India's luxury market full of with opportunities with nuances

India's luxury market is on the cusp of a significant transformation, says a recent report by Barclays. While it currently contributes only around 2 per cent to global luxury sales (as of May 2024), the market is projected to grow at a compound annual growth rate (CAGR) of 15-25 per cent in the next seven years, reaching €23 billion to €38 billion. This optimistic outlook is getting a boost due to several key factors.
Growth drivers, a perfect storm
Several factors are propelling India's luxury market. Top most is a thriving middle class that is expanding rapidly, with a growing number of millionaires, who present a significant consumer base with an appetite for luxury goods. Major cities like Mumbai, Delhi, and Bengaluru are at the forefront of this trend, housing 90 per cent of the nation's luxury retail infrastructure. Moreover, India's robust economic growth, projected at 7-8 per cent in the coming years, translates into increased purchasing power. A growing aspirational middle class with a taste for finer things is also driving demand for luxury products.
China vs. India, a tale of two titans
While India's growth is promising, it's important to compare it to China, the current king of luxury consumption. In terms of market share, China currently holds 35 per cent share of the global luxury market, dwarfing India's 2 per cent. China also boasts of a much larger affluent population compared to India. China's luxury market is more mature, with a well-established infrastructure and a strong brand presence. There are crucial distinctions to consider. Unlike China, India has a vast income disparity. This, along with limited retail space compared to its massive population, creates challenges for widespread luxury adoption.
However, Barclays' report also highlights a changing consumer behavior towards luxury goods in India. There's a growing emphasis on experience and heritage, alongside the traditional focus on brand names. This is evident in the growing interest for vintage and repurposed jewelry, reflecting a sense of nostalgia.
Meanwhile, international luxury brands are keenly aware of India's potential. Many are already establishing a strong presence in the country, recognizing the vast opportunities it presents. However, they must adapt their strategies to cater to the unique preferences and cultural nuances of the Indian consumer. As Manoj Kumar, Managing Director and CEO of Aditya Birla Fashion and Retail Limited (ABFRL), which partnered luxury designer Tarun Tahiliani, explains, "The Indian luxury market is witnessing strong growth, and there is a growing demand for designer wear.” This sentiment is echoed by other global brands entering or expanding their presence in India.
While India might not replicate China's dominance in the luxury sector overnight, its growth story is undeniable. With a booming economy, a growing middle class, and evolving consumer preferences, India's luxury market is poised for significant expansion in the coming years. However, brands must be mindful of the existing challenges and tailor their approach to resonate with the discerning Indian consumer.