Opinion: India Is An Incredible Opportunity For Luxury Brands. Here’s What They Should Know.

Last week, Balenciaga announced that it had signed a deal with India's biggest retailer Reliance, to open its first-ever mono-brand story, a country that is expected to become one of the fastest growing luxury markets within the next five years. The news follows an announcement a few weeks earlier from Italian fashion house Valentino that it would also open its first-ever standalone boutique first in New Delhi at the end of this summer, which would be followed by a flagship store in Mumbai later in the year.

The two deals represent a wider move from luxury brands looking to tap into different markets for growth, particularly as uncertainty over the global pandemic, surging inflation, severe slowdowns, supply chain disruptions, the energy crisis, and the Ukraine war have forced the International Monetary Fund (IMF) to cut global GDP growth down to 3.2 percent, 50 percent lower than last year’s estimate.

While the outlook of the global economic landscape remains uncertain, India’s GDP is expected to grow by 7.4 percent by the IMF for 2022-23. The Indian government projects that its economy will reach $5 trillion by 2026-27 and is likely to become $20 trillion by 2040. In such a scenario, it’s little surprise that the world is looking at India as a growth engine of opportunity.

On top of that, India’s luxury market has been steadily growing at an impressive pace. Euromonitor forecasts the luxury goods market to be worth $8.5 billion, up by an impressive $2.5 billion from 2021. According to Statista, it is expected to continue growing annually by ~8 CAGR, to help the overall luxury market surpass $200 billion by 2030.

Luxury brands have already reaped the benefits from moving their attention towards other markets as seen with the United States, and now India, which for years has remained elusive due to complexities like high import duties, has become a focus, particularly as brands like Gucci, Bottega Veneta, and Burberry have all made their entry.

Now, a new wave of brands like Valentino and Balenciaga are making their debut, but despite this incredible opportunity, India is a complex market that is not easy to impregnate or conquer. In reality, it requires a deep-rooted knowledge of local culture, people, geography, and purchase motivators to navigate and sustain oneself successfully.

Understanding The Indian Market

There are many different nuances that luxury brands should take note of when it comes to the Indian market. For instance, the Indian male shopper tends to spend big on international luxury fashion brands, more so than female shoppers. However, accessories like bags and footwear are large drivers for women’s luxury brands since these are easy to pair with Indian luxury outfits and are a place where womenswear brands need to focus.

Another point to note is that Indians like to be pampered, so luxury brands need to offer unique experiences, storytelling, and melodrama to keep them hooked. A large chunk of the customer is maturing and seeks value and experiences over just brand name and logo.

Specificity counts. Brands that have launched India-specific collections and or communications have fared better. This is an easy route to connect to Indians not only in India, but a larger diaspora spread all across the world, particularly as a larger part of the Indian luxury market invests in brands that help define their sense of style rather than just social stratification.

Celebrity endorsements and influencer campaigns are key drivers of brand affinity. Self-indulgence comes out even bigger than a display of logo.

Unlike the West, Indians are comfortable with crowds. They prefer to step out and shop in-store as compared to online shopping.

The e-commerce surge is real. Don’t ignore it. Limited physical availability is driving small town consumers towards virtual and digital shopping.

Most consumers are unaware of NFTs. Overall awareness of NFT is marginal and ownership is negligible. NFT launches by a few Indian designers and celebrities did not take off as anticipated mainly due lack of any strategy and direction.

Resale and rent a luxury is beginning to see an increasing acceptance in first-time luxury consumers and is helping to expand the market.

The big fat Indian wedding, festivals, and gifts for such occasions remain to be large consumption opportunities. The pandemic has changed the wedding celebration into a much smaller event with limited guests but high-value expenditure on the venue, food, liquor, and of course gifts. It is not uncommon to see expensive cars, dresses, watches, etc being gifted away.

Not Just In Big Cities, But Small.

A largely fragmented market, Indian High Net Worth Individuals (HNWI) can be located in many parts of this gigantic geography. Dedicated luxury malls are a handful and few - The Emporio and The Chankaya in New Delhi, The Palladium and Jio Drive in Mumbai, The UB City in Bangalore.

However, the customer bases have been identified in mini and upcoming metropolitan areas which are ready for the luxury explosion. Statistics reveal that 45 percent of the HNWIs are based out of non-metro cities. Interestingly, 65 percent of non-metro residents buy luxury on a regular basis versus 53 percent in metros.

Today, the desire for luxury consumption runs across cities like Chandigarh, Ahmedabad, Kanpur, Raipur, Indore, Hyderabad, Jaipur, Pune, Surat, Lucknow, Indore, Nagpur, and a number of other cities. Luxury brands considering growth can no longer be relevant unless they extend their footprint to India’s non-metropolitan cities.

Not Always Physical, But Digital.

The non-metro consumer is quickly catching up with his metro counterpart. The biggest catalyst of all, the pandemic has opened up access to luxury goods via digital and virtual channels. Luxury buying via online shopping has added to the elasticity and variety of their experiences. The shy experimenter has now taken to a host of digital channels to satisfy his desire for all good things in life.

The definition of luxury for a non-metros Indian is slightly different. More than the moral fibre of a brand or self-indulgence, luxury for those in non-metros is about upcoming trends and remaining relevant to their city tribe.

Leading names like Tata Cliq, Ajio Luxe, and even The Collective offer a variety of brands – some of which may not be available in an off line mode. In fact, 50-55 percent of demand for luxury goods on The Collective’s e-commerce portal comes from cities where there are no physical stores.

As per the Atlas of Affluence, 2 out of 3 among the affluent had shopped luxury online for the first time during COVID19 restrictions. Interestingly, 65 percent of those shopping online eagerly await for stores to open within easy accessibility. This perhaps explains the rush to physical stores with renewed frenzy and fanatic zeal.

India Is Not China, India Is India

Many brands have tried to compare and expect their China story to repeat In India. This may be a big mistake. India and Indians are unique, incomparable to none.

Indians in general are highly value-conscious. The definition of value changes not only by demographics but by geography, culture, family systems as well as age cohorts. They place a greater premium on value; they look for a greater return on their investment.

Today’s Indian is a lot more confident about his future. He sees affluence within a relatively easier reach. Many Indians hence want to claim a better quality of life. Since luxury brands initially surfaced in India, the pre-sales, during sales, and after-sales experiences have evolved to get closer to the global benchmark.

Better quality talent, more educated, and exposure to luxury now serves demanding clientele. Acceptance of premium price points has become better and is thus accelerating further demand for premium and higher quality products and experiences.

Today’s Indian consumers seek luxury in every aspect of their lives— from car services to cosmetics and household furnishings to dining out. Brands today need to look at new ways to offer luxurious experiences even in the seemingly mundane. Indian consumers are looking for cutting-edge products and services to put them a step ahead of their peers.

Trendsetting products or services, innovations that create talk-value will win big. International brands must strive to understand Indian culture and customs to enhance their relationship-building efforts. This will shorten the distance between new introductions and a sense of familiarity in the marketplace and earn consumers’ respect.

India remains an incredible opportunity. But luxury brands must take the time and make the effort to understand it.

With inputs from: The Knight Frank wealth report; The Hurun India Wealth report; The Atlas of Affluence; Various news articles across the public domain.