Do You Know Luxury Will Be The New Normal In India
Do You Know Luxury Will Be The New Normal In India
The global financial powerhouse Goldman Sachs ignited a social media blitzkrieg by publishing a report called 'Affluent India', which dwelled at length on the prospects and reasons why India will be a major consumer of luxury goods.
Consumption of luxury goods and services is set to be the new normal in India.
To be clear, this is not an overnight phenomenon.
Marketers and consumer behaviour experts opine that Indian consumers have shown four distinct signs suggesting that luxury goods are here to stay.
The four signs are (a) status signalling replaced by personal fulfilment objectives, (b) a shift to subtlety and sophistication, (c) socially aware and conscious consumption and
(d) spending on experiences like holidays, hobbies, education, health and wellbeing
What’s driving this?
The Goldman Sachs report says demographic shifts, economic growth and changing consumption patterns drive this growth.
Consider this data. The number of Indians with an annual income of over $10,000 has grown at over 10% CAGR from 2019 to 2023.
These individuals have shown a strong tendency to spend on luxury goods, high-end fashion, premium healthcare, and upscale travel experiences.
The inclination to spend on luxury items has been noticeable since the pandemic, with more individuals using credit cards to pay for purchases.
The report said that credit card purchases (a rise of 2.5 times since FY19) indicate the higher financial capacity and confidence of affluent customers.
More importantly, there has been a significant growth in individual bank deposits exceeding Rs 15 lakhs, showing an impressive CAGR of 45%.
Beneficiary Sectors
In recent years, companies focusing on high-end consumption have experienced more rapid growth than those catering to general mass-market consumption.
The most significant beneficiaries of the increasing affluent demographic in India are sectors such as leisure, jewellery, premium dining, healthcare, and premium brands across various categories.
This trend highlights the shifting consumer preferences towards luxury and premium experiences, indicating a robust potential for businesses operating in these segments. The following four sectors stand out for their growth, an indication of the willingness of consumers ready to pay for luxury goods and services.
High-end Jewellery
India's affluent consumers are increasingly gravitating towards high-end jewellery, not just as a symbol of status but as an investment and a mark of personal style. Brands that blend traditional craftsmanship with contemporary designs are particularly in demand.
This sector is seeing innovation in the use of precious metals and stones, and bespoke jewellery services are becoming more popular.
Premium Healthcare
With increased wealth, there's a noticeable shift towards premium healthcare services. This includes not just advanced medical treatments but also personalised wellness programs, preventive health check-ups, and luxury medical facilities.
There's a growing market for services that offer holistic health experiences, combining state-of-the-art medical care with luxurious accommodations and amenities.
Luxury Travel
Luxury travel in India is evolving beyond just opulent accommodations and exclusive destinations. It now includes personalised experiences, adventure tourism, wellness retreats, and back-to-roots and cultural tours.
There's a surge in demand for exclusive and off-beat travel experiences tailor-made to the preferences of the affluent traveller.
Gourmet Food
The gourmet food sector is experiencing a boom, driven by a growing interest in international cuisines, organic and farm-to-table concepts, and culinary experiences like chef's table dinners, farm-to-table eating experiences and wine-tasting events.
The rise of speciality restaurants, gourmet food stores, and luxury food delivery services supports this trend.
Investor Focus
Investors must ensure they are ahead of the curve even as the market's landscape evolves.
To stay ahead, they must:
1. Identify Emerging Trends: Stay abreast of the latest developments in the luxury market. Look for emerging consumer trends, innovative business models, and technological advancements shaping the luxury sector.
2. Diversify Investment Portfolios: Consider diversifying your investments across various sectors benefiting from the rise of affluent consumers in India. This includes luxury retail, premium real estate, high-end healthcare, and bespoke travel services.
3. Focus on Quality and Sustainability: Invest in companies that prioritise quality, exclusivity, and sustainability. Rising consciousness about environmental degradation is leading to customers being ready to pay more for sustainable products, encouraging companies to launch relevant products. The rising sales of Electric Vehicles in India are testimony to it.
4. Leverage Digital Transformation: The digital landscape plays a crucial role in the luxury market. Investing in businesses that effectively utilise digital channels for marketing, sales, and customer engagement can offer a competitive edge.
5. Engage with Market Leaders and Innovators: Look for opportunities to engage with companies that are market leaders or innovators in the luxury segment. The managers of these businesses constantly evaluate their product and service portfolio to ensure they are future-proof. These entities are often at the forefront of market trends and can provide valuable insights and opportunities.
6. Monitor Policy and Regulatory Changes: Keep an eye on government policies and regulations, as they can significantly impact the luxury market. Understanding these changes can help in making informed investment decisions. For instance, a change in the GST structure for Sports Utility Vehicles can impact companies manufacturing them.
7. Seek Expert Advice: Consult with market analysts and industry experts specialising in the luxury sector. Their perspective can guide investment strategies and help identify potential risks and opportunities.
The rise of luxury consumption in India presents a unique and exciting opportunity for investors.
By strategically aligning investments with the evolving preferences of the affluent Indian consumer, investors can capitalise on this growth and participate in shaping the future of India's luxury market.