The $10 Trillion Prize. David Michael
can be divided into three subsegments.
First are the business families that are old money. These consumers have always been wealthy—though not at the billionaire level. Many of them are traditional and conservative in their social outlook—and they are comfortable with spending their money and displaying their wealth. One such consumer we talked to is Anjali. Born in 1969, she was raised in a traditional family and sent to an all-girls boarding school—as expected in those days. Her father, worth $11 million at the time, expected her to abide by the strict social norms and mores of the day.
To illustrate how her life has changed in the last twenty years, she takes the example of the apparel that she wears every day. When she won a coveted place at the best local college, she was still required to live at home and wear saris rather than jeans and a T-shirt. “Western clothes were off-limits,” she says, “and we didn’t have the guts to rebel against the family.” But from the late 1980s onward, the restrictions started to ease. “As society started to get more Westernized, it became more acceptable to wear Western-style clothing,” Anjali recalls. She gained a further measure of independence when she married a wealthy pharmaceuticals entrepreneur. “By this time, I was able to make my own decisions, and I didn’t want to wear just Indian clothing anymore.”
Today, she still wears clothes by some Indian designers, such as Vivek Narang and Bina Modi, as well as footwear from Joy Shoes, a Mumbai-based store (located opposite the Louis Vuitton store at the Taj Mahal Hotel) favored by Bollywood divas. But she has also seized the moment to buy big-name international luxury brands on shopping trips to Dubai and Fifth Avenue and Oxford Street. Her wardrobe now features clothes from Burberry and Shanghai Tang. In her choice of clothing, Anjali is an archetypal consumer from the upper echelon of the superrich consumer group. These consumers have money and they like to spend it—both in India and abroad. They are aware of brands—but pick and choose the brands with which they like to associate.
The second group is what we call the educated rich. These are typically professionals with a university degree who work in banking, private equity, professional services firms, and global multinational companies. Infosys alone has granted stock options worth $10 billion since its inception—creating hundreds of millionaires in the process. One of them is Chandra—an Infosys lifer. He joined Infosys nearly fifteen years ago after completing his engineering degree at the IIT in Delhi. He has lived around the world, and he is now back in Bangalore leading one of Infosys’s distribution businesses.
For Chandra, who says his newfound wealth has been the natural product of his education and his effort, his top priorities have been a good house for his family, a nest egg for his retirement, and the best education for his children. He has earmarked about $1 million for his son’s education in the United States (partly because he believes that the U.S. education system is the best and partly because he is not sure whether his son will be able to get into the ultracompetitive IIT system). Beyond this, he indulges in the best electronic gadgets, but only after a lot of research. For many other things—whether it is furniture or apparel—he and his wife favor functionality rather than global brands. In this, he is a typical “educated rich” Indian. Most grew up in middle-class homes and worked incredibly hard to achieve what they have today, so they are reluctant to consume conspicuously.
The third group consists of what we call the emerging rich. These people can be found in the top eight cities, but many also hail from tier 2 or emerging cities such as Coimbatore, Ludhiana, Surat, and Visakhapatnam. One of them is Nirlipt Singh (not his real name) from Ludhiana. Nirlipt has a successful midsized apparel export business—and he likes to display his wealth. He recently bought a BMW 7 series automobile and a Porsche. Alka, his wife, visits Dubai twice a year to buy her Gucci and Louis Vuitton bags. She has no interest in buying these items in India. As she told us, she finds the Emporio Mall in Delhi (which carries the same luxury brands) “a waste of time because it does not carry the latest collections and it is also more expensive.”
The emerging rich are typically first-generation entrepreneurs who have set up small and medium-sized companies in manufacturing, services, or trade—and they have made it big as the economy has expanded. They travel widely and are influenced by what they see during their visits to Europe and the United States. They have high aspirations and are willing to buy international brands to announce to the world that they have arrived.
Implications for Business
China’s and India’s superrich will spend on modern houses, fast cars, complete luxury wardrobes, financial advisers, and servants to prepare their meals and clean their homes. They will travel, educate their children abroad, and, for the most part, live the dreams of the rich and soon-to-be-famous. A few will engage in social enterprise, helping their fellow compatriots (and the world) to achieve more.
They may be a small segment of the population, but the sheer number of millionaires in China and India and their rapid growth make them an important consumer market. As we will explain in chapter 9, China will soon be the world’s top luxury market and India will soon achieve the critical mass of wealthy families necessary for a place on the global luxury map.
Serving these consumers requires a company to understand that they are not one homogeneous segment. To win, you must divide the groups into microsegments—and not just based on income. As we have shown, education, profession, and family background drive attitudes and behavior. It is also essential to develop the right go-to-market model—because large numbers of these consumers do not reside in the big cities. Successful segmentation models aggregate groups of consumers into targets that can be specifically addressed—with customized products, focused distribution, and advertising that is compelling and informing.
Moreover, you must stay true to the rules of new luxury consumption. Deliver the following, and the large China market and the emerging India market can be yours:
Technical, functional, and emotional benefits
Rich and graphic consumer targeting
A continuous stream of innovation
A deep and broad product line
A communication strategy that engages the core consumers to just say yes
A map of the needs and dissatisfactions of each segment and how to respond to them
An environment that matches their need for exclusivity, privilege, and catering
The back story of the brand, which defines the reason to believe
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