The other day I ran into an old friend, who comes from India’s one of the biggest retail chains- Big Bazaar. With a lot of dismay, he told me that their prime location in South Mumbai was being shifted to a suburban area, while the former location was given away to the global lifestyle brand, H&M. The idea was that H&M will cater to upmarket consumers located in South Mumbai.
It was a premium luxury brand, displacing a mass big box retailer, big bazaar. It left me wondering about the status of luxury goods market in India. Are there enough luxury goods consumers? Consumers buy from H&M because of its ‘value’ proposition or is it because they want to ‘look rich’ with the premium badge associated with H&M?
The truth is, Indians love to flaunt their money. They do not shy away from ostentatious display of wealth. Marriages are one such platform where one can witness India’s ramp walk on ‘who is the richest’ show. Well, it’s not such a bad thing. If you got it, you will flaunt it. Who doesn’t want luxury and other shiny things in life?
India’s consumption story of luxury goods has changed drastically. There is an increase in appetite for luxury goods amongst consumers. Number of High Net worth Individuals (millionaires) in India have increased and data suggest that luxury market in India has been growing at unprecedented levels (currently valued @$18.5 billion).
There is a strong interest in luxury goods. The tags have become important for people. H&M stores are opening and other global luxury brands are setting their foot in Indian Market. High-end perfumes, jewelry and handbags remain consumers’ favorites.
However, there are many reasons to feel downright glum about this market ebullience.
As the consumption of luxury goods is increasing, consumer behavior is also undergoing a drastic change. Consumers are continually relinquishing their conservative Indian avatars, and having a hard time controlling their spending spree. India’s average household debt (amount of money all adults in a household owe to financial institutions) has been continually rising without fail for 5 years. In their attempts to flaunt their money and ‘look rich’, these riches are in actual losing their true wealth.
“Consumers are continually relinquishing their conservative Indian avatars, and having a hard time controlling their spending spree.”
There is a difference between ‘being rich’ and ‘being wealthy’
When you spend on a Louis Vuitton bag or an Armani Suit or Mercedes-Benz, you are not being wealthy, you are being rich. Why? See, it from the point of view of a smart investor. Sure, you will ‘look rich’ with these, but in reality, you have bought these ‘depreciating assets’ by trading your money for it. So, you have just become ‘little less rich’ now.
To rich it may not matter, if these are poor investments, but to a person who wishes to be wealthy, it should. Wealth doesn’t impress anyone. It seeks freedom. Freedom to buy anything one wants without losing on prior money.
If you take into account one’s balance sheet, you may find both rich and wealthy the same. With all the hard assets in store of rich, the rich may look even richer than the wealthy one. But, is he?
The difference between rich and wealthy is a simple one. A wealthy person looks always for alternative ways to put more money ‘in his coffer’ (even when it comes to buying), while a rich person may just put his money on a liability by taking money ‘out of his coffer’.
I am not suggesting, keep your money intact or don’t spend it on things that you have longed for. Purchase them. Invest in luxury goods all you want. But purchase them by keeping an attitude of a wealthy person, not a rich person. How? Let’s see.
How to flaunt your wealth without spending on it?
Warren Buffet invests in permanent assets such as roads, electricity and railways. He chooses them because new technologies and inventions may get replaced by newer ones and old stocks may go down, but roads, electricity, railways, etc. are some permanent assets which won’t go down so abruptly.
A wealthy person looks for opportunities to grow his assets so that he could pay for his luxurious wishes.
Take for example- You want to buy Mercedes-Benz. There are two ways you could go for it. You can directly buy this car or you can carefully invest in a short term stock, from which you can get good returns and from those returns you can buy a Mercedes-Benz for yourself. A wealthy person will choose the latter. Being rich is lucky, staying rich is strategy.
Being rich is lucky; being wealthy or staying rich is strategy.
There is always a choice between creating wealth and spending it
Ever heard, Money creates money? It’s true.
Money works round the clock. It doesn’t do any good by lying in cash chests and nor does it grow by spending on depreciating luxury assets. It needs to keep moving. One needs to keep investing it for it to multiply. Money needs your nurturing and acknowledgement. A wealthy person well understands this.
Don’t be a pretender spender. Flaunt away your money in limited edition watches, cars and handbags, but take a little longer route and create more wealth for fulfilling your whims and fancies.
Be a smart consumer!