The Indian luxury landscape is clearly experiencing Strong evolutionary undercurrents that are redefining the consumer profile
In the past few years, luxury in India has been growing at a compound annual growth rate (CAGR) of about 25 per cent. As per a report by Assocham, the market is expected to exceed Sl 8.6 billion by 2016-17. Interestingly, as per Amitabh Kant, CEO, Niti Aayog, the luxury industry in India has the potential to grow 10-fold from ts current size and reach a topline of 5180 billion by 2025.
The Indian luxury landscape is clearly experiencing strong evolutionary undercurrents that are redefining the consumer profile and also how luxury players need to operate in this domain.
Service areas such as fine dining, electronics, luxury travel, luxury personal care and jewellery have seen increasing revenues and are expected to grow 30-35 per cent over the next three years. Spending on luxury cars continues to rise growing upwards of 18-20 per cent. As the purchasing power of women is rising in India, luxury beauty products market is witnessing a fast-paced growth. According to Euromonitor International, the luxury product categories that have recorded considerable growth are luxury jewellery as well as timepieces, luxury writing instruments/stationery; super premium beauty/personal care products, luxury electronic gadgets and luxury tobacco.
Besides, the Indian luxury market is developing many facets. Luxury is no longer restricted to the rich and famous alone; the new age consumers, who do not typically fit into the boardroom definition of luxury consumers, are staking claims to luxury products, brands and services, but on their own terms.
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. Going forward, this will be the biggest challenge faced by luxury brands this year.
It is against this backdrop that one needs to study the key challenges presented by the changing face of luxury in India:
(b) Import tariffs are high at an average 30-40 per cent, which causes simple price parity and margin issues for retailers. It is hence often cheaper for Indians to buy abroad.
(c) The presence of "knock off' products in the local market. The local market is much more open/susceptible to trade in fake goods. As per Assocham, the size of the counterfeit luxury goods market in India was estimated to be a whopping Rs 5,600 crore in 2015.
(d) Multiple taxes across the country maintaining a single MRP with differential taxes across states has been a challenge till date. Recent GST rollout is, however, expected to ease this by April 2017
(e) Crackdown on big ticket purchases by the IT department. Revision of cash transaction limits to Rs 2 lakh from the earlier Rs 50,000 could help the luxury sectors like fashion, footwear, low end jewellery/watches; bags and accessories, etc. However, recent reports about legitimate big ticket purchase items being targeted by IT officials is expected to affect sales. Customers just want to avoid the harassment value and prefer to shop abroad.
(f) Ease of doing business, including general infrastructure of roads, airports, warehouses, add further to the challenges. Besides, real estate is heavily regulated for a brand to want to build ground up.
As the disposable income of the aspiring consumers in India rises, and the share of men and women as a separate category keeps further increasing, luxury and bridge brands will continue to outperform.
Brands and businesses need a conducive environment from all fronts to help create a presence and maintain personal touch with customers across platforms. Focus on maximising the efficiency of supply chain and human capital by training their associates will be the ones to increase conversion and retention.
The journey has just begun! This article was published in Businessworld issue dated 'Oct. 17, 201 6' with cover story titled 'The Luxury Special 2016'
Founder & CEO, Luxury Connect & Luxury Connect Business School