|India accounts for 55 billionaires in the global billionaire list, accounting for a total net worth of US$ 194 billion. And 10 years back there were just nine Indians on that list.
Consumerism in India is seeing a fantastic upward trajectory fuelled by a very aspirational young and middle class population, plus a favourable economic environment for the past few years. And the super-rich out there are making the most of it, given the record-breaking growth of luxury goods and services that is growing at 30-35%. The Luxury market can be characterized into 3 areas; Luxury Assets (cars, homes, yachts), Luxury Services (spas, hotels), and Luxury Retail (fashion & lifestyle goods, including apparel, electronics, liquor, jewellery, accessories, footwear amongst others). The prediction is that the Indian luxury market would grow to US$ 14 billion in 2016, up from US$ 8.5 billion in 2013.
This combination of aspirations and rising income levels is also contributing to the ascendancy of the erstwhile upper middle-class into High Net-worth Households (HNH) category of customers. The attraction quotient of this potential market has also resulted in high-end brands investing in innovative products specifically designed for these first-time buyers of luxury goods. Their expectation, obviously, is to nurture this first-mover advantage into a life-long relationship. The fact that almost 50% of this market reside in non-metros is resulting in wider distribution of this market beyond metro cities. BMW, for example, has a presence in Kanpur, Lucknow, Faridabad and Raipur, to name a few. And it has also invested in mobile showrooms in Nashik, Kottayam and Karnal to help develop these markets for the future.
Beyond the conventional brick & mortar store, the trends in online retailing also looks very promising for the high-end/luxury goods industry. While buying a pen-drive online and even a mobile phone costing INR 10k-15k is quite imaginable people are increasingly getting comfortable buying laptops, LED TVs and home theatre systems worth INR 50,000 - 1 lakh and beyond. Possibly, the best indicator of where this trend is destined to be, can be gauged by the recent investment by Mr. Ratan Tata in Bluestone, an online jewellery store which has already clocked in INR 50-60 crores in revenue in less than 2 years flat, and is targeting another INR 25 crores in this forthcoming festive season alone!
The luxury leather goods is one industry that has seen considerable interest from globally renowned brands such as Gucci, Dior, Burberry, Hermes, Hidesign and Louis Vuitton. And the consumer is lapping everything from wallets, handbags, footwear to belts, soft luggage and other accessories. It’s a tough business with not just styles and trends changing every year, but even colours, textures and materials can have a unique story from one season to another, but has seen most excitement due to its ability to offer multiple options across products, sizes and price points.
Having said the above, the fact still remains that Luxury Retailing in India presents a fair bit of challenges. The lack of quality real estate for luxury retailing is probably the biggest impediment. Churchgate and Colaba, while equated with the high net worth geographies in Mumbai, are just too cluttered and crowded - quite unsuitable for the ambience that luxury retail demands. Secondly, import duties and FDI clauses of local sourcing may not be palatable for many of the international brands. Lack of skilled salesforce and expensive rentals also inhibit the growth of this market.
There are supply chain constraints as well. While things have been quite favourable for local sourcing and production for luxury automobile players, competition from China remains quite significant for other sectors such as the leather industry where India is still characterized by small sized players operating in a fragmented market that do not offer the economies of scale to brands desirous of sourcing locally.
Notwithstanding these challenges, the recent FDI regulations allowing international players a 51% stake in multi-brand retail, the unprecedented growth of the nouveau-rich in India and the trends in online retailing - all of these are going to contribute to an explosive growth of the luxury goods market in India.
For us, the most heartening aspect of it all is the welcome emergence of Indian brands into the luxury space, namely Hidesign, Ritu Kumar, Sabyasachi, amongst others.
May the Force be with you all.
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