With increasing brand awareness amongst the Indian youth and purchasing power of the upper class in tier II and III cities, Indian luxury market is expected to cross $18.3 billion by 2016 from the current level of $14.7 billion growing at a compound annual growth rate (CAGR) of about 25 per cent, according to a study by Assocham.
The sectors such as five star hotels and fine-dining, electronic gadgets, luxury personal care, and jewelry performed well in the year of 2015 and are expected to grow by 30-35 per cent over the next three years. Big ticket spendings such as on luxury cars, mainly SUVs are likely to continue, growing upwards of 18-20 per cent over the next three years, driven by consumption in smaller towns and cities.
With the luxury market expected to grow at over 25 per cent year on year, Private Equity investments (PE) in the luxury segment are expected to increase and support the enhanced size of the Indian luxury market.
The Assocham paper segregated the luxury sector into products: apparel and accessories, pens, home décor, watches, wines & spirits and jewelry, services: spas, concierge service, travel & tourism, fine dining and hotels and assets: yachts, fine art, automobiles.
The high internet penetration across tier-II and tier-III cities along with high disposable income shall lead to approx. 100 mn transactions on the Internet by 2020. As a result, the luxury consumption is going to increase manifold in the country, the study highlighted.
The size of the High Income group (HIG) consumers continue to enlarge and spend over 40 per cent of their monthly income on some of the world’s largest luxury brands whereas the middle income group (MIG) consumers spend 8-10 per cent of income on luxury products. Globally too, consumer spending is on the rise and is expected to reach $40 trillion by 2020 with an unprecedented growth of $12 trillion in a decade.
D S Rawat, Secretary General of Assocham said that the slowdown in the economy has not affected the spending patterns of high income group (HIG), with many of them stating that maintaining their lifestyle is an extremely important facet of their social life.
According to the report, luxury jewellery, electronics, SUV cars and fine dining have grown beyond expectations, while apparel, accessories, wines and spirits have continued their strong growth in 2016. Consumption of branded wine is also likely to register over 30 per cent increase in the metro cities.
In 2015, Delhi ranked first in spending most on luxury brands followed by Mumbai, Ahmedabad, Pune and Bangalore.
The demand for luxury goods in metros are booming as incomes continue to rise. The survey also reveals the role of digital media and the extent to which it is being used as a tool to engage high-end consumers. The Indian luxury market is poised to expand five fold in next three years and the number of millionaires expected to multiply three times in another five years. (SH)