India’s luxury market to surpass $18,3 billion by 2016
An Assocham study stated that with the increasing brand awareness and growing purchasing power of the upper class in second and third tier cities, the Indian luxury market is expected to surpass US$18.3 billion by the end 2016 from the current $14.7 billion growing at a compounded annual growth rate (CAGR) of about 25%.
Sectors such as five star hotels and fine-dining, electronic gadgets, luxury personal care, and jewelry performed well in the year of 2015 and are expected to grow by 30-35% over the next three years. Big ticket spends such as on luxury cars mainly SUVs are likely to continue, growing upwards of 18-20% over the next three years, driven by consumption in smaller towns and cities.
The chamber paper divided the luxury market into the following product categories: apparel and accessories, pens, home decor, watches, wines and spirits and jewellery, services: spas, concierge service, travel & tourism, fine dining and hotels and assets: yachts, fine art, automobiles.
According to the study, the high internet penetration across tier-II and tier-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.
The size of the High Income group (HIG) consumers continues to grow and they spend over 40% of their monthly income on some of the world’s largest luxury brands whereas the middle income group (MIG) consumers spend 8-10% of income on luxury products, reveals the Assocham survey. Globally too, consumer spending is on the rise, expected to reach $ 40 trillion by 2020 with an unprecedented growth of $ 12 trillion in a decade, added the report.
Luxury jewelry, electronics, SUV cars and fine dining have grown beyond expectations, while apparel, accessories, wines and spirits have continued their strong growth in 2016, according to the Assocham assessment. Consumption of branded wine is also likely to register over 30% increase in the metro cities.
Some of the significant players across various verticals who performed well in 2015 included – GUCCI, Christian Dior, Louis Vuitton, Canali India, LVMH India, Judith Leiber, The SPA Group, Starwood Asia Pacific Hotels & Resorts, and Reliance Brands.
The aspiration and disposable income of consumers in India is on the rise, the purchasing power of women has improved, and men are fast emerging as a separate consumer category. As per the estimate, luxury beauty products market has been growing at average 28% over the last three years.
The survey was conducted in major places like Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabad, Pune, and Chandigarh. A little over 250 employees were selected from each city on an average. In 2015, Delhi ranked first in spending most on luxury brands followed by Mumbai (2nd), Ahmedabad (3rd) Pune (4th) and Bangalore (5th).
Around 55% of the survey respondents were under the age bracket of 20-29 years, followed by 30-39 years (26%), 40-49 years (16%), 50-59 years (2%) and 60-65 years.
Rawat further said that the 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.
According to survey majority of women tend to make purchasing decisions around cosmetics, perfumes, spa treatments, clothes, footwear, bags and jewelry. Men on the other hand mostly decide on purchases related to alcohol, watches and automobiles.
A majority of survey respondents said they purchase luxury items during overseas trips, with cosmetics, watches, bag, and perfumes etc. Nearly 85% 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.
Many of the major luxury brands are continuing with their current investments, despite the ongoing global economic slowdown, women are an important target market for luxury players, as their purchasing power rises and start to seek a wider range of products, adds the survey.