India’s luxury retail market growing steadily amidst challenges march 15

India’s Luxury Retail Market Growing Steadily Amidst Challenges

India’s luxury retail market is growing at a phenomenal pace.

#DigitalErra Thought Corner

An annual sector trends report from the Confederation of Indian

Industry (CII) and research agency Kantar notes that between

2015 and 2016, the Indian luxury market grew from 14.7 billion

dollars (Rs 96,751 crores) to a whopping 18.6 billion dollars (Rs

1,18,498 crores), at a growth rate of 25 per cent year-on-year.

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With a growing affluence, India’s tier-II and III cities are also

emerging as new reservoirs of luxury spending. India’s share of

the global luxury market is presently 1 to 2 per cent, and sales of

luxury goods grew faster in India than anywhere else in the world

in the last few years.

Some of the reasons for the growth are:

Changing consumer behavior and increasing brand

consciousness

Burgeoning aspirational, younger middle class and growing sense

of ‘brand-consciousness’ are driving growth of luxury sector in

India. Moreover, increased Internet penetration and digitization

have contributed immensely to this consumer behavior, allowing

consumers to search and satisfy their desire to own and possess

designer brands. The top-selling items in the luxury market are

fragrances, watches, jewellery, skincare and apparel.

Entry of foreign players


With growth in online shopping, it is expected that online luxury

stores will see investments of $35 billion dollars (Rs

2,30,365crores) in 2016, which will double by 2020.Removal of

the cap on foreign ownership in single-brand retail and

liberalization of FDI limits in multi-brand retail will encourage

international brands to invest more. Brand like Louis Vuitton,

Gucci, BottegaVeneta and others have successfully integrated

itself into the Indian luxury market by offering luxury as an

experience.

Women become a force to reckon with

With increasing disposable income and on gaining financial

independence, women tend to make purchasing decisions around

personal care and beauty products, spa treatments, apparel,

footwear, bags and jewellery. Luxury personal care and jewellery

are expected to witness growth of around 30-35% over the next 3

years. This is also driving an increase in the institutional capital

being invested in the sector, for instanceNykaa (Luxury beauty

products retailer) recently raised Rs 82 crores, Bluestone (online


jewellery seller) raised Rs200 crores in Series D funding in July

2016.

Key Trends to be seen

Customization: To cater to the desire of the individual

customer, brands offer customization services, limited

edition collections and bespoke services.

Brand collaborations: International and Indian brands are

now collaborating across product segments to create unique

offerings for the ever-demanding luxury consumer. For e.g.

Christian Louboutin and Sabhyasachi put together a unique

line of shoes with Indian design and western aesthetics.

Jewellery: Brands such as NiravModi, PC Jeweller, Gitanjali

Gems (Nakshatra, D’damas) and Tanishq have made their

mark both at home and internationally as well for gold and

diamond jewellery. International jewellery brands like Cartier

and Tiffany have minimal, if any, presence in India.

Ethnic apparel: Indian designers are the top choice for ethnic

wear for the well-heeled Indian consumer. Brands /


collections by Indian designers are now worn by global

Indians and international celebrities with equal panache.

Having said that, there are challenges that need to be

dealt with:

High duties make a lot of luxury brands, in some cases 15-

30% more than elsewhere.

High street malls and other high end retail infrastructure

have limited presence in Indian metros and are virtually non-

existent elsewhere.

Most luxury brands housed in locations with high rentals also

incur high maintenance and upgrading costs to continue to

meet the defined standards of the brand and attract the

demanding luxury shopper.

An understanding of spending habits across regions and

states of India is essential for luxury brands to succeed at

the micro market level in India.

Conclusion


When it comes to luxury market, India still lags behind

disproportionately to its economic growth.Fragmented and

diversified customer base offer a challenge as well as a huge

opportunity to the retailers. The brands will have to tailor make

their products to cater the need and demand of Indian

consumers.


India’s luxury retail market growing steadily amidst challenges march 15

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