The name is Bharat
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Luxury in the conventional sense speaks of a rare and desirable commodity with an aspirational value. Factors like limited production, expert craftsmanship and the ability to invoke an unforgettable experience contribute to its enigmatic appeal. Staggering price points make it a “luxury” for a majority.
Globally, the very definition of luxury is beginning to change, dislodging exotic skins and environmentally hazardous manufacturing processes of their halo. India, which curiously remains largely distanced from luxury’s new challenges, is contributing to current dialogues with a distinct change in consumer profile.
At the Mint Luxury Conference held in Mumbai in March, Abheek Singhi, senior partner and director at The Boston Consulting Group, said India accounts for only 1.5% of the global luxury trade, catering to a mere 4-6% of its population.
Another study released by the trade association Assocham in January this year finds that the value of the Indian luxury market is expected to cross $18.3 billion by 2016. Currently, it is valued at $14.7 billion, growing at a compound annual growth rate of 25%. This is a positive indication for luxury fashion houses such as Valentino, which is set to enter India, and Longchamp and Coach that have recently set foot here. The study shows that most Indian women tend to purchase luxury in the form of cosmetics, perfumes and spa treatments, followed by apparel, footwear, bags and jewellery. On the other hand, men indulge in luxury alcohol, watches and automobiles.
India’s luxury market is still at a nascent stage and mostly concentrated in the metros with only three dedicated luxury malls—UB City (Bengaluru), DLF Emporio (New Delhi), and Palladium Mall (Mumbai), for high-end brands seeking the right environment. But that hasn’t stopped the new luxury consumer in smaller towns. The big takeaway from market researcher Euromonitor International’s March 2016 report—‘Beyond the Metros: India’s Growth Frontiers’—is that an increasing number of consumers from Tier II cities flock to the metros for luxury purchases. This report states that cities like Malappuram, Thiruvananthapuram, Indore, Surat, Thrissur, Ghaziabad and Kochi are expected to record a nearly threefold growth in constant terms over the next 15 years.
Once dubbed as the golden bird, India has had a long and abiding relationship with luxury. Rich royal heritage, their dynastic troves of sartorial regalia, the palaces they lived in, the arts, crafts and fabrics they patronized, the extraordinary objects they collected, and the jewels they donned inspire global luxury brands such as Cartier, Louis Vuitton and Hermès, to name a few, till date.
Which makes the new face of the Indian luxury consumer an interesting inflection point in a story that is otherwise well worn. If the Indian royalty, the rich and famous were the primary luxury customers of the past, today it is the rising upper class in Tier II and III cities, citizens of Bharat who are becoming most aspirational. Growing disposable incomes, sudden flow of money from high paying jobs, brand awareness through media and the Internet, status consciousness among the youth in smaller cities, among other factors, have contributed to this.
The new figures urge a rethink: who is the really affluent Indian and what does affluence mean in the current environment? Even the Kotak Wealth Management Report released in 2015 says that 44% of India’s millionaires live in emerging towns and cities, far from the playground of South Delhi’s Aisha, a young Beetle-driving, luxury-obsessed girl in the eponymous 2010 film played by actor Sonam Kapoor, who frequents Dior and Chanel stores at Delhi’s Emporio mall.
Brands such as Gucci, Christian Dior, Louis Vuitton, Canali and Judith Leiber which performed exceedingly well in 2015, according to Assocham’s report, can expect to find their ‘Aisha’ in the deepest pockets of Tier II and III cities now.
The luxury market in India is predicted to expand fivefold in the next three years and the number of millionaires is expected to multiply three times in another five years. By 2020, global luxury spending will hit $40 trillion, a $12 trillion rise in a decade, according to the Assocham study.
With inputs from Gauri Jhangiani and Madhav Dutt.