Given the rising brand awareness among Indian youth and purchasing power of the upper income consumers in tier II and III cities, Indian luxury market is expected to cross US $18.3 billion by 2016 from the current level of US $14.7 billion growing with a compound annual growth rate (CAGR) of about 25 per cent, reveals a latest study by ASSOCHAM.
“The factors that have fuelled the luxury industry’s growth are the rise in disposable income, brand awareness amongst the youth and purchasing power of the upper class in Tier II and III cities in India,” Secretary General ASSOCHAM, D S Rawat, said.
The sectors such as five star hotels and fine-dining, electronic gadgets, luxury personal care, and jewellery performed well in the year of 2015 and are expected to grow by 30-35 per cent over the next three years.
The size of the High Income group (HIG) consumers continue to enlarge and spend over 40 per cent of their monthly income on some of the world’s largest luxury brands whereas the middle income group (MIG) consumers spend 8-10 per cent of income on luxury products, the survey reveals. Globally too, consumer spending is on a rise, expected to reach US $40 trillion by 2020 with an unprecedented growth of US $12 trillion in a decade, adds the report.
The survey segregated the luxury sector into products: apparel and accessories, pens, home décor, watches, wines & spirits and jewellery; Services: spas, concierge service, travel & tourism, fine dining and hotels and assets: yachts, fine art, automobiles.
The high internet penetration across tier II and III cities along with high disposable income shall lead to approx. 100 million transactions on the Internet by 2020. As a result, the luxury consumption is going to increase manifold in the country, highlighted the study.
“Luxury jewellery, electronics, SUV cars and fine dining have grown beyond expectations, while apparel, accessories, wines and spirits have continued their strong growth in 2016. Consumption of branded wine is also likely to register over 30 per cent increase in the metro cities,” the report said.
Some of the significant brands and companies across various verticals who performed well in 2015 included Gucci, Christian Dior, Louis Vuitton, Ocean Style Yachting, Canali India, L’Oreal Luxe India, LVMH India, Judith Leiber, The Phoenix Mills, The SPA Group, Geetanjali Group, The Bauers, Starwood Asia Pacific Hotels & Resorts, Da Milano Leathers, Reliance Brands, Hidesign and others.
As per the estimate, luxury beauty products market has also been growing at average 28 per cent over the last three years.
The survey was conducted in Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabad, Pune, Chandigarh, Dehradun, etc. A little over 250 respondents were selected from each city on an average. As per the survey, in 2015, Delhi ranks first in spending most on luxury brands followed by Mumbai, Ahmedabad, Pune and Bengaluru.
“Interestingly, slowdown in the economy has not affected the spending patterns of high income group (HIG), with many of them stating that maintaining their lifestyle is an extremely important facet of their social life,” Rawat said.
Majority of women tend to make purchasing decisions around cosmetics, perfumes, spa treatments, clothes, footwear, bags and jewellery. While, men mostly decide on purchases related to alcohol, watches and automobiles, said the survey.
A majority of survey respondents said they purchase luxury items during overseas trips, with cosmetics, watches, bag, and perfumes etc. Nearly 85 per cent of potential consumers search for luxury brands on the internet at least once a month.
There are also increasing signs of changing consumption patterns in major cities. “The demand for luxury goods in metros is booming as incomes continue to rise. The role of digital media and the extent to which it is being used as a tool to engage high-end consumers is also increasing,” the report noted.