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Small towns go online to quench thirst for luxury

Most consumers tend to go bargain hunting online. For a large part of 2019, luxury mall managers reported that sales were lacklustre. Luxury goods websites, however, managed to buck the trend because of 20-50% lower costs on their sites. But at the moment, watch companies do not seem to be finding too many takers in tier-2 and 3 towns.

Updated: Dec 10, 2019, 10.55 AM IST
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A lack of stores and luxury malls is pushing up online orders for luxe goods in tier-II and III cities.
New Delhi| Kolkata: Vrinda Sharma, 24, has a penchant for all things luxury. It’s been three years since she returned from the UK, but she wants to keep her wardrobe updated at all times.

She now lives back home in Yamunanagar, working in her family business around 200 kilometres from Delhi. When visiting the capital, a visit to DLF’s Emporio Mall and The Collective is a must for her. But on other days, she relies on luxury websites to buy her goodies.

A lack of stores and luxury malls is pushing up online orders for luxe goods in tier-II and III cities. For some websites, the growth rate of orders from smaller towns is much higher than in tier-I cities, according to industry executives.

She usually opts for Darveys.com and sometimes Tata Group’s TataCliq for her purchases. Like her, a number of customers from tier-2 and tier-3 cities are looking to pick up smaller ticket luxury and bridge-to-luxury products online, opening up newer markets for websites such as Darveys, Luxepolis and Elitify.

Offline luxury multi-brand retailer The Collective has 45-50% of its sales in tier-II and III cities. Around 9% of The Collective’s total revenue comes from online luxury sales. “Even in the smallest of cities, the ability to buy luxury items is second to none. We see traction from Hyderabad, suburbs of Kanpur, Aurangabad and Narwana in Haryana,” said Amit Pande, the company’s brand head.

But for luxury websites, the supply chain is a bit different. Brands such as Elitify and Darveys usually work with authentic multi-brand stores abroad (like The Collective is in India) to find the cheapest deals and resell them here. “We are experiencing major inflows from tier-2 cities like Indore, Ludhiana, Jalandhar etc. Given the right catalogue mix and experience, this section of the market is the fastest growing,” said Ritesh Srivastava, CEO of Elitify.

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Most consumers tend to go bargain hunting online. For a large part of 2019, luxury mall managers reported that sales were lacklustre. Luxury goods websites, however, managed to buck the trend because of 20-50% lower costs on their sites.

At Darveys, orders from smaller cities increased more than 50% compared to 25% from major cities such as Delhi and Mumbai. “In terms of absolute numbers, orders are much more from smaller cities,” said Nakul Bajaj, founder of Darveys.

Vijay KG, founder, Luxepolis, luxury goods seller and reseller, said nearly 45% of sales come from smaller cities. Contribution from tier-2 and 3 markets has risen 25% in past three years and is expected to grow to 50% by 2021, he said.

Darveys has seen the share of tier-II,III and IV cities in orders grow to 50% from just 20% in 2015. Besides, while average spends on the website from tier-I cities have dipped to Rs 26,000 from Rs 36,000 per customer since demonetisation in 2016, average spends from tier-2 and 3 cities have grown to Rs 18,000 per customer from Rs 14,000.

“Industrial and agricultural belts with prosperous business persons have been driving luxury consumption so far. But we have noticed traffic from millennial employees of service industries like IT, KPO, BPO, ecommerce etc., who have shifted base to tier II or III markets,” said Vijay of Luxepolis.

But at the moment, watch companies do not seem to be finding too many takers in tier-2 and 3 towns. “In the premium and luxury watches we do not see extraordinary momentum or growth,” said Yasho Saboo, chairman of board, Ethos Watches.

About half the company’s sales are from Delhi-NCR and Greater Mumbai and 90-95% within the top 10 cities of India. “Indeed there is wealth in small towns too but the wealthy of small towns really like to shop in larger cities,” he said. Elitify works with Italian and US-based resellers who are wholesale distributors as well as retailers for brands. While names are a trade secret, the company said it buys in bulk. Websites get the latest collection or old collections in bulk and offer products to resellers.
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