/ crystals
- Luxury pens
- Vintage spirits
- Art/artefacts
11.10%
10%
44.30%
18.40%
16.20%
Luxury market 2007
Accessories
Home and
others
fashion and
clothing
fragrance and
cosmetics
watches and
jewellery
12.10%
10%
41.90%
17.70%
18.20%
Luxury market 2012
Accessories
Home and
others
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LUXURY BOOM IN INDIA
The luxury goods market in India is one of the worlds most diverse and exciting and a challenging one
for brands seeking to gain a presence there. Brands and retailers that want to capture a share of this fast-
paced business need to learn and adapt, or risk missing one of the great untapped opportunities for the
luxury business.
USD $ 975 billion to its economy and shall add twice as much, USD $ 1811 billion, over the next
decade to grow to the current size of a United Kingdom, France or Italy by 2020.
This past transformational decade has fuelled the increase in the number of millionaires across
India; owing to the robust economy, resurgent stock market and keen entrepreneurial drive; and
the next 10 years will only augment this growth. The drivers of the world economy are
increasingly polarizing towards the BRIC countries.
The net worth of Indias rich- including professionals, inheritors and the self madecould increase five
times by 2015. From an estimated rs 45 lakh crore now, it is expected to reach rs 235 lakh crore.
THE LUXURY CONSUMER IN PROFILE
Profile of the Indian luxury consumer, leaning on the latest study by research group KSA Tecnopak: _
Primarily resident in urban India Lives in a household earning more than about INR800,000 (US$18,000)
a year, where the chief wage earner is male, average age 3637 Owns a premium/luxury saloon car such
as a HondaAccord, a Vectra, a Skoda Octavia etc . Among women consumers, 65% are housewives.
85
Figures in $ billion
2007 2008 2009 2012 2015
Product 3.66 4.39 4.75 8.21 14.73
Services 1.04 1.28 1.53 2.85 5.38
Assets 1.76 2.26 2.45 4.31 7.90
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RESEARCH MEASUREMENTS
Research Methodology
Project has information gathered from both from primary and secondary sources, the primary
sources will be survey done with schedules and through interviewing employees of the company
and luxury retail outlets. The secondary information was gathered through internet, brochures
and through old research papers etc. The sample size was 30 respondents of company employees ,their
selection will be totally based on the non probability sampling.
The main body of the questionnaire included 12 questions are useful to get the information . Use was
made of a five-point Likert scale. Structured questionnaires are very useful to get information about the
scope of luxury brands in India.
SAMPLES:
Sample Size: 30
Sample Frame: Pune City
Sample Unit: working professionals of Pune
Sampling Method: Simple Random Sampling
Constraints: Time, No. of Respondents
Survey: Questionnaire
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STATISTICAL ANALYSIS & FINDINGS
1.Does purchase of Luxury is directly related to income level?
Answer No. of Respondence
yes 27
no 3
ANALYSIS
The result was totally skewed to one side and respondents agree that Purchase of Luxury Products istotally related to the Income level of an Individual which is 90%.Income usually affects the lifestyle and attitude of individuals which might shape choice of the productsyou buy.
2. Rank the following parameters on your purchase preference ?
Answer No. of RespondencePrice 8
Quality 10
Availability 6
Involvement 4
Recommendation 2
90%
10%
NO.Of Respondence
yes
no
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ANALYSISMost of the respondents prefer quality followed by price and availability. Thisresponse shows that customers are ready to pay of quality.People purchase products because they find some sort of value in it. If the benefitis more than the purchasing price the product is beneficial for them
3.Why does one person purchase a Luxury Brand?
Value No. of Respondents
Quality 4
Flaunt Value 12
Interested in art 5
Exclusivity 9
0 2 4 6 8 10
Price
Quality
Availability
Involvement
Recommendation
No. of respondence
No. of respondence
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ANALYSE
In opinion of Respondents, majority of People buy luxury product because they want to flaunttheir superiority over others. Followed by those people who really have taste of art andexclusiveness of the luxury that is around 30%. Always customers are looking for quality in productsthats why they go forshopping of luxury products.
