Safir Anand on premiumisation of consumers & mkt

Safir Anand, Strategist & Investor, talks about how priorities of people are changing now. “If you are well-to-do and you have good savings, you are encashing some part of the savings for this and on the other hand if you do not have the immediate means to buy this, there are systematic instalments, EMIs, that are enabling people to get the sort of experiences that they have longed for.”

Prada here, is a connotation, a metaphor for how the customer is aspiring for more. Be it real estate, automobiles, clothing, footwear, across the board, we have seen the aspiring Indian aspiring for a little more and that theme has played out very well for equities as well.

I feel that this is just the start of it. What is essentially happening is that we have all become a Jekyll and Hyde in our own lives, in a way. We have an overexposure to digital which is now causing a desire in people to have real-life experiences – whether it is travel, whether it is spending on luxury goods or cars or anything that has more to do with experience. That balance is being struck off and after experiencing Covid lockdowns, they want to catch up fast in life. So, that is the segment that, according to me, is at the verge of multi-years of growth.

But it is interesting because food inflation as well in the year gone by has hit us hard. We have sort of been very conscious and paid attention to what is the price of onion and tomatoes there. But when buying high-end cars or high-end homes, that has clearly not been a consideration. Is it a surprise that the Indian consumer is willing to loosen their purse strings?

No, it does not come as a surprise. It is like you have Rs 100 to spend on multiple purposes. It is that the priorities of people are changing now. If you are well-to-do and you have good savings, you are encashing some part of the savings for this and on the other hand if you do not have the immediate means to buy this, there are systematic instalments, EMIs, that are enabling people to get the sort of experiences that they have longed for.

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We are all in a world of social media where there is so much gratification in terms of likes and the wow factor and how that video wow has now also become very trendy and people are just latching on to their wow experiences and the likes. So, either they are doing it by direct spending or via EMIs.

Let us now focus on individual segments and I want to talk about real estate. In realty, a notable shift has emerged as people seek to transform their homes into not just living spaces but opulent retreats. Homebuyers are increasingly investing in properties with an elevated lifestyle, where the residence itself is a statement of luxury. In Delhi, Mumbai, some of these premium properties have been selling like hotcakes within days of their official launches. So, Prestige or Sobha or Godrej Properties – where do you bet on in case you have missed out on the complete rally that took place in the realty segment in the year gone by?

Well, you bet initially on the sector itself and then you segregate the valuations and the sort of governance standards that the companies have because in the past, real estate could have carried a little bit of reputation when it came to cash deals. But because of the stamp duty going online, because of the onset of several initiatives that have been taken in respect of circuit rates because of the funding that is setting in from the NBFCs or the banks on real estate, etc, the entire paradigm is now changed and people are not reluctant now to buy the properties at the sort of prices that are on paper as opposed to off paper.

So, one has to look at a basket of stocks there, not a single segment. It is very difficult to just pinpoint and say Delhi or Mumbai will do well. I will give you an example like Sobha as an example comes from Bangalore and typically somebody will think that with the slowdown in the IT sector Bangalore should see a slowdown in real estate. But having visited Bangalore, I found that a lot of buying in Bangalore is happening from Hyderabad or it is happening from non-IT sectors. For example, infra players or hoteliers.

There was an article recently in Economic Times that spoke about how HNIs themselves are now buying small niche hotels and are venturing out. So, profitability derive is the derivation for your expenses and if you are profitable in whatever you are doing, then you are more inclined to spend and that is exactly how it is playing out. Unexpected consequences coming in from industries are not so obvious as that is where the driving force is.

So, much like real estate, we have seen the premiumisation trend play out within autos as well. I am purely going to talk about the passenger vehicle market here because you are seeing even the likes of Maruti and Tara Motors offering newer models within the slightly upper end segment as opposed to the completely affordable passenger cars that they earlier had. Is this a trend which one can still latch on to?

Yes, I do think it is a trend and as a consumer if I was to question, would I do it? The answer is yes and there are many reasons for this. First of all, the time being spent in the cars is increasing and which therefore means that when you are spending more time on the road, you would be inclined towards luxury and some of these cars have graduated away from being basic cars into more luxurious models whether they are in the form of leather or Nappa seats or they are in the form of the entertainment systems that they carry or even in terms of ambient lighting and other features.

The second is the human desire for safety because now all lives are becoming more and more precious, particularly with the onset of the kind of problems that are happening all around the world and the kind of misery that it carries, people want to leave all that baggage behind and be more secure within their own setup. So, these new level cars come with a lot of safety. They cut out a lot of noise. We are overexposed to noise pollution all around.

