Emerging markets such as Brazil, China, India are continuously increasing their contribution in the 2.2 trillion USD global luxury market. In the last decade the Indian luxury market is in the spotlight with global luxury brands showing a growing presence. The current Indian luxury market which is valued at 18.5 Billion USD has right potential to reach more than 100 Billion USD in the next 7-8 years. India’s growth in Ultra High networth Individuals has also been impressive.
As per latest Knight & Frank wealth report India’s UHNWI count rose by 340 per cent (to 6,020 persons), whereas global growth was 61 per cent (to 187,468). The report also says that “India will account for five per cent of the total UHNWI population and six per cent of the billionaire population across the world by 2025.
1. Growth of Luxury in Non metros
While Mumbai & Delhi lead in the numbers of Ultra High Net worth Individuals, Tier I & Tier II towns also account for 45% of the total luxury market in India. There are specific super rich segments such as Diamond merchants of Surat, Machine tool exporters in Punjab, Brass exporters of Moradabad, Marble merchants of Rajasthan, Flower exporters of Tamil Nadu, Hosiery manufacturers & exporters in Ludhiana, Coffee planters in Coorg, Spice traders in Cochin which are in not in traditional metro markets but are key growth drivers of the luxury market in India. While Indian luxury brands are known to have sub products that are largely local, there are a few instances where international luxury brands have tried to ‘Indianise’ their offerings, most commonly seen in the food & beverages industry.
2. Growth of Affordable luxury segment in India
With the increase in middle class wealth in India along with increased internet penetration there is a new segment of first time buyers who buy luxury products & thrive on good deals. Luxury car makers ( mainly BMW, Mercedes & Audi) have successfully exploited this opportunity with full fledged line up of Entry level models backed with attractive finance schemes which have made owning a luxury car in India even more easier. The average age of ownership of these cars is less than 40 years in India . This segment has sophisticated tastes and are fast taking up entry level luxury segment cars to flaunt their success. Similarly the concept of luxury homes in India is also becoming aligned towards affordable segment . The focus of premium developers currently more on affordable luxury & Branded homes than the traditional super luxury homes . They are specifically priced to appeal to larger cross section of the population while retaining its premium appeal. Also with the growing internet access & increased awareness of luxury products via social media, the luxury goods service providers are now focusing on combination of offline, digital & social media to influence customers.
3. Innovation in premium Electronics gadgets & appliances
There is an increasing trend in the usage of wearable tech gadgets for leisure and health. Most popular being Smart Watches, Fitness Bands & Head Sets among High net worth individuals There is also an increased demand for high end panel TVs ( Super UHD with HDR , OLED TVS) 55 Inches & above . The contribution of this segment is on rise especially in Metros. Similarly demand for high end multi door refrigerators & high capacity Top load washing machines ( 8kg & above) is also increasing especially among HNIs.
4. New age luxury Indian consumer
The definition of luxury Indian consumer is changing and also the new areas of buying & investment. Increasingly younger ultra HNIs, with high disposable incomes are also high spenders in non-traditional avenues . They are also the ones who are largely responsible for bringing in concepts such as ” Value based & experience luxury marketing” into the limelight. The recent e-commerce and technology boom has created many new segments of luxury customers in India who are relatively young and highly aspirational . Apart from the traditional high spending on Jewellery, Apparels and Foreign trips, this heterogeneous segment also prefers investment in domestic VCs over savings, prefers investment in commodities mainly gold , Renewable energy ( Mainly wind power & Solar energy) , believe in Rent a luxury concept and has high affinity for latest technology personal gadgets. The luxury consumer base some time back was made up of two distinct segments – there was old generation which went in for classy elegance and there were high end taders that went for flashy indulgence. Today, there is far more micro segmentation in the profile of the luxury customer. A lot of millennials are now becoming consumers of luxury and their tastes are quite different & unique. Luxury today is shifting rapidly from “having” to “being” – from owning a product to experiencing a luxury, says the BCG report, Shock of the New Chic. According to the report, the Millennial generation – those in their 20s are geared to pleasure rather than possessions. To these young people, owning something usually comes second to sharing new ideas and new experiences. Its also true of the older HNIs, who after surrounding themselves with a plethora of luxe products are now looking for novel experiences.
5. Regulatory Mechanism
Traditionally Infrastructure hassles and lack of clear guidelines have prevented Multinational luxury Retailers to directly invest in Indian markets. The other deterrents for consumers in this segment being High Import duties & counterfeit market which contributes 8-10% of the overall luxury consumer market.However, with the opening up of FDI in single brand retail & GST roll out will minimize these deterrents to a certain extent.
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