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Business News/ Industry / Advertising/  The ultra rich prefer to shop abroad
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The ultra rich prefer to shop abroad

Despite the availability of global brands in India, larger range on offer and better prices abroad are big factors

Shopping destinations top the list of vacation theme preference for nearly four-fifths of ultra high networth individuals. Photo: BloombergPremium
Shopping destinations top the list of vacation theme preference for nearly four-fifths of ultra high networth individuals. Photo: Bloomberg

Even as luxury marketers see India as a high growth market, the ultra rich still prefer to shop abroad while on their vacations, says the Top of the Pyramid report by Kotak Wealth Management released on Wednesday.

Shopping destinations top the list of vacation theme preference for nearly four-fifths of ultra high networth individuals (HNI), people who have family wealth of over 25 crore or an income in the range of 3-4 crore per annum, followed by beaches, hills, wildlife safaris, cruises and skiing holidays, said the report.

The report looks at 0.05% of the top percentile of India’s households or 117,000 ultra HNIs who account for 15% of the nation’s wealth. It talks about how this segment spends, saves and invests.

The total net worth of ultra high net worth household’s (HNHs) has increased by 20.9% to 104 trillion in FY 2014 from 86 trillion in FY 2013. This is set to increase four-fold to 408 trillion in the next three years due to the stable political and optimistic economic environment.

The change in the economic and political condition of the country will have a favourable impact on this segment’s wealth further, the report said.

But the survey was unable to capture the full impact of the positive change in consumer sentiment in recent months, as it was conducted in January and February when the mood was still a little pessimistic. After five quarters, India has once again topped the Nielsen consumer confidence survey to become the most optimistic consumer market, overtaking Indonesia, Nielsen, an insights provider said on Tuesday.

The change in the macro-economic environment will see the ultra HNH population grow threefold in the next three years to 343,000 from 117,000 in FY 2014. Last year, the number of ultra HNH population grew just 16%, slower than the four year average of 24%. Whereas, the accumulated wealth of these households rose 32% year-on-year during this period.

Meanwhile, India’s luxury market grew 41.6% to 51,000 crore in 2013 from 36,000 crore in 2012 and is estimated to cross 84,000 crore in the next three years, growing at a compounded rate of 19.03%, said the report.

All the same, a consumer looking at buying a Carolina Herrera dress which costs a few lakhs or a Birkin bag may time the purchase with their holidays, as some brands are still not available in India or the range offered here is smaller than the international collection. The Ultra HNI is also value-conscious, and getting better prices compared with those at Indian outlets is also a factor, says the report.

“I see my clients timing their big purchases along with their holidays or have the brand deliver to them or a friend pick it up. They know what they want especially when it comes to menswear and accessories," said fashion designer Nachiket Barve.

“Over 90% of the brands here don’t offer the same brand experience that they have in their stores in London or Dubai," said R. Burman, fashion photographer, while sharing an anecdote about a recent visit to the Gucci store in Dubai where he landed up buying two pairs of shoes after speaking with the store manager, an expat who was very well groomed. “Initially, I was undecided about what I wanted and then I landed up buying two pairs of shoes, one of which was the same ones that he (store manager) was wearing," he said.

Nearly 50% of ultra HNIs make three luxury trips in a year.

“I travel three-four times a year with my family," said Michelle Poonawalla, wife of billionaire Yohan Poonawalla, director, Poonawalla Engineering Group Intervalve and Elomatic, who also shops while on vacation, but likes the fact that luxury marketers are present in India as they can provide customer care and after sales services here.

The study also showed that there has been a positive change in the outlook of the ultra-rich towards equity investments. Money is expected to move to equity from fixed income in anticipation of a domestic economic recovery. The allocation to equity has increased from 35% in 2012 to 38% in 2013. The report states that select ultra HNIs have liquidated their debt and real estate investments to generate funds for investing in the equity markets.

The survey by Kotak Wealth Management was conducted among 150 respondents who are ultra high net worth individuals across the country.

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Published: 23 Jul 2014, 11:30 PM IST
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