Right now, for example, with the air quality concerns, if a car comes and says that our air quality is in double digits as opposed to the high three digits that Delhi and Mumbai experiences, then people will say I will attach that as a premium factor. So, these technology companies and Mercedes being one of them, are all moving towards enhanced customer experience between all these factors and creating more and more desire.

I do not know if I can call it a problem or not, but it is pretty much a monopolistic sector when it comes to the jewellery market out there within the listed universe. Sure, it is broadening now with some more players getting listed. But is that the way to go, or would you say stick to gold ETFs?

Gold ETF is a very different form of investment vis-à-vis, for example, buying gold or a diamond. And therefore, the two consumer segments are very different. As an example, as an investor, if I fancied gold, I would probably do gold ETF. But as a consumer, I would definitely look at what is in the market and whether it is diamonds or it is polkis or whatever interests you, you will look at that.

The interesting thing here is that India has in the past been a very large gold market and therefore they bought gold for many reasons, including stability and passing off from one generation to the other marriages or just the convenience of liquidity. But now having reached a basic level there will be a value added there. And the value added would be the design skills that some of the players will carry. So now it will be about differentiation of the kind of necklace that you want or the kind of earrings that you want.

And there, the skills of the larger players are more equipped because they have not only reached the level of having a huge network but they have huge capabilities, whether it is computer-aided designs or manual designs. And there, this entire transformation will happen by the value-added sector. And that is one of the reasons why, when you look at gold and you say step up, the step up is going to come in from many of these segments.

So bet on the obvious one, the biggest, largest, with a proven track record, Titan, within the sector, you think?

Well, Titan does not let us speak because they let the numbers speak. So all you do is just keep reading the numbers. Every year, Titan has been a growth story. It is a phenomenal company with a very powerful brand. The good part about the management is that the management is as hungry today as they were many years back. And you find every year they innovate. So Titan has a lot of things going for it. It will be very interesting to see how they capture the diamond market, having done exceptionally well in the gold market.

I do not know about yours but my home is definitely waiting for an upgrade like that. But do you think that is another theme that one could look at?

Definitely it is. Once you start experiencing it, you want to then move on to the next. So while you are giving an example of a button that would, for example, work your curtains or things of that sort. I think we are on the onset of the entire machine learning and artificial intelligence and a lot of these technologies will become voice prompted. It is just like what happened with Siri and Amazon and other things. And it is happening in cars.

Mercedes has a beautiful feature called Hey Mercedes, where the car enables a lot of actions without you requiring to press buttons. So there will be a movement towards more luxury, which is voice enabled. Then there will be haptic technologies, such as fingerprinting. Certain parts which are to do with securities, for example, door locks and many other things, will work on haptic technologies. And then there will be a new feeler, which is to do with this entire ambient system and how you can transform your house without needing to change the lights.

So there will be companies that adapt to that. Already the LED technology did very well. Now there will be other beneficiaries. For example, I always say that no matter whatever automation you talk about at home, there will be a huge segment for wires and cables because you will also have to take on loads. You will have to take on safety, you will have to take on special gadgets that require these circuit boards and ICs, so many other things so this all which benefits electronics. There is a whole segment there that is going through transformation, not just the obvious names of furniture and tiles and other things.

This premiumization trend has even played out for the likes of Bata and Metro Shoes as well. Do you think this is also the other theme that one can look at? And more importantly, it is a very long drawn theme. You do not have to talk today, tomorrow, it is going to be relevant for the next five years as well.

It is like taking a rubber band that stretches too much. And you currently are not at the end where the stretch is going to snap at you. If you actually go even on a road trip, you will find that unlike the past, today, a lot of Indians are very well dressed within their own means. Whether they wear a shirt or they wear a trouser or they wear jeans, they are far better fashion conscious than they were in the past when they were sort of recycled the same sort of clothes. They are becoming more conscious about things.

Also the brands have very good distribution networks. So the ability of the brand to reach those people, whether it is because of the opening of franchises and licenses, or because of the internet and the ability to buy it online. Also the fact that they can experience a lot of things because they not only see pictures but they have cash on delivery models and many other forms. The social media impact where somebody who dresses up well gets all these thumbs up from different, different kinds of people sort of encourages them to believe that it is something that they should be spending on. So that onset is applying to footwear. It is also applying to clothing. I feel that that sector is sort of coming back after many years of not doing much. Therefore, the scope of that sector should be a manifold journey.

Roy Walsh

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