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Is 'Price-sensitive' India Market Ready For Luxury Products? India's growing middle class, rising disposable incomes, and shifting consumer preferences have created a favorable market for premium brands to thrive, say experts

By S Shanthi

Opinions expressed by Entrepreneur contributors are their own.

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India is often called a price-sensitive market. While it may be true to a large extent, today there are innumerable takers for premium products as well. Luxury is evolving from niche to normal. A look at the sale of iPhones in India validates the same. According to the Counterpoint Research data, Apple iPhone 13 was the best-selling smartphone in the country during Q4, 2022. iPhone 13 had a 4% market share of sales. While this may not come under the super luxury category, it definitely falls under the premium category, especially for the India market, which is packed with products across price ranges.

A lot of international brands are preparing to launch themselves in a big way today. The increasing demand for premium brands in India presents an exciting opportunity for investors as well, who are all in to capitalize on India's readiness for premium brands.

"You will find that luxury, over-indulgence, grandeur and desire have always been closely and firmly woven into the fabric of Indian history. The shift however today is a question of scale and access. Wealthy Indians have been patrons, connoisseurs and ardent buyers of premium luxury for a long enough time in history. That was however an era of extremes for our economy! It is the last 25 years where industrialization, liberalization, the Internet, globalization, branding, education, social media & two-way migration has created a robust & sustainable middle class," said Pavan Anand, an international Bijoutier.

The middle class is expanding every day and they are the primary target for the premium and luxury market, be it technology, vehicles, real estate, apparel and lifestyle goods and services.

Driving factors

Many sectors and technologies in India have leapfrogged by five to ten years in terms of consumption because of the pandemic. Luxury is one of them. "After the pandemic, there has been a surge in spending on luxury in India, encompassing the acquisition of luxury real estate and cars, splurging on destination weddings and exotic holidays, as well as indulging in gourmet food and dining experiences," said Ankur Bansal, co-founder and director, BlackSoil.

Having said that, India's economy has been experiencing significant growth since the turn of the decade, leading to a rise in disposable incomes and a growing middle class. "India's growing middle class, rising disposable incomes, and shifting consumer preferences have created a favorable market for premium brands to thrive. As more consumers aspire to a higher standard of living, they are willing to invest in premium products that offer quality, exclusivity, and status," said Somdutta Singh, founder, Assiduus Global.

A rise in entrepreneurship, digitalization, global offshoring, and a booming middle class are some of the key factors driving the change. Furthermore, India's favorable demographics, including a young population and a rising urbanization rate, contribute to the growing demand for premium brands. "As urban centers develop and consumers become more exposed to global trends and lifestyles, the appetite for luxury and premium goods continues to rise," Singh added. According to recent reports, the number of millionaires in India is projected to grow by 105% by 2026.

Moreover, just like any other sector, it is a matter of demand and supply for luxury products as well. International premium brands have been actively investing in the Indian market. Indian conglomerates are also betting on luxury products. Reliance Brands Limited (RBL) has partnered with over 60 premium brands such as Burberry, Giorgio Armani and has also invested in homegrown luxury brands such as Manish Malhotra and Ritu Kumar.

"They have introduced various strategies to make their products more accessible and affordable, such as manufacturing devices locally to reduce costs and offering financing options such as BNPL. These initiatives have helped premium brands expand their reach and attract a broader customer base," said Bansal.

In addition to that, a new consumer cohort called LOHAS (Lifestyle of Health and Sustainability) is emerging among millennials who value responsible luxury, which combines luxury and premium products with a focus on ethical sourcing, sustainability and social responsibility. "These consumers believe in conscious consumption and want to know the larger impact of the brands they endorse by understanding the brands' use of eco-friendly materials, efforts to minimize waste and pollution and ethical labor practices. Building a sustainable brand for the future requires the organization to make sustainability a part of its core DNA and mission," said Kiran Ranga, managing director, Ripple Fragrances.

Indian celebrities and influencers also play a significant role in shaping consumer preferences. Many luxury brands collaborate with celebrities for endorsements, which further drives the growth of the industry.