4.Quality of Luxury brands are more superior then others?
Answers no. of respondanceStrongly Agree 8
Agree 13
Neutral 5
Disagree 3
Strongly Disagree 1
0
2
4
6
8
10
12
14
Quality Flaunt Value Interested in
art
Exclusivity
No. of Respondents
No. of Respondents
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ANALYSIS
About 70% of the respondents are of the view that service quality in luxury brands is moresuperior then other brands.Generaly people believe that luxury items are for high income group, to know more aboutfollowing question was asked to the respondents.
5.Services provided by luxury brands is better then others ?
Answers No. of Respondance
Strongly Agree 7
Agree 14
Neutral 5
Disagree 3
Strongly Disagree 1
27%
43%
17%
10%
3%
No. of respondance
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
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ANALYSIS
About 70% of the respondents are of the view that service quality in luxury brands is moresuperior then other brands.Generaly people believe that luxury items are for high income group, to know more aboutfollowing question was asked to the respondents.
6.Luxury brands are prefer by high income groups ?
No. of Respondance
Strongly Agree 7
Agree 14
Neutral 5
Disagree 3
Strongly Disagree 1
0
5
10
15
Strongly
Agree
Agree Neutral Disagree Strongly
Disagree
No. of respondance
No. of respondance
0 5 10 15
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
No. of respondance
No. of respondance
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ANALYSISHere we can see that most of the responses are in favour of our assumption that main targetcustomers for luxury brands are high income group. About 70% believe that luxury brand is forhigh income group people.There are various factors which affect the luxury market in both ways either positive or
negative. To understand which factor affect most, the following information was gathered
7.Rank the following Socio Economic factors which affect the Luxury market?
Socio economic factors No.of respondent
Change in lifestyle (like household patterns) 9
Retail boom 7
Working women 6
Rise in living standards 8
ANALYSIS
Change in lifestyle is the factor which affects the luxury sales most, followed by the Rise inliving standards and Retail boom. These factors are very less skewed that shows all the factorsaffect the sale of luxury goods almost at the same level.
8.Which brands you prefer to shop ?Answer No.of Respondent
local brand 11
luxury brand 13
International brand 6
02468
10
Change in
lifestyle
(likehousehold
patterns)
Retail
boom
Working
women
Rise in
living
standards
No.of respondent
No.of respondent
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ANALYSIS:
Here we can see that now a days most of the people prefer to shop luxury brands. A major partpurchase luxury brand followed by local brands. International brand has least share.Following question is frame to find out the impact of real estate (commercial), retail i.e mallconcept on the sale of luxury product, like from where actualy customers prefer to shop?
9.Where do you prefer to shop?
Answer No.of Respondent
local market 8
malls 14
Brand outlet 6
others 2
37%
43%
20%
No.of respondent
local brand
luxury brand
International brand
0
5
10
15
local market malls Brand outlet others
No.of respondent
No.of respondent
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ANALYSISMost of the people like to purchase from Malls followed by local market and brand outlets. Thisshows that real estate (commercial) mall concept have such a high impact on the sale of luxuryitems.India being a developing country is not an attractive hub for luxury brands till recent yearsbut now the scenario seems to be changing
10. How often they indulge in luxury in their lifestyles as opposed to buying the ordinary brand?
Time duration
No. of
Respondence
once in a month 2
once in a 6 month 6
once in year 8
once in a 5 year 8
once in a 10 year 5once in a lifetime 1
ANALYSIS
The above diagram depicts that there are most number of people who buy luxury brands once ina year followed by those who buy once in five year and by those who buy once in a 6 month.The GDP is growing and the Number of HNIs are also growing at a very high rate, still thereare some reasons because of which luxury sales are not able to take a flight in India. Tounderstand those reasons lets see the following result:
0 2 4 6 8 10
once in a 6 month
once in year
once in a 5 year
once in a 10 year
once in a lifetime
No. of respondence
No. of respondence
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11.What are the problems because of which luxury brands are not able to take a flight in India?
