Luxury in India : Top 10 Trends for 2016
The Indian luxury landscape is experiencing strong evolutionary undercurrents that are redefining the consumer profile and how luxury players will need to operate in this domain during the year 2016.
In the last few years, luxury in India has been growing at a compounded annual growth rate (CAGR) of about 25%,. As per a report by ASSOCHAM, the market is expected to hit Sl 8.6 billion by 2016 from the current 514.7 billion.
Service areas such as fine dining, electronics, luxury travel, luxury personal care and jewelry saw increasing revenues and are expected to grow by 30-35% over the next three years. Spending on luxury cars continue to rise growing upwards at 18-20% over the next three years.
As the purchasing power of women is rising in India, the luxury beauty products market is witnessing a fast paced growth. Bolstering the increasing size of the Indian Luxury market, private equity investments in the segment are also expected to elevate.
Although the segment has faced challenges in the recent past but the industry is looking forward to positive developments such as the addition of new luxury players to the mix, improvements in infrastructure, the advent of digital luxury, among other trends.
Luxury is no longer the privilege of the few who were born into wealth. There is now a larger consumer base, which has the money to splurge but want a real value proposition. In 2016, this will be the biggest challenge faced by luxury brands this year.
The key trends / developments one can expect to further fuel growth in this sector are :
- Digi-lux : the new mantra : A hesitant adopter of the digital space, luxury brands today have slowly but surely started giving in to this phenomenon. A combination of physical stores, digital experiences and social media engagement is the new mantra. The millennial consumer seeks collaborative opinions and collective influencers to finalise his purchase decision. Suddenly jewelry to cars to real estate to services – all being sought on the net. “Increasing mobile and Internet penetration, m-commerce sales, advanced shipping and payment options, exciting discounts, and push into new international markets by e-businesses are the major drivers of this unprecedented growth,” a joint study by Assocham-Deloitte said.
- Step outside the metro cities : As per latest Kotak Wealth Report, just SS% of the total luxury market revenue is generated from metro cities of Mumbai, Delhi, Chennai and Kolkata. Balance comes from smaller and new towns. Despite of low outreach by luxury brands in tier 2 and tier 3 cities the luxury consumption is growing steadily due to high internet penetration, increasing awareness amongst the youth and growing purchasing power of the upper class in tier 2 and 3 cities.
It is stated that:
- 16% of revenue comes from cities like Bengalaru ; Ahemdabad ; Pune ; Nagpur, Hyderabad and Ludhiana.
- 7% from cities like Surat, Jaipur, Lucknow, Kanpur, Indore and Vadodara.
- 22% from rest of the small towns and cities
- Increase of HNI’s : India has the fastest growing number of HNl’s in the world. The size of HNI and UNHI’s in India continue to rise and they spend a considerable part of their income on luxury brands, as compared to the middle income segment that spends 8-10% of their income on luxury products.
- Pre-owned luxury is disruptive force : With the trend of luxury consumption changing from ‘having’ to ‘being’, more and more millennial luxury consumer wants to ‘enjoy the ‘Luxury of owning the product, but is questioning the need to splurge on the ‘latest’ collection with no clear value proposition besides being the ‘first to own’ it. Enter the ‘pre- owned’ luxury seller. Sites like luxepolis.com offer ‘pre-owned luxury at a relatively lesser price. Clearly more such offerings can be anticipated to add to the demand.
- Rent a luxury product : Why own it when you can ‘experience’ it at a fraction of a cost? Going one step further, there are sites wanting to offer ‘rent a luxury product / services. One could look at renting cars to bags to wedding outfits to jewellery for a special occasion at much lower costs and yet flaunt as well as enjoy the brand, the product and the associated benefits. The consumer wants to lap it up since works completely well with their changing mindset as well as pockets.
- Democratisation of luxury : Brands across sectors understand that the luxury customer in India is not completely evolved. A purely intimidating approach may not help expand the base from its existing sophisticated customer. An approach of lower lines in hybrid mall is the perhaps the way to attract new clients and larger volumes into your domain. Examples of Armani Jeans ; Brit by Burberry ; Bulgaria perfumes ; Mont Blanc pop up at Select City walk mall could be the examples to adopt.
- Collaborate not compete : With the successful collaboration of an Indian designer brand (Sabhyasachi Mukherjee) and an international designer brand (Christian Louboutin), the trend is clear maintain your core strength and do not dilute into every product category. Instead – collaborate.
- Personalise, customise, Indianise : Past offerings by International brands (Sari by Hermes ; Nawab jacket by Canali) have clearly set the tone for future directions. A luxury brand must not only personalise its offering to every individual customer, but must also allow possibilities of customisation for easy adaptability. A India centric range, touches the sensibilities and draws in a fresh audience that can easily connect with the brand.
- Make In India : With the GOI offering special incentives and environment for fostering Indian Luxury brands, the new generation Indian designer has opportunities galore. They have the best education and global exposure to create new rules for themselves. Also, being much younger, they are closer to the millennial mindset to connect with ease by the right offering. Success stories of Shivan &Naresh ; Rahul Misra : Nappa Dori have set great expectations in this direction.
- Regulatory influences : that could affect the luxury landscape are :
- FDI in single brand retail : Latest initiative by the government in easing the ‘sourcing’ clause on a case to case basis in single brand retail could see a renewed activity in luxury brands wanting to enter India.
- GST roll out : Looming tax reforms in form of GST roll out could substantially ease the tax pains of multinational luxury brands and help them operate seamlessly across
- GST roll out : Looming tax reforms in form of GST roll out could substantially ease the tax pains of multinational luxury brands and help them operate seamlessly across multiple states and locations.
- Revision of Cash transaction limits to 2 lakhs from earlier 50,000 could help luxury sectors like fashion, footwear, low end jewellery / watches ; bags and accessories etc.
As the disposable income of the aspiring consumers in India, and the share of men and women as a separate category is increasing, luxury brands in India will continue to outperform. Brands that can create an omnichannel presence to maintain personal touch with customers across all platforms and focus on maximising the efficiency of supply chain and human capital by training their associates will be the ones to increase conversion and retention.