The Surging Tide: Unraveling the growth of luxury retail in India

Luxury brands have been seeing a steady growth rate in India, with a faster growth trajectory in the last few years. As per a report by PHD Chamber of Commerce and Industry and CBRE South Asia, luxury brands footprint across retail formats saw a 170% leap in 2023, covering as much as 600,000 square feet.

India’s emergence as a burgeoning market for luxury brands comes on the back of a rapidly growing consumer base that appreciates and aspires to indulge in opulence. This shift in consumer behaviour can be attributed to a combination of factors, including a burgeoning economy, an expanding middle class, and a changing mindset towards luxury. This article delves into the remarkable growth of luxury brands in India, exploring the key drivers, and the evolving landscape of the luxury market.

Based on Euromonitor International, India’s luxury market is projected to be among the most dynamic markets in the world and is projected to reach a value of $8.5 billion by 2023, growing from $2.5 billion in 2021. A Bain & Co report even predicts that by 2030, the market for luxury goods in India could hit $200 billion.

If we look at the comprehensive overview of the economic growth and wealth distribution trends in India, we can see there is a positive trajectory for the Indian economy. Factors such as strong domestic demand, robust infrastructure (both physical and digital), and global competitiveness are the main factors contributing to its growth.

Major cities like Mumbai, Delhi, Bengaluru, Kolkata, and Hyderabad, particularly in terms of high-net-worth individuals (HNWIs), indicates the concentration of wealth in these urban centers. Mumbai being India’s richest city with 59,400 high-net-worth individuals (HNWIs), according to the World’s Wealthiest Cities Report 2023, published by migration consultancy Henley & Partners –makes it the 21st wealthiest city in the world.  Moreover, the projections about the growth of millionaires in India by 105% by 2026, as per the Credit Suisse report, reflect a rising affluence and a growing market for high-end goods and services.

These trends suggest a dynamic economic landscape in India, with opportunities for businesses, both domestic and international, to tap into the growing consumer base and expanding markets. It will be interesting to see how these projections play out over the next decade and how various sectors capitalize on the changing economic dynamics.

Factors contributing to these forecasts:

• Rising Income Levels: As disposable incomes rise, consumers may be more inclined to spend on luxury goods and services.
• Domestic Demand: With a large and increasingly affluent population, there's a growing market for luxury products and experiences within the country.
• Infrastructure Development: Better infrastructure facilitates the movement of goods, reduces transaction costs, and supports the growth of various industries, including the luxury market.
• Global Competitiveness: India's efforts to enhance its global competitiveness can attract foreign investments and promote the export of luxury goods.
• Recessionary Trends in Other Economies: While major economies face recessionary trends, India's resilience and growth can attract international investors and businesses looking for stable markets.
• Fastest Growing Economy: The expectation that India will be the fastest-growing economy over the next decade highlights the country's potential for sustained economic expansion, which bodes well for various industries, including the luxury market.

Commenting on the factors driving growth in luxury retail, Vejay Anand, CEO, Ironhill India & Branding Expert, said, “The country's rapidly growing economy and the emergence of a sizeable group of affluent consumers have made it an attractive destination. The rising middle and upper classes, with higher disposable incomes, present an untapped market with considerable potential. Moreover, the shift in consumer preferences towards luxury goods, driven by evolving lifestyles and global desires, has further fueled the interest of brands in establishing their presence in India. Additionally, India's burgeoning population and rising spending power have made it an attractive market for luxury brands, prompting them to consider expanding their operations within the country.”

Delhi and Mumbai: Hubs of luxury retail

There has been a continuous competition between Delhi and Mumbai for the title of India's luxury fashion capital. Luxury brands like Louis Vuitton, Dior, Chanel and Hermès arrived in India via Delhi while Gucci, Jimmy Choo and Bottega Veneta, preferred Mumbai for their flagship stores. More recently, Christian Dior Couture showcased its Fall 2023 collection in Mumbai, signaling a growing interest in India's untapped market. While there is an emphasis on exploring new markets, Delhi and Mumbai are deemed the two largest luxury markets. The recommendation is for brands to establish a presence in both cities, leveraging the existing infrastructure and consumer base.

Both the cities boast of luxury malls, such as DLF’s Emporio, Chanakya Malls, Palladium Mall, and Jio World Plaza, providing suitable environments for luxury brands. Mumbai, in particular, benefits from attractive real estate in the south, chosen by brands like Hermès and Christian Louboutin.

Recent partnerships between luxury brands like Valentino, Balenciaga, and Galeries Lafayette and Indian retailers, including Reliance Brands Ltd. (RBL) and Aditya Birla Fashion and Retail Limited (ABFRL), demonstrate the industry's strategic moves. RBL, a unit of Reliance Industries Ltd., owns nearly 35 popular luxury brands. ABFRL has partnered with Galeries Lafayette for a massive flagship store in south Mumbai and a second store in Delhi.

