The Indian luxury market, estimated at $5.8 billion (nearly Rs 28,500 crore), is spreading beyond the big cities as adoption of global trends is catching up in smaller cities.
According to India Luxury Review 2011, published by the Confederation of India Industry (CII) and AT Kearney, the luxury bug has not bitten big cities alone. One in four luxury stores are established outside Mumbai, Delhi and Bengaluru. This could very well be the trend for the next few years, what with the Indian luxury market growing at over 20 percent per annum. The luxury market here will be worth an estimated $5.8 billion by end-2011. The CII-AT Kearney report also revealed that despite the high tariffs, the prices here are on par with those of Singapore, making domestic luxury purchases more practical.
The most marked trends are of new cities and catchments on the luxury map. Chennai, Hyderabad and Pune are now confirmed luxury destinations with several brands opening stores in these cities (Hermes, Paul & Shark, Diesel, Canali, Tumi etc). Stores in cities beyond Mumbai, Delhi and Bengaluru now account for 23 percent of the stores. In addition new catchments in Mumbai (North Mumbai/Juhu) and Delhi (Gurgaon) are becoming popular destinations for luxury. This is where the future of the luxury market lies.
Car dealerships are the most penetrated with more than 50 percent of their dealerships outside the metros (Mumbai/Delhi/Bengaluru/Hyderabad/Chennai) – towns where luxury car dealerships are present are Ahmedabad, Bhubaneswar, Chandigarh, Coimbatore, Goa, Guwahati, Jaipur, Kochi, Kolkata, Ludhiana, Pune, Raipur, Surat. These are potential destinations for luxury products as well as services and assets.
The second major trend is that Indian consumers are accepting and adopting international customs and trends at a much faster pace than anticipated. India no longer continues to be the ‘lagging’ market that takes time to adapt to global changes. Consumers are well-informed and increasingly demanding about latest trends – especially in the luxury products space. In categories like apparel & accessories and personal care, the key criteria for purchase is no longer price parity with international markets (which is almost expected as a ‘given’ criteria), but the availability of the latest collections. The report said: “In fact, while brands do launch their latest collections in India at the same time as they do in other markets, consumers still complain about width and depth of range.”
Traditionally, selling ‘famous brands’ and products with prominent logos has always been easier than introducing new brands in India. The CII-AT Learney report however says, “While the ‘badge’ is – and will probably continue to be – an important factor in our market for some time to come, consumers are now increasingly willing to move beyond the very popular brands, brands that are well known in other markets and have a clear and unique value proposition.”
In the apparel space for instance, there are a growing number of takers for brands that are differentiated and have a strong ‘point of view’. Several new brands like Etro, Paul & Shark, Hackett and Superdry are making their mark in a market that wanted to stick only to the likes of Armani, Versace and Hugo Boss.
The report also talks of challenges, especially in effectively reaching the target consumer. Reservations on luxury purchases are declining, with price parity with Dubai/Singapore being very clearly attempted and communicated. The need for Indianisation is also being felt by most players, and some efforts are already visible in apparel, watches and cars. There has also been limited progress on the infrastructure front.
According to CII-AT Kearney, there are three paths that luxury players could choose to take: grow cautiously by getting the basics right, experiment selectively to adopt a differentiated position in the market, or gain first mover advantage in high potential sectors by bold ‘market making’ moves.