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This report has been jointly produced by Confederation of Indian Industry and A. Kearney Limited, the contents of which are meant only for information purpose of the reader. Readers are advised to conduct their own investigation and analysis of any infor- mation contained in this report, and not rely on the information contained in this report for any purpose. Neither Confederation of Indian Industry, nor A. Kearney make any representation regarding the accuracy or completeness of such information and express- ly disclaim any or all liabilities based on such information or any omission thereof.

No part of this report may be reproduced or distributed without the prior written con- sent of Confederation of Indian Industry and A. Kearney Limited. Like many other industries in India, it is of great interest to both international and Indian players. International brands see India as an emerging luxury market which could become a sig- nificant part of their portfolio tomorrow. Indian companies also see the growth at the top end of the market as an oppor- tunity to introduce premium offerings.

This enthusiasm was reflected in the first moves of several iconic international brands in the last years. Indian companies have also seen the opportunity and a handful of players are now very active in the space. Apart from luxury products such as watches, apparel, accessories, large Indian five star hotel chains, fine din- ing and spas, apart from luxurious houses, the latest luxury cars and yachts have expanded the definition of luxury.

Kearney have been active players in the luxury space. CII through its National Committee on Retail has played an active role in trying to create an industry forum for players in the luxury indus- try.

CII brought the industry together to help organize the industry and create a forum for dealing with issues of common interest. Kearney, apart from serving clients in the luxury industry has also contributed to providing a robust fact base and perspectives on realizing the potential of the industry through their first study in The Economic Times - A.

Kearney India Luxury Review Just when the industry was showing signs of coming of age in , from the third quarter of , the global recession dampened the hopes of the industry. The industry suffered internationally, and that acted as a brake on the emotional eupho- ria for a good months in India as well. Several players used that time to consolidate their position, right size their busi- ness, restructure real estate deals and become fitter.

A few others suffered. Now with positive signs in the Indian economy, optimism about the industry is on the rise, as demonstrated by heightened market activity and consumer spending. However, key issues such as a relatively new market, duties, access to quality real estate etc continue to pose a challenge to exponential profitable growth. When will the market be fully ripe? Given this backdrop, CII and A. Kearney decided to team up and take stock of the industry and address key questions that current players, potential entrants and other stakeholders have about the industry.

Our desire was to study and understand the major changes in the industry in the last years and the implications of these for the future of the industry.. With this end in mind, over the last three months, we conducted an exhaustive and comprehensive research of the industry.

The A. Kearney team collated and analysed large amounts of data, interviewed several industry leaders and luxury con- sumers to develop all round insights on the industry. The report establishes the growth trajectory for the industry over the last three years, takes stock of the opportunities and the potential as well as the continuing challenges that it faces and estimates the likely potential over the next 5 years and recom- mends actions for industry players to undertake.

It clearly confirms that the hope in the potential of the Indian luxury industry is not misplaced, that there is still a huge latent demand in the market and that India will be an important market and player on the global luxury plat- form. While the hope in the potential remains undaunted even after the recession, infrastructural and regulatory issues con- tinue to impede the development.

Like in all other sectors, though we are confident that the Indian industry will discover a uniquely Indian way of converting them into opportunities. We are grateful to all the industry leaders and consumers who spent time with us in sharing their perspectives and validating our hypotheses. We hope this study will act as a milestone in the evolution of the Indian luxury industry and will take the collective under- standing of the industry a few steps forward. Confederation of Indian Industry A.

The wealth in India. This new found prosperity has attracted lux- children are the bigger spenders, having been educated ury brands that were looking for new engines for growth to abroad and hence familiar with brands and the luxury way of make up for slow growth in their traditional markets.

This report attempts to answer these ques- several decades and go for the finer things in life. The other tions through a wide and deep coverage of all segments of sub segment comprises the promoters of some very large the luxury market in India. To get the most credible answers, businesses which have come up in the last two decades and we adopted a robust methodology with a large element of have created a disproportionate amount of wealth very primary interviews and extensive data collection.

