India’s luxury consumption story intact3 min read . Updated: 26 Mar 2013, 04:48 PM IST
Firms are bullish on the sector, thanks to the youthful demographic profile and changes in govt regulations
New Delhi: Ask luxury sector experts about growth in India last year and the number varies widely between 6% and 20%, depending on who you speak with.
“You must remember that the rupee depreciated 20% to 23% last year. Since all luxury is imported, some of this cost would have been passed on to the consumer," he said.
Reliance Brands is a subsidiary of Reliance Industries Ltd that retails top fashion labels such as Ermenegildo Zegna, an Italian luxury label specializing in men’s clothing, and Paul and Shark, also an Italian sportswear brand, in India.
However, most marketing departments are bullish on India’s luxury sector, thanks to changes in government regulation and the youthful demographic profile of consumers.
Sanjay Kapoor, managing director at Genesis Luxury, estimates the Indian luxury goods market is at about €1 billion (around ₹ 7,000 crore) and is set to grow by 20% in five years. “This is an encouraging future for luxury brands in India and those planning to enter," said Kapoor. Genesis represents luxury brands such as Jimmy Choo, Burberry and Canali.
Of the 50 global leading luxury brands, 19 are present in India, said a Reliance Brands report. “India’s demographic profile and high disposable incomes, growing middle class, increasing individual wealth and
According to Mehta, there are no reversals when it comes to luxury.
“In luxury, you can only trade up," he said, adding that the India growth story is embedded in the very young, aspirational consumer.
Kapoor of Genesis agreed. “Luxury purchases are starting much younger, at high school levels... In fact India is one of the youngest consumer subsets in the world."
The report divides the luxury consumers into three categories: old money aristocracy, new money affluence and the professional elite. The first segment encompasses individuals with family wealth inherited over generations. Such consumers could be landowners, industrialists or royalty. The new money consumers could include entrepreneurs, sports persons and film stars. The professional elite group comprises CEOs, top-notch lawyers, doctors and investment bankers, among others.
Besides the aspirational consumer, relaxation in foreign direct investment in single brand retail may drive this market too.
According to Amitabh Mall, partner and director at Boston Consulting Group, the relaxation of norms in single brand retail “has definitely heightened the interest of global brands in the Indian market".
While the early entrants are exploring options to own their businesses in the country, those waiting in the wings are considering launching in India.
Mall said that although queries from European, American and even Asian brands are flowing in, “overnight conversion" is unlikely. In his view, experiential luxury is on the rise, making the market attractive to hotels, spas, salons and residences that cater to this segment.
Kapoor said his company was in talks with several international brands in the luxury and premium segment that are interested in coming to India. Mint reported on 23 January that Prada was one of these exploring an India entry.
Some of the existing brands may be looking to open more stores.
“There is definitely enough demand in the market," he said. Ferragamo has four stores in the country.
For Genesis, the new cities on the radar are Chennai and Kolkata. It opened a Jimmy Choo and a Canali store in Chennai at the new Bergamo Mall.
Critics argue that more stores does not mean that the brands are doing well.
The Indian luxury consumer faces two main challenges: there is no price parity between India and overseas owing to customs duty and the choice is limited.
Besides this, on the demand side, brands may not be doing enough to create awareness and India is still a very small part of the global portfolio, he said.