I am reading yet another article in the Economic Times of how international luxury brands are openly targeting (gatecrashing!) the wedding market in India. Much has been written about Big Fat Indian weddings, estimated to be a staggering USD 25.5 billion industry growing at the explosive rate of 20-25% per annum. This figure perhaps doesn’t include certain elements of wedding spends (cash and dowry for example).A recent 2013 study by Assocham reveals that the luxury market in India is slated to show a similar growth of 25% per annum and may touch 15 bn dollars by 2015! This clearly establishes luxury’s dependence on weddings in certain markets in Asia.
In a recent meet in Hong Kong where I was invited to be on the advisory committee of the Asia Retail Expo 2013 it was interesting to hear how luxury brands are rapidly targeting the wedding market here in China. The Chinese wedding market (with 10 million couples tying the knot every year) is estimated to be USD 80 billion. Jewellery brands like TSL Jewellery today have wedding advisory services and dedicated teams advising clients and taking special orders. A large amount of this gluttonous consumption is in organizing the weddings (hospitality, décor and travel) in addition to the wedding trousseau.
Way back in 2002 when the Indian market had no real “International luxury brands” – the French and the Italians were still flirting with the market- I remember how a collaboration with the couture designers in India and the wedding planners for Louis Vuitton was seen as radical. We even risked a wedding trousseau installation with Indian trousseau elements in the LV stores then. The initiative has paid off and how! Louis Vuitton trunks are now integral to trousseau shopping in India. Elaborate trousseaus are now packed in these hand made trunks by the new rich like the Maharajas did in yesteryears. In later years with Ferragamo we toyed with the idea of offering “gift ideas” for wedding guests and even hosted a wedding in a Florentine villa. Wonderful memories and now looking back great marketing initiatives which only seemed then, a natural way of giving a local context to international luxury brands.
Private equity players seem to recognize the potential of the market and in recent years have flirted with the idea of acquiring indigenous trousseau brands. More interestingly there was an interest in acquiring a wedding photography service business in China by L Capital. Given the opportunity I have often wondered why Private equity hasn’t engaged with the wedding planner business in these markets. It has all the components that appeals to private equity – immense revenue potential and growth, the opportunity to scale up (boutique wedding planners are available to the super rich). At the same time the segment offers the potential to build organized infrastructure, processes and re-structure the business on the supply side to increase efficiency, a straight fit for a BPR (six sigma) initiative. The organisation of the industry will also create a demand for professional courses for wedding design and create a quality talent pipeline which will raise the bar in creativity and execution.
Today most of the wedding planners operate like a cottage industry with challenges of quality execution and wafer thin margins due to rising costs of production. Few have been able to organize themselves like any other service business and change the revenue model to a % fee structure. The intervention of private equity would possibly mean we may live to see a network of large scale, professional “wedding agencies” operating like “boutique travel agencies” with a presence in luxury shopping malls in markets like China, Indonesia and eventually India. Private Equity, are you listening?