Reason
No. of
Respondenceconservative thinking 6
lack of organized retailing 9
high rentals 5
high taxation 10
ANALYSISAccording to the respondents high import duty is main reason why sales of luxury brands in nottaking flight. The import duty on premium cars, for example, stood at 205% while wines &spirits invite 185% customs levy, followed by the lack of serious organized retailing.Due to less sales luxury brands generally fall into trap of discounting and that goes very truein case of a developing country like India. To understand this question following information is gathered.
0 2 4 6 8 10
conservative thinking
lack of organized retailing
high rentals
high taxation
No. of respondence
No. of respondence
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12.What should International Luxury Brands do to woo Indian consumers?
Technique
No.of
Respondence
Sensory gratification 5
celebrity endorsement 11
word of mouth 7
public relation 7
13. Say something about grey market of luxury goods in India.
No. of respondence
Sensory gratification
celebrity endorsement
word of mouth
public relation
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CONCLUSION
There are many multinational luxury brands which are entering in India with their full pace like Jimmy
Choo, Gucci, Christian Dior, Louis Vuitton, Cartier, Piaget, Tiffany, Moschino, Prada, Fendi and others.
More than 200 luxury brands are present or in line of opening their shop in India. All this rush is
registered due to highest growth in HNIs which is around 25% per year and growing GDP. There are
many other reasons because of which market size of luxury brands is also boosting which are Change in
lifestyle (like household patterns), Retail boom, Working women, Rise in living standards. Luxury brands
can also increase their brand awareness and sales through celebrity endorsements. The things which are
hampering the growth of luxury market is high import duty, lack of organized retailing, Chinese
counterfeit products. By keeping the above points in mind we can conclude despite being few difficulties
luxury Brands have a great future ahead in India.
In 2011 recovery in the luxury goods market has continued with retail expenditure on branded luxury
products forecast to expand by 17.3% in dollar terms year-on-year. Asia Pacific is at the forefront of
growth and China remains the key growth generator in the region, but new demand from other markets
such as South Korea, Taiwan and to a lesser extent India, is also contributing to strong performance.
India has over 2.0 million households earning USD $ 100,000 or more annually and these households are
expected to grow at a 13% rate over the coming years. The segment geared to show tremendous promise
over the next few years is number of households earning between USD $ 50,000 to $ 100,000 annually.
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SUPPORTIVEDOCUMENTSQuestionnaire
1.Does purchase of Luxury is directly related to income level?
Yes____
No____
2. How often do you go for shopping?
within a week__ within a month__
within 6 months__ within a year__
3. Where do you prefer to shop?
Local market___ Malls__
Brand outlets___ Others__
4. Which brands you prefer to shop?
local brands
Luxury brand
International Brands
5. On what parameters you select brands?
Price____ Quality___
Availability___ Involvement___
Recommendation___
6.Services provided by luxury brands is better then others ?
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
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7.Quality of Luxury brands are more superior then others?
Strongly agree
Agree
Neutral
Disagree
Strongly disagree
8. Why does one person purchase a Luxury Brand?
Quality
flaunt value
Interested in art exclusivity
9. Rank the following Socio Economic factors which affect the Luxury market?
Change in lifestyle (like household patterns)
Retail boom
Working women
Rise in living standards
10. What are the problems because of which luxury brands are not able to take a flight in India?
Conservative Thinking__ High Rentals__
Lack of Organized Retailing__ High Taxation__
11. What should International Luxury Brands do to woo Indian consumers?
Sensory Gratification__ Word of Mouth__
Celebrity Endorsement__ Public Relations__
12. Say something about grey market of luxury goods in India ___________________________.
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BIBLIOGRAPHY
THE CULT OF LUXURY MAGAZINE- BUSINESS WORLD 2011
REPORT OF TECHNOPARK REPORT 2011
WWW.MEDIALINE.DE
HTTP://ZENITHRESEARCH.ORG.IN
Hindustan times .com
Brand channel.com
Wikipedia.com
Eluxury.com
Luxury marketing/India.com
http://www.medialine.de/http://www.medialine.de/http://zenithresearch.org.in/http://zenithresearch.org.in/http://zenithresearch.org.in/http://www.medialine.de/