In addition, ABFRL plans to launch a dedicated e-commerce platform for Galeries Lafayette in India, reflecting the increasing significance of online channels in the luxury retail sector. Overall, the text underscores the dynamic nature of the luxury fashion market in India, with brands strategically expanding to new cities and forming partnerships to tap into the country's growing affluence and consumer base.

Feather on the cap of luxury – Jio World Plaza

Opened in November 2023, Jio World Plaza is the newest entrée, spanning across a massive 750,000 square feet. It showcases 66 globally renowned brands. Among the premier brands featured are Louis Vuitton, Gucci, Burberry, Valentino, Dior, Balenciaga, Rolex, Bottega Veneta, Cartier, Bulgari, Jimmy Choo, and many more. Notably, Tiffany & Co, Versace, Bulgari, and Pottery Barn have opened their first stores in India within the mall.

Retail evolution and unique marketing strategies

The retail landscape in India has undergone a transformation, with the emergence of luxury malls and high-end shopping districts in major metropolitan cities. International luxury brands have increasingly set up flagship stores in these premium locations, providing a unique and exclusive shopping experience. Additionally, the rise of e-commerce has further facilitated the accessibility of luxury goods to consumers across the country, breaking geographical barriers and reaching a wider audience.

As the luxury brands are a class apart from regular retail brands, their branding and marketing also need to be unique. Vejay Anand noted, “Luxury retail brands are indeed masters in the art of marketing. They don't just sell their products, but they create an entire experience that's unique and personalized to each customer. They achieve this by hosting exclusive events, offering customized services, and carefully curating limited editions that captivate consumers. These brands also take pride in their heritage, craftsmanship, and legacy and are committed to creating an emotional connection with their customers. It is important to note that scarcity alone cannot thrive in the luxury market. Instead, it requires an entire ecosystem fueled by a commitment to excellence. The scarcity principle has a potent psychological impact and is closely linked to the perception of value in the face of infinite abundance.”

On the luxury brands embracing the digital age despite their exclusive status, he said, “They're active on social media and provide online shopping experiences as elite as their in-store ones.”

Are the luxury brands offering ‘Value for money’?  

Answering this question, Chandramouli Nilakantan, CEO, Blue Lotus Communications, said, “India has a burgeoning middle class which has growing aspirations. At the same time luxury brands want to attract more and more classes to luxury products. This convergence has led to a mixed strategy by luxury brands in which they keep higher end products priced very high, and affordable only by the very affluent. At the same time, they have products like perfumes, scarves, pens, handbags, etc. which any person can indulge in.”

Changing consumer trends

The Indian consumers’ perception of luxury has evolved over the years. While traditional luxury items like jewelry and apparel still hold significance, there is a growing interest in experiential luxury, such as fine dining, luxury travel, and high-end technology. Luxury brands are adapting to these changing preferences by diversifying their product portfolios and creating immersive experiences that resonate with the evolving tastes of the Indian consumer. Moreover, we see an increase in demand for luxury labels in lesser-known towns and cities, which suggests a change in buyers’ habits.

Vejay Anand noted, “One trend that is easy to see is that consumers in these smaller areas are becoming more ambitious, replicating global lifestyle choices and aspiring to follow international directions. With greater access to global trends through various media channels and the ease of online shopping, connectivity has skyrocketed, making luxury brands more accessible outside major cities. Luxury brands have responded to these changes by establishing boutique stores and unique sections within malls, providing a taste of luxury and tailoring their offerings to suit local preferences.”

Walking a tightrope: Maintaining their exclusivity while increasing customer base

Luxury brands walk a tightrope, balancing exclusivity with broad appeal. On this Vejay Anand said, “They carefully choose where to place their brand and control the number of regional stores. This ensures accessibility to their target audience while preserving their air of exclusivity. Personalized experiences and limited-edition products create an exclusive feel for customers without compromising the brand's elite image. Some brands create entry-level or diffusion lines to expand their customer base without diluting the exclusivity of their core products. Returning to the scarcity principle, brands elevate the demand and allure of their products by instilling a perception of rarity or exclusivity. Utilizing limited-time offers, exclusive editions, or controlled product releases, they leverage scarcity to stimulate consumer interest and prompt a sense of immediacy for purchasing.”

Future of Luxury in India

As the Indian economy continues to grow, and consumer preferences evolve, the future of luxury brands in India appears promising. The potential for further market penetration, coupled with the increasing affinity for luxury experiences, suggests that the luxury sector will continue to thrive. Brands that understand the nuances of the Indian market and can strike a balance between global appeal and local relevance are poised for success in this dynamic and rapidly expanding landscape.