Indian Luxury Market in 2023 and beyond

Over the next decade, India will be the fastest growing economy owing to its strong domestic demand, physical and digital infrastructure and global competitiveness. Although, major economies in the world are witnessing recessionary trends, Indian economy is estimated to grow by around 7% this year to become fifth largest economy in the world. According to recent EY report, India’s GDP will reach $26 trillion and its per capita income will touch $15000 by 2047, placing it among the top developed economies.

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Number of millionaires in India are projected to grow by 105 per cent by 2026, as per Credit Suisse report. No wonder, therefore, global luxury brands are bullish on Indian market and are eying to enter and expand in the country. Recently, Aditya Birla Fashion Retail (ABFRL) announced a partnership with French luxury department store chain Galeries Lafayette. The flagship stores in Mumbai and Delhi will house more than 200 luxury brands. Reliance Brands Ltd signed a deal to bring global luxury brands Valentino and Balenciaga to India.?The eagerness among global luxury brands to capture a pie of the booming luxury market in India clearly depicts that Indian luxury market is getting matured and is on a strong growth path.

Key factors contributing to Indian luxury market growth

As per Bain and Company report, India’s luxury market is expected to grow to 3.5 times the current size and reach US$200 billion mark by 2030, propelled by rising number of UHNWIs (net assets with USD 30 million or more), growing entrepreneurship, strong middle class, greater penetration of e-commerce and demand from tier 2 and 3 cities. Number of ultra-rich grew 11 times in the last decade in India, making it third in billionaire population globally after US and China in 2021, as per Wealth Report 2022 by Knight Frank.

Key luxury sectors growing in India

Post pandemic, there has been surge in spending on luxury in India. From acquiring luxury real estate to luxury cars; from splurging on destination weddings to exotic holidays, gourmet food and dining experiences, the list goes on.

Luxury homes

Recently, the demand for luxury homes have been rising in India as middle-class consumers are looking for avenues to showcase their new-found wealth and status. Further, post-pandemic, a key shift has been witnessed in the willingness to own home among young consumers. Around 33% of HNIs and UHNIs are ready to spend more than Rs 10 crore to buy a property as per annual Luxury Outlook Survey 2023 by India Sotheby’s International Realty (ISIR). High rise apartments, followed by farmhouses and holiday homes are among their favorites. Delhi, Mumbai, Goa and Bengaluru are their most preferred cities. There also has been a significant increase in demand for second homes, retirement homes and homes in gated/compound houses with access to world class amenities. The luxury real estate growth is further propelled by demand from NRI’s who are looking to invest in this asset class back at home. The dollar’s continued strengthening against Indian rupee has improved the purchasing power of NRI’s.

Luxury Cars

In 2022, 38000 luxury vehicles were sold in India, about 50% increase from the year 2021. Mercedes-Benz alone sold 15,822 units in the country last year, its maximum yearly sales for India, a 41% growth over 2021 volumes. Although, at present India is a nascent Indian market for luxury car industry with luxury brands contributing to less than 1% of the total automobile sales, the market is poised for more than 20% growth with industry estimates of almost 45,000-unit sales in 2023. Further, brands like Mercedes are witnessing significant demand for their top end models that contributed 22% of its sales in 2022. Along with new car demand, there has been significant rise in the demand for pre-owned luxury cars, which clearly depicts that there has been significant rise in demand for luxury cars among aspirational luxury buyers. Used car dealer Spinny found that average age of buyers looking for used luxury cars is 38 which shows that Indian consumers are looking to own luxury cars at a much earlier age than before.

Experiential Luxury

After the pandemic, well-heeled Indians are itching to spend on experiences rather than spending on possessions, primarily driven by the YOLO (you only live once) phenomenon and realizing the long-term value of indulging in experiential luxury. The inability to travel during pandemic triggered pent up demand for luxury and experiential travel in 2022 and the trend does not seem to be slowing down in 2023 as well.

Rich Indians are opting for elusive, out of the box destinations and indulging in luxury experiences, be it offbeat luxury tours, adventure sports, culinary and spa experiences or even booking private charters for holiday travel. The list is endless and Indians are lapping up these opportunities with great enthusiasm. Travel booking engine Kayak found out that 60% of travelers consider themselves as curious. Indian travelers have also shown willingness to spend more on sustainable travel and are ready to loosen to their wallets to lesser known destinations offering hidden gems, sustainable holidays and impeccable experiences.

Bridge to luxury brands

A significant number of young Indians have become aspirational consumers of luxury products owing to higher disposable income, increased awareness about luxury brands and stable economic growth in the country. A number of luxury brands have introduced entry level or diffusion brands to capture these growing list of aspirational luxury buyers in India, be it entry level luxury cars from Mercedes and BMW to increasing retail presence of brands like Michael Kors. India’s elite class is expected to reach 26 million household by 2025 from 10 million household currently as per a report by Retail Dive, with income levels multiplying by 1.7 times. Hence, luxury brands should tap this opportunity and come up with bridge brands for Indian market.

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Road for future

Indian market is unique and offers peculiar set of challenges to luxury brands. The technology trained digital native population with rising disposable income presents attractive growth opportunities for global luxury brands, but at the same time, requires deep knowledge of local culture to navigate this market successfully.

With the growing appetite of Indian consumers, high-end brands should introduce India-exclusive collections to create deeper connection with uber-rich Indians. Lately, Louis Vuitton launched a limited-edition capsule collection of footwear priced at??75,000-1.20 lakh to target the booming wedding season. Italian luxury brand Bvlgari launched mangalsutra exclusively for Indian market. Swiss luxury watchmaker Franck Muller introduced 150 pieces of limited-edition time pieces for India on 75th year of India’s independence. Etched with India’s map on the back of each case, the watches won Indian hearts.

Indian luxury consumers are evolving and use brands as an expression of self rather than just signaling logos. These consumers are now well-educated and well-travelled; they understand true meaning of luxury and associate it with quality and craftsmanship. Demand for personalization and growing expectations for service levels make it imperative for brands to create a seamless shopping experience at every touchpoint of consumer journey. This includes using metaverse, gamification, AR/VR tools and incorporating channels like WhatsApp where luxury brands can update their patrons on latest collections, new arrivals and overall provide bespoke service.