T. Rowe Price — Connections: Vice-President and Asia-Pacific Practice Leader at Cognizant Business Consulting Talks About Luxury Consumption in Emerging Markets

“There is still some confusion regarding the identification of mid-tier brands from top-tier brands,” explains Sandilya Gopalan. “Unlike the more mature American, European, and Japanese markets, the Chinese and Indian luxury retail markets are just getting exposed to luxury items and high-level customer service.”

He cites the example of Louis Vuitton, which has been focusing on second- and third-tier cities such as Hohhot (the provincial capital of Inner Mongolia, currently experiencing a mining boom) and Urumqi (the capital of Xinjiang, China's western-most province). “Louis Vuitton’s stores in these regions now outnumber the brand’s first-tier city stores in China by nearly three to one,” says Gopalan.

In India, Gopalan says most of the luxury stores are located in five-star hotels due to a lack of high-end retail space, whereas in Singapore and China brands are building mega-stores on the high street to reach out to shoppers and build brand awareness and image. “These are some of the brands’ largest stores in the world,” he says. “They have become iconic and a must-visit.”

While demographics have a very limited role in brand marketing decisions in Asia-Pacific today, Gopalan points out that a few luxury brands like Armani have unveiled “product diffusion lines”, essentially less expensive versions of their higher-end merchandise that will encourage customers to buy pricier items as their income rises.

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