India’s luxury market – the unexpected potential
As sales growth slows in China, Brazil and Russia, luxury-goods makers are increasingly looking to cash in on patches of new wealth sprouting in often-unexpected parts of India, where there is a growing appetite for luxury brands.
Most of the smaller cities where the wealthy are located are also where key industries have taken root. Ahmedabad hosts textile, pharmaceutical and chemical factories.
The hunt for these customers is sending big name brands into India’s heartland, as they seek to sell handbags, high heels and other glamorous goods in India’s second- and third-tier cities, which may have populations in the millions,
“There is a growing demand for luxury products because people want to look better, feel better,” Sanjay Kapoor, managing director of Genesis Luxury Fashion Pvt. Ltd., told WSJ. Indians are “more aware of trends now.” There is no taboo in India on leather goods despite prohibitions in some states on consumption of beef.
Knowing “where the rich live…that’s critical,” said Genesis’s Mr. Kapoor. Second tier cities with a potential for international luxury brands include Indore in Madhya Pradesh to Nagpur in Maharashtra.
Genesis is one the leading luxury fashion retailers in India, partner and franchisee of several major international luxury brands.
An increasing number of the people in this creamy layer—at least 44%—of the economy are from outside its megacities, according to a Kotak Wealth Management report. The number of millionaire Indian households worth 250 million rupees ($3.8 million) grew by 17% from 2014 to 2015.
That figure is expected to more than triple to 348,000 households over the next five years, with a combined net worth of 415 trillion rupees, according to the Kotak report. They make up less than 1% of a population where 20% of people make less than $2 a day, and the majority make $10 a day, according to a study by Pew Research Center.
India’s luxury market is set to more than double to $5.6 billion by 2019, research firm Euromonitor predicts. That is still small compared with the $23 billion sold in China last year. But it is growing rapidly. Luxury sales in India rose 25% in 2014 from a year earlier, compared with 7% in China, Euromonitor said.
adapted form the Wall Street Journal