Luxury Cult

Cash is King

 “Are you having a party?” I asked the Louis Vuitton salesman at Delhi’s new Emporio Mall.  There were a dozen people standing alongside the cash counter near the entrance, happily chatting, each holding the brand’s signature brown shopping bag.  Deeper into the store, there was a similar buzz of people, and I thought I had walked into a store party.

“No, it’s a Sunday,” the salesman replied with a straight face.  And the bunch at the entrance was just a Punjabi tubbar of twelve – three generations of a family – bonding over some weekend luxe shopping.  (They later left the mall in a mini fleet of  Mercedes’s and SUV’s and there was much pairi penna and jhappi-pappi before they got into their cars.) And the little toli on the left was a Dad-and-sons threesome trying to buy Mommy a birthday gift – they had decided on a suitcase but couldn’t figure out whether she’d like a monogram or a Damier…they finally got her on the mobile and described each piece of luggage in great detail to her!

One of the questions I am often asked is about how the economic downturn is hurting the luxury business.  The answer for the world at large is simple – it is hurting, baby – with the developed markets – USA, Europe, Japan – in significant pain, and the emerging ones still growing, albeit at a slower clip.  China still seems to be holding up reasonably well.

It becomes harder to judge in a just-off-the-starting-block luxury market like India where clear patterns are still forming.  Look at the merry whirl of activity at the aforementioned Louis Vuitton store and you’d think these are boom times.  But my gut said there’s got to be some slowdown in luxury brand spending in India too, and less optimistic sentiments should make people tighten even their LV belts - that is human nature across the world. (And indeed, the whopping 30-50% discounts at some of the stores in Emporio seemed indicative of that.)  Could Indians be different?

A few stores down the line, the penny dropped.  I tried using my credit card and the salesman fumbled with the card machine.  He yanked wires from the little machine’s derriere and stuffed them in again.  It didn’t work, and he finally handed back my card and asked if I might want to pay by cash.  How can he expect me to be walking around with so much money? Turns out most shoppers at the mall do.  8 out of 10 transactions are paid for in cash.  But isn’t it cumbersome counting wads and wads of rupee notes, given that a men’s suit costs a lakh plus and a pair of shoes upwards of Rs. 20,000.  No sweat, it seems, as he pointed to a handy cash-counting machine.

(China’s luxury industry is similar and cash counting machines are par for the course.  Stories of shutters being downed for a couple of hours of thumbing through Reminbi notes are legion, especially from the start-up days of China’s luxury business in the 1990s.)

So of course, the more relevant question to ask is how the economic slowdown is impacting the “cash” economy? Does it shrink in hard times?  Or does it expand, instead?  And what about the urge to splurge this sort of “cash cash”?  Does that go up or down?  How does the liquidity crunch affect this entirely liquid economy?  What if all this cash was pulled out of cupboards, mattresses and suitcases, could it save the financial world, and the luxury industry along the way?

I really don’t have a well-researched answer, and it is difficult to judge…especially over the din of cash registers ringing incessantly at the Emporio mall on Sundays.

Ka-ching.