Have you been to a high-end mall in India lately? I've been to a few, most recently DLF Emporio in New Delhi and Palladium in Mumbai. What's striking is that truly high end shops are cheek by jowl with middle market ones. In clothing and accessories, for instance, you'll see Louis Vuitton and Chanel but then you'll see Zara and Mango as well.
As another example, at Palladium, Neutrogena has its own trendy-looking boutique. This seems strange to someone living primarily in North America, where Neutrogena is a drug store brand and would never rate its own boutique.
So what is going on here? There seems to be a pattern of brands that are at the middle of the market in the West promoting themselves at the top end of the spectrum when they go to India. One fairly obvious explanation is that in doing so they can charge a premium over what they would abroad. To put it in economic terms, a luxury brand tends to face a demand curve that is less price-sensitive, or less "elastic" in jargon, which correspondingly supports a higher mark-up over cost, and hence a higher profit level.
This perfectly plausible-seeming explanation is contradicted by two facts: first, the prices actually aren't that much higher than abroad, making allowances for the higher taxes in India; and second, the level of sophistication of the Indian consumer has increased exponentially as of late, making it difficult to palm off an inferior product as a superior one.
I remember when Mercedes Benz first came to India, some years ago. They tried to sell a model that was outmoded in Europe, and Indian consumers cottoned on to this fact, turning away in droves. They were savvier than the German automaker had given them credit for. Nowadays, Mercedes and the other luxury automakers sell the same models in India as they do abroad -- the only difference being that they also sell versions with smaller power plants, better suited for Indian road conditions than the hulks engineered for the German Autobahn.
None of which helps to resolve the mystery I began with. Perhaps the deeper explanation is cultural. Having been a society that survived in austerity for so many generations, both before and after Independence from the British, it's only in the past twenty years since liberalization, in truth really only in the last decade since the economy has really taken off, that Indian consumers have been able to indulge their pent-up desire for mass consumption, conspicuous or otherwise.
What results is the phenomenon that one may dub "mass exclusivity". Mass market brands are cloaked in the garb of exclusivity, such as being sold in fancy boutiques. This makes the experience of consuming them more ritualized than in the West, and therefore more satisfying to the Indian consumer than to her more jaded Western counterpart.
This is a pattern we've seen in other countries, as they latterly develop mass consumer societies. Ever been to a Pizza Hut in Eastern Europe? They're posh-looking restaurants with table linen and a wine list, unlike the rather more tatty lunch counters we're used to seeing in North America.
And so it goes in India and other emerging economies, and it's not likely to change anytime soon. So if you're tired of grabbing your cappuccino at the drive-through Starbucks on the way home from work, it might be time to move back to India. You can park yourself at the tony coffee bar on the top floor of the Emporio and watch the rich and famous go by for forty rupees a cup. Sounds like my cup of coffee.