We collated quickly. These While Indian consumers talk about exclusivity, uniqueness executives are well traveled and are aware of brands. That said, traditional attributes try. Other segments include self employed professionals, young professionals, expatriates, politicians and bureaucrats. The Indian luxury consumer is young - years old.

The segments are ber of high net worth individuals is the most important driv- composed primarily of: er. Interviews with leading luxury brands in India point to the fact that family wealth is a stronger determinant of spending Medium size enterprise owners: This is the largest seg- than household income. The masstige phenomenon can also ment in terms of number - these are typically the medium be observed very clearly in India.

Luxury products in India are enterprise owners - industrialists and traders who run busi- appealing to, and purchased by, middle-class consumers that nesses with revenues upwards of 50 cr. Their wealth is their do not fit the typical profile of an elite consumer segment. While tronics. This market has been estimated to be USD 1. We believe in the next 5- egories like Electronics, Wines and Spirits, Apparel and 7 years, at least new towns will get added on the luxury Jewellery has been exceptionally strong.

We also believe that the potential in Delhi and Mumbai has not been fully exploited and that there exists a The Indian luxury services market was severely hit by the few more micro markets within these cities that need to be recession over the past 2 years. Nonetheless, the India tapped.

Luxury Services industry is considered to be one of the best in the world. Consumer interviews revealed that consumers Luxury Market prefer Indian hotel chains like the Taj, Oberoi or ITC even Our endeavor in this study has been to provide robust data when International chains like the Hyatt, Hilton or Four on the size and growth of the Indian luxury market for stake- Seasons have entered the country.

For sizing the market, Product, Price and The current Indian luxury assets market is estimated at USD where possible brand also filters are applied to isolate the 2. The growth of the Luxury Assets market is driv- luxury from the non-luxury in all segments.

We err on the en mainly by the phenomenal growth of the Real Estate and side of conservatism i. Automobile sectors. This includes all luxury products, luxury services and global standards. Luxury market in India On the demand side, there are several potential consumers in India who either do not buy luxury at all or do not buy enough of it from the local market.

As we had mentioned, Rupee millionaires with incomes between INR lakhs do not really spend on luxury. On the other side, supply of most luxury products in India is present is mostly present Mumbai, Delhi or Bangalore. However, wealth creation in the country is now no longer limited to these cities. The current market size for luxury products in the country is around USD 1.

This implies that there is a latent demand of almost USD 1. As percentage of the current Source: A. The most visible segment of the luxury industry is the luxu- ry products segment. This includes the most visible fashion We have estimated the expected growth in the luxury goods luxury segments such as apparel, accessories, personal care, market using a number of methods.

Regression of the mar- viii Country comparison based on GDP and of 1. Difficulty in reaching the target consumer: The scat- HNIs tered nature of the target population and absence of critical mass in India is a big concern for the industry. While luxury magazines have increased in maturity and volumes, they still reach only a small fraction of the existing consumers and a much smaller fraction of new consumers. Consumer reservations about luxury purchases: India is faced with a low luxury penetration, with most of the rupee millionaires with income between INR 30 lakh segment having the capacity but not the propen- sity to spend on luxury goods and services.

Furthermore, there are reservations against buying less- er known brands as well as shopping in India. Infrastructure and regulatory constraints: Source: Altagamma, A. Based on numerous tions on FDI and high import duties. Given this and considering the huge latent demand, we al locations. However, there are several ideas that could be used to address these challenges.

Once identified, focused com- munication would be needed to reach out to them and con- vince them of the offering.

Players also need to look at effec- tive media vehicles to reach their target consumers. To address the infrastructure and regulatory challenges, play- ers can use smaller retail formats to increase store densities far above the global benchmarks in order to drive higher sales productivity. A multi-brand environment would also Source: A. Kearney research and analysis help players attract a critical mass of consumers and also lