Luxury sales to surge in India

11 October 2011

NEW DELHI: Luxury sales are anticipated to rise by 20% in India this year, as the category develops several distinct characteristics in the country, a study has argued.

The CII, the trade body, and AT Kearney, the consultancy, reported industry revenues hit $5.8bn in 2010, a 21% increase on 2009, a rate of growth expected to continue in 2011.

Such a pace of acceleration is in line with a previous forecast made by the two organisations, which also suggested returns would reach $14.7bn in 2015.

Automotive was among the fastest-growing sectors last year, enjoying a 36% lift and generating $745m in all, aided by the roll out of new brands and better pricing resulting from localised production.

Jewellery was up by 30% to $730m, apparel and accessories by 30% to $205m, personal care by 24% to $230m and hotels posted a 10% leap to $440m.

Electronics also grew by 35% to $160m. Equally, watches, fine dining, travel, stationery and premium alcoholic drinks saw impressive growth, leaving real estate and yachts as the only "laggards".

One driver of these trends is the expansion of luxury chains beyond top-tier cities. However, challenges like limited infrastructure, the lack of suitable retail outlets, ineffective marketing and the need to "Indianise" goods remain.

More broadly, attempts by luxury brands to attract new customers, the local adoption of global habits, and the rising importance of digital media were cited as positive shifts taking place in the market.

At present, stores deliver sales productivity of 60 to 80 rupees per square foot each day, gross margins of between 55% to 60%, rent costs in the 25% to 30% range, and other expenses of 15% to 20%.

"A unique Indian model is emerging," the study said. "Companies would benefit from choosing smaller store formats and being very careful about rent and overheads."

In the South East Asian luxury market - valued at $8bn and housing Indonesia, Malaysia, Singapore, the Philippines, Thailand and Vietnam - accessories and apparel make up 60% of sales, whereas jewellery dominates in India.

The customer base was also argued to be wider in South East Asia, with consumption starting at a lower annual income threshold of $10,000, aided by simpler payment options that encourage purchases.

Data sourced from CII; additional content by Warc staff