India’s slow Internet march

Hermes_spring_summer_2008

One look at the current advertising campaign for Hermès, and it’s clear that India is on the radar screen of Western luxury brands. But this is not a new phenomenon. At the recent Walpole Seminar on China & India, Dr. Amin Jaffer, International Director of Asian Art at Christie’s, described the long relationship that India has had with European luxury brands, dating back to the late 1800’s.

Today, however, things aren’t as straightforward. Other Walpole seminar participants like Mohan Murjani (of the Murjani Group – partners to Jimmy Choo, Gucci and Bottega Veneta in India) also revealed that new luxury entrants in India are up against strong domestic players, labyrinthine bureaucracy, and inconsistent infrastructure. Break-even will take longer than some might have hoped.

On the Internet side, despite the naturally chatty and curious Indian nature, things have also been very slow to develop.  I explored this topic in an article in Luxeletter, an online publication from the Murjani Group, covering the luxury industry in India.

The entire article is republished below.

‘Net’ting gains online

Fashion Industry expert and writer Imran Amed thinks it’s only a matter of time before the Web 2.0 revolution hits luxury in India

After consecutive years of explosive revenue and profit growth, many luxury brands and retailers are beginning to grapple with the consequences of what could prove to be a challenging 2008.

The economies of North America and Western Europe are experiencing varying degrees of softness, and the much-vaunted luxury explosion in Asia, while still promising, will take years to deliver a return on the large investments that have been made, even with astronomical growth rates. Empty luxury shopping malls in China and ongoing structural challenges in a nascent Indian market are proof of this.

Thankfully, there is a bright spot on the horizon that is still undeniably promising for the luxury sector in the West. Just consider these striking facts: The Saks 5th Avenue website is now the second largest contributor to revenues after its iconic New York flagship. Its closest competitor, Neiman Marcus, reported that its online site generated revenues in excess of US $500 million in 2007. European luxury brands from Gucci to Louis Vuitton are also reaping the bonanza of the online luxury frenzy, recognising the luxury consumer’s increasing comfort with and desire to buy goods online.

But in India, luxury e-commerce has yet to take off. For now, Indians seem to value the experience of walking into a bricks-and-mortar store more than the convenience of shopping online. Even if customers wanted to shop online, broadband internet penetration in India remains stubbornly low and unreliable, meaning that it is harder to use bandwidth-intensive shopping experiences that have become standard fare on pioneering luxury e-commerce sites like Net-a-Porter.

The good news for India is that the potential for luxury on the internet is not limited to e-commerce. Today, a luxury brand’s homepage is arguably the single most important point-of-call for consumers looking to learn about a brand’s heritage, products and DNA.

Unfortunately, when consumers turn to many luxury brand websites, they often don’t find anything new and different. Sure, they can find recent ad campaigns (which are already in every magazine), images from the most recent runway shows (which are ubiquitous on the internet anyway), and a video or two (these are few and far between). What consumers really seem to be looking for is an opportunity to engage with the brands and each other.

Let’s talk!

In recent years, a wave of emerging interactive technologies has transformed how people spend their time online. Referred to generally under the umbrella-term Web 2.0, online tools such as blogs, social networks and wikis have marked a shift from an era of one-way ‘read-only’ communication on the internet to one which is characterised by a collaborative dialogue among groups of individuals.

In the luxury space, passionate groups of consumers, in their millions, are talking about luxury brands on blogs and social networks. In France, Café Mode’s independent perspective on the latest runway shows and fashion trends has become so influential that L’Express, a leading daily newspaper, now houses the blog on its own website and pays its blogger a salary. Manolo, an American who writes a popular blog on shoes and celebrity, earns a six-figure salary from his blog and has a column in the Washington Post. Every month, hundreds of thousands of Japanese visit @Cosme, a Japanese consumer review website dedicated to the cosmetic industry. The recommendations are so influential that they can make or break a cosmetics brand in Japan.

Some of the most prolific participants in these communities, said to be about 1 per cent of internet users, may know more about the brands than the brands even know about themselves. As trusted authorities, these experts have the potential to become a brand’s most fervent evangelists — or detractors. What’s more, through the active engagement of these passionate communities, luxury brands can also gain valuable feedback to understand what consumers want and what they expect.

But where is the ‘Blogger’atti?

It’s a mystery to me that India (a country that loves nothing more than to debate and discuss everything) does not yet have an indigenous fashion blogosphere. Indians are notoriously chatty — the Indian blogosphere is already buzzing with technology and Bollywood news. Indians are smart shoppers who like to research before they shop. They actively seek recommendations from friends and family, making word-of-mouth recommendations extremely powerful. Finally, blogs and social networks are not bandwidth-intensive, so are still easy to access even in India’s low bandwidth environment.

Given all of this, it’s only a matter of time before Indians, particularly those of the younger generation, like their luxury compatriots elsewhere in the world, begin to actively turn to the internet to learn more about luxury brands.

The only question is: Who will be the first to answer their questions? The luxury brands, or the bloggers?

Imran Amed is an advisor to the fashion industry and is Editor of The Business of Fashion at www.businessoffashion.net.  Image courtesy of Hermès.