The indian luxury market a snapshot
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© Hand2Hand Solutions, All Rights Reserved www.hand2handsolutions.in The Indian Luxury Market- A Snapshot The luxury market is growing at a rapid pace in the India with a compounded annual growth of 25 per cent. Its present and future is endowed- estimated to be at US$4.76 billion, the luxury market in India is set to touch three times its current size at US$14.72 billion by 2015. The country has become the prime destination for top-notch global brands, while many high- end luxury brands have quickly set up their shops here. The Market The entire luxury market can be divided into three- luxury products, luxury services and luxury assets. According to a CII- AT Kearney report in 2010, in the last few years (2007-2009), the luxury products market has grown at 22 per cent. In 2009-10, India consumed luxury goods worth US$1.5 billion. The escalation can be attributed to the evolving number of wealthy shoppers in India – today, nearly 70% of India’s wealth is concentrated in the five metros. Over time, the market has grown to be so strong that it even escaped the brunt of recession as only a fraction of luxury products saw a minor dip in the sales. The riches for whom the switch from a luxury item to a ‘second-fiddle’ would not be a consideration helped wade the industry over money crunch period. According to the Kearney report most luxury product categories witnessed over 15 per cent growth over the past few years (including recession years). The performance of categories like Electronics, Wines and Spirits, Apparel and Jewellery was impressive. Growth rate of the luxury industry is superior to that of the entire retail market
Transcript of The indian luxury market a snapshot
© Hand2Hand Solutions, All Rights Reserved
www.hand2handsolutions.in
The Indian Luxury Market- A Snapshot The luxury market is growing at a rapid pace in the India with a compounded annual growth of 25 per cent. Its present and future is endowed- estimated to be at US$4.76 billion, the luxury market in India is set to touch three times its current size at US$14.72 billion by 2015. The country has become the prime destination for top-notch global brands, while many high-end luxury brands have quickly set up their shops here.
The Market
The entire luxury market can be divided into three- luxury products, luxury services and luxury assets. According to a CII-AT Kearney report in 2010, in the last few years (2007-2009), the luxury products market has grown at 22 per cent.
In 2009-10, India consumed luxury goods worth US$1.5 billion. The escalation can be attributed to the evolving number of wealthy shoppers in India – today, nearly 70% of India’s wealth is concentrated in the five metros. Over time, the market has grown to be so strong that it even escaped the brunt of recession as only a fraction of luxury products saw a minor dip in the sales. The riches for whom the switch from a luxury item to a ‘second-fiddle’ would not be a consideration helped wade the industry over money crunch period. According to the Kearney report most luxury product categories witnessed over 15 per cent growth over the past few years (including recession years). The performance of categories like Electronics, Wines and Spirits, Apparel and Jewellery was impressive.
Growth rate of the luxury industry is superior to that of the entire retail market
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*Source: The Retailer, Ernst & Young, July 2008
Growth drivers
-India’s consumer class is estimated to grow nearly twelve-fold (from 50 million at present) to 583 million by 2025, with
more than 23 million people likely to be listed among the world’s wealthiest citizens.
-An increase in the young working population especially women and growing opportunities in the service sector act as
biggest growth drivers for the luxury retail sector in India. 60 per cent of India‘s population is below the age of 30.
-Growing incomes coupled with optimism about the future. A recent report by The Nielsen Company puts India on top of
the consumer confidence index.
-Easier consumer credit & loans - With the emergence of concepts such as quick and easy loans, easy monthly
installments (EMI), loan through credit cards and loan over phone, it has become easy for Indian consumers to purchase
expensive products.
-Credit card spending in India rose by 22 per cent to Rs 75,516 crore in 2010-11 from Rs 61,824 crore in 2009-10. The
numbers of credit cards in the country stay at 1.8 crore.
-Real estate development in the country, for example, the construction of mega malls and shopping malls, is augmenting
the growth of the organized retail business.
-On-going liberalization of retail sector. Already, 51 per cent FDI allowed in the luxury sector in India by the government.
The Consumer profile
The prime consumer of the luxury segment remains the rich class. India has around 127,000 high net worth individuals and in 2010, their total wealth grew by more than 50 per cent from the previous year. There are 3 million other households earning above Rs 1 million annually which are ready to consume luxury. The riches come largely from the metropolitans like Delhi, Bangalore and Mumbai. Even though Mumbai stays as the cosmopolitan face of India, luxury brands have chose the capital city for their setting up their high mast. Delhi resides industrialists, entrepreneurs, politicians and wealthy
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farmers (trickling from Punjab and Haryana) whose capital are not largely dependent on share markets. Also, a huge amount of wealth creation is protected from taxes through cash collection (black money). “A large number of customers prefer to pay by cash”, as per our Brand Consultant of a high end brand at Vasant Kunj, Delhi. This is why the ‘separate segment’ has catapulted sales in the luxury stores and kept it safe from credit crunch circumstances like the recession.
Typical consumer patterns in urban India: metros and tier 1 cities
Household Income (Rs/Year)
Number of Households
Typical occupations Luxury Products
Luxury services
Luxury Assets
10-50 lakhs 280,000 Service industry professionals
Low-ticket items such as accessories, wines and
personal care
Spas, infrequent fine dining
-
50 lakh-1 crore 200,000 Corporate executives; self-employed professionals
Watches, apparel,
accessories, wines and
spirits, personal care
Travel, frequent
fine dining, hotels, spas
1-5 crore 120,000-150,000
Medium enterprise owners; traditionally
wealthy company CEOs; top bankers;
professionals
All All Cars, yachts, real estate, paintings
The middle class consumer families are quite ‘value and quality conscious’, like to be discreet and see the overseas luxury shopping experience as superior to that in India. These aspiring consumers look for products that are customized and suit their requirements and culture. The middle class families are more constrained in their purchases of luxury products and consider serious deliberations over each buy.
Self employed professionals like doctors and lawyers emerge from the middle class background and do not mind a slight exuberant lifestyle. They shop to flaunt- watches, jeweler and perfumes- brand names they can associate themselves with. New professionals in service industries like- airlines, hotels and BPOs- are from the age bracket of 20-30. They follow fashion trends, hop malls and are less inhibited shoppers. Their reach is not high-end products but entry level purchases like that of perfumes and cosmetics.
Bureaucrats, Politicians and Celebrities are more inclined to luxury investments in real estate and automobiles. Their luxury spends are less but consumption is high thanks to gifts and PR promotions by brands.
Indian luxury consumers
Luxury Buyers by Profession Luxury Buyers by Age
Industrialist 49% 25-34 53% Corporate 29% 35-44 32% Self-Employed 9% 44-50 above 15%
IT-BPO 8% Professional 5%
*AT Kearney’10
