Luxury brands see potential in smaller towns

Growth expectations among the world’s biggest luxury goods manufacturers are highly optimistic for India, especially since some brands appear to be heading towards smaller towns. With one million young adults entering the job market every month, the potential unrivalled demographic dividend is too strong to ignore for luxury automobile manufacturers, cosmetic giants, or even those from the real estate sector.

Indian consumers tend to appreciate luxury more than ever before, says Dhruv Agarwala, CEO, PropTiger and Makaan.com. “Growing personal disposable income leading to affluence is one factor. Customers’ lifestyle aspirations are also going up,” he adds.

Automobile major Mercedes-Benz too sees a lot of potential in India’s luxury automobile space. Eberhard Kern, Managing Director and CEO, Mercedes-Benz India, says India’s increasing affluence makes the prospect for luxury car brands even brighter.

“Mercedes-Benz has sold almost the entire 2012’s volume of 7,138 units in the first six months of 2015 alone, with sales recording 6,559 units. India is one of Mercedes-Benz’s key emerging markets, and the 41 per cent H1-2015 growth is also one of the fastest among all markets globally,” said Kern.

India is also an important market for Shiseido India, a premium cosmetics company. Salman Z Bukhari, Marketing Director, Shiseido India, adds that the country’s rising exposure to luxury brands has been brought about by the “explosion of media and information and an increasing middle-income category.”

India’s luxury market is growing at a compounded annual growth rate of approximately 18 per cent and is projected to reach $15 million by 2016. A fast, increasing urban middle class, along with a growing number of high net worth individuals has attracted most luxury brands.

In terms of real estate, the increasing exposure of Indian consumers to luxurious homes outside India through their travel has helped grow the market, according to PropTiger’s Agarwala, who says developers forming joint venture with international luxury builders and brands such as Donald Trump, Armani, Four Seasons etc, has also aided the trend. Citing several examples to buttress his point, he adds that sales of luxury homes are de rigueur in India. DLF Camelias in Gurgaon, with a starting price of ₹25 crore, sold 34 units in the January to March quarter, whereas Trump Towers in Mumbai, with bookings that start at ₹10 crore, sold 100 units within a month of opening bookings.

India’s luxury goods market has been growing by more than $255 million a year in absolute terms, much stronger than Singapore and Australia, according to research firm Euromonitor. “The larger the city, larger the potential. So the metros, especially Delhi NCR, Mumbai and Bangalore, do have the highest contribution. But there is another big market in Tier 1 and 2 cities that seeks luxury,” says Shiseido’s Bukhari.

COMMENT NOW