Digital-first luxury marketplaces

Digital-first luxury marketplaces have played a crucial role in facilitating the growth of luxury businesses in India. "Digital platforms have not only enabled consumers to browse and purchase luxury products conveniently from the comfort of their homes, but they also provide exclusive access to limited-edition items and collaborations, creating a sense of exclusivity and desirability," said Ranga.

These platforms have increased accessibility, allowing luxury brands to reach a wider audience across the country. "By eliminating geographical limitations, consumers from smaller towns and cities can now explore and purchase luxury products that were previously out of reach. The enhanced brand visibility provided by digital marketplaces has helped luxury brands, which can now showcase their products to a vast online audience," said Anand Nichani, managing director, Magniflex India.

To this day, India has very few retail outlets for luxury goods in a few pockets in Tier-1 cities. However, with the advent of digital-first luxury marketplaces, not only are these brands able to cater to people for whom these stores are inaccessible, but they are also able to expand their product offerings to include items that won't be available in stores. For instance, Stock-x, a premium marketplace, is a platform where customers can purchase an expensive set of Jordans that will be extremely rare to purchase in-store at a Nike.

The Collective, a multi-brand Indian retailer, launched in 2009 by Aditya Birla Group's fashion division, sells 85 brands, including Moschino, Ralph Lauren and Kenzo, across stores in 11 cities in India and also via its e-commerce platform. 25 per cent of its sales come from e-commerce, through its own website, according to this news report.

"Till half a decade ago, luxury was sold hinging on exclusivity, personal experience, human interaction & had a very tactile experience. This has changed enormously with brands pushed to convert that into a digital experience. It's not an easy transition to make. However many luxury brands have made that transition successfully," said Anand.

The demographics

Luxury brands these days are being bought by the younger population just as much as the older ones. Gen Z has been privy to the global phenomenon and is more willing to spend on luxury due to their increased and early exposure to it. "By far, the biggest audience for luxury brands is the audience between the ages of 25 and 44. The 44+ segment values their hard-earned money and spends on luxury brands when there is an occasion to celebrate. They grew up with these brands as an aspiration for them, and today, when they buy them, these brands give them a sense of achievement," said Nichani.

While Tier I cities are easy buyers, there is also an increasing demand for these brands in Tier II cities. Consumers are showing a willingness to spend on luxury brands.

Overall, there are two categories of people these brands cater to. Those with enough disposable income to purchase these goods and the second category of people who treat these products like an aspirational purchase and saves up to buy the item.

Is price sensitivity no longer a challenge?

While the luxury market has evolved a lot, price sensitivity remains a challenge. Indian consumers still seek value for money and may compare prices across various channels, including international markets, leading to potential price competition, say experts. "These businesses are inherently low volume businesses and even today most Indians don't like spending their disposable income on luxury goods that will lose value as opposed to saving it via fixed deposits or other risk-free investments," said Bansal.

"India's luxury market also faces infrastructure challenges, such as limited availability of high-quality retail spaces and luxury malls, especially in Tier II and Tier III cities. This can hinder the expansion of luxury brands outside major metropolitan areas," added Ranga.

Moreover, most luxury goods are not manufactured in India and the government levies a heavy import tax on such goods, which further adds to the cost of these already high-priced goods.

And, just like many sectors, luxury businesses have to navigate complex regulatory frameworks which can impact their pricing and profitability. Further, building trust and understanding local consumer expectations are essential for long-term success. "Luxury brands need to adapt their marketing strategies and product offerings to resonate with the cultural nuances of different states and communities. Luxury brands must strike a balance between maintaining their global brand identity and adapting to local tastes and preferences. Educating consumers about the value, craftsmanship, and heritage associated with luxury brands is crucial in a market where luxury consumption is still evolving," said Assiduus Global's Singh.

Overall, the luxury market in India is growing rapidly. India's luxury market is expected to be one of the fastest-growing in the world, with a projected value of $8.5 billion in 2023, up by an impressive $2.5 billion from 2021, according to Euromonitor International. However, luxury businesses and brands still face several challenges such as high import duties, counterfeit products, lack of awareness, difficult distribution channels, cultural differences and stiff competition.

S Shanthi

Former Senior Assistant Editor

Shanthi specializes in writing sector-specific trends, interviews and startup profiles. She has worked as a feature writer for over a decade in several print and digital media companies. 

 

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