India has officially gone luxurious. Across the sub-continent, high-end retailers are lining up take advantage of the multi-billion dollar opportunity the Indian luxury sector presents.
India’s luxury market is currently estimated to be at approximately US$20 billion, up from US$14.7 billion in 2015 at a CAGR of 25%1.
The target demographic is part of a newer breed of consumer—well-educated, widely travelled, and the highly aspirational population of 390 million Generation X and 440 million millennials2 of today’s India.
By the forecast year of 2021, India is projected to have 294,000 households with a combined net worth of about USD 5.3 trillion3.
Luxury as social currency
In gateway cities like Mumbai, Delhi and Bengaluru, young millionaires, entrepreneurs and high-income professionals view luxury as a social currency. They approach high-end consumer goods as a reflection of their personal identity.
Of course, the traditional consumers of luxury in India—the old monied who are able to afford as well as appreciate luxury brands—continue to thrive, as seen by the success of standalone boutiques like those of Louis Vuitton, Chanel, and Hermès. But the ‘new’ customer cannot be overlooked anymore.
In a market which opened up to ‘branded retail’ only about two decades ago, Indians have only begun to discover international brands. When it comes to luxury consumption, they continue to be value-conscious and prefer to shop in stores over online to ensure authenticity of goods.
More so, while they may pick up a single luxury product—a watch or a handbag or a pair of shoes—they are yet to adopt luxury products as a complete lifestyle.
In fact, ‘bridge-to-luxury’ is a significantly attractive segment for the new-age Indian consumer – and 2015-2016 witnessed the foray of brands such as BCBGMAXAZRIA, Le Perla, Longchamp, Armani Exchange, and Coach in this category.
3 reasons for luxury department stores in India
The new-age Indian consumer requires and demands a luxury retail experience which plays an evolutionary catalyst into a more matured, discerning luxury consumer.
From where we stand, the luxury department store could be just the right model to take the consumers through their journey from ‘affordable’ or ‘bridge-to-luxury’ segment to the ultra-luxe segment. Why?
1. Nonintimidating environment
A luxury department store provides Indians with the opportunity to explore the bouquet of international luxury products in a non-intimidating and non-hotel shopping environment.
2. Connection with brands
It represents a next generation retail ecosystem where buyers can actually connect with the brands, receive the best-in-class shopping assistance and personalised service, and have the quintessential luxury experience.
3. Testing ground
At the same time, the luxury department store can also serve as a platform for the international luxury brands to test the niceties and perceptions of the Indian luxury consumer.
Luxury brands looking to harness the immense potential of the Indian luxury market need to understand that the ‘real’ opportunity lies with the aspirational Indian consumer, and a luxury department store could be the next big thing to look out for in India’s retail landscape.
- CBRE Research, The Associated Chambers of Commerce of India (ASSOCHAM)
- Goldman Sachs – “India Consumer Close-up”
- Kotak Wealth Management – “Top of the Pyramid India – Decoding The Ultra HNI”
Based out of the Gurgaon office, Vivek Kaul is Head of Retail Services for CBRE India. With over 17 years of real estate experience, Vivek has been involved in a wide range of assignments on feasibility, retail planning, positioning, mall design reviews and leasing for international and large scale Indian developers and retailers.