A recent CII – AT Kearney Report says that the luxury goods market in the country is set to touch a mark of USD 14.72 billion by 2015.
According to the ‘Luxury in India: Charming the snakes and scaling the ladders’ report, which was released at the ‘Luxury Goods Forum’ organised by Confederation of Indian Industry (CII) on October 7, the growth of India as a luxury goods market and its emerging potential can be gauged by the increasing number of premium luxury brands entering into India. Jyotiraditya Scindia, minister of State for Commerce and Industry, Government of India, remarked, "India has historically been a sourcing area and now it’s becoming a market for luxury goods. India is already aware of creating luxury with the skilled workforce, but what is needed is consistency, marketing and technology to transform this niche market."
Scindia urged the foreign designers to establish manufacturing hubs in India and make it the gateway to other parts of the world. He summed up the five reasons for the huge potential: ready consumer market; high growth in tier I, II and III cities with disposable incomes; credit and leverage in finance available; brand awareness; and role of government.
Armando Branchini, executive director, Altagamma, announced that Italian brands will soon announce investment plans in India. Thomas Varghese, chairman, CII National Committee on Retail and CEO, Aditya Birla Retail, said, "The challenges faced by the market are to segment exactly and understand the psyche of luxury customer in India. This understanding will drive the product and service offerings, formats and business models. On one hand, we have new customers emanating from the middle class backgrounds whose higher disposable incomes may not necessarily translate in to higher spend. We need to induce trials, educate and create awareness about various luxury brands, products, services at suitable price points. On the other hand, we need to ensure that the expectations are well catered to in terms of range and freshness of merchandise. Also infrastructure development, regulatory framework (especially FDI), fiscal incentives and suitable employee skill sets are also challenges."
Sanjay Kapoor, chairman, CII Luxury Goods Forum and MD, Genesis Luxury Fashion, said, "The new aspiring middle class, tier II and III cities with emerging population will lead the growth story forward and they present a huge scope. Luxury good awareness is growing exponentially. The mindset of the discerning customer is changing slowly to suit our lifestyle."
Neelesh Hundekari, principal and head, Luxury and Lifestyle Practice, AT Kearney India remarked, "In the matured markets growth has plateued and the Indian middle class with an income of around Rs. 10 lakhs household income per annum, this market is the one which is highly under penetrated, will give the luxury market in India huge fillip. Indian Luxury market is currently estimated to be at 4.76 billion in USD and has a latent demand of USD 3-3.5 billion, which is ready to be tapped. The major component of this market is jewellery. The hindrances are supply chain constraints and initiatives are needed in this side and scattered customer. What is needed is micro-segmentation of the customer. What is also needed is getting the real estate component with local knowledge of real estate and right pricing for the Indian customer to hit it off the right way."
John Hooks, deputy chairman, Giorgio Armani Group said, "New vistas of marketing need to be delved, and India needs to remove barriers in trade to luxury market to become more accessible."
According to the report lack of proven real estate model, a highly fragmented consumer base and no central organisation to address regulatory issues are the main problems that luxury retailers still face in India. The report further stated that the critical success factors for a luxury player include attracting the right footfalls, getting the pricing right, providing a world class experience, getting the cost structure right, experimenting with new formats and developing a robust real estate management capability.
— IndiaRetailing Bureau