NEW DELHI: Sales of luxury goods are set to accelerate dramatically in India, according to new figures from McKinsey.
The consultancy reported that there are now 4.5m households claiming income levels of at least $14,000 (€9,924; £8,743) a year and purchasing high-end products.
Some 42% of this target audience live in Mumbai and Delhi, rising to 60% when incorporating the country's eight largest cities, including Pune, Hyderabad, Bangalore and Kolkata.
In 2010, exclusive goods secured around $3bn in annual sales, approximately 3% of the global total.
However, the sector is expected to generate $30bn in India by 2025, a market share of between 8% and 10%.
One key driver behind this shift will be growing affluence, as 9m homes should fall into the segment's core customer base by 2015.
McKinsey broke down luxury consumers in to two distinct groups, the first of which was described as the "super rich and other rich" - households with annual incomes of $36,000 or more.
"They are very educated - postgraduate, senior management - and they buy multiple brands. Quality and convenience matter to them," Laxman Narasimhan, a director at McKinsey, told Livemint.
Another cohort sits within the $14,000 to $36,000 earnings bracket, and is normally most interested in items like perfume, scarves, ties and wallets.
"They are also graduates, middle-upper management executives. They are selectively premium and are aware of the brands," said Narasimhan.
Among the unique characteristics of the Indian market is jewellery's central role, providing 30% of category sales.
This trend is fuelled by lavish Indian weddings and festivals.
Narasimhan suggested high-end companies typically go through discreet strategic phases, as global operators initially establish a presence and target "super premium types" with existing offerings.
"The next stage is when you become more embedded, have a local expression of brand - use India for sourcing, become a relevant player in the country," said Narasimhan.
"We are in the second stage right now. This market has to be shaped."
Currently, tackling infrastructure problems also needs to form part of a wider consideration set if the industry is to enhance its position.
"It depends on supply, real estate, pricing, products being sensitive to local needs and local issues," Narasimhan continued.
Looking even further ahead, to 2040, one substantial advantage possessed by India is its demographic dividend, as the country's working age population will stand at over 1bn people on this date.
Comparative numbers are due to reach 832m in China, where the one-child policy has delivered a different population profile, alongside 133m individuals from Brazil, and some 70m Russians.
An area that manufacturers must address in India to tap into this trend is building a network within major cities, predicted to retain a primary status.
"It is such an urban phenomenon; how you resolve … urbanisation is an important part of how [the] luxury market will play out," Narasimhan said.
Creating bespoke goods should also become a priority, following the lead of Hermes, which introduced the Shang Xia range solely for its Chinese customers.
"You are seeing it already in experiential products such as real estate and hotels. These are leading indicators to what might happen here," Narasimhan argued.
Data sourced from Livemint, Wall Street Journal; additional content by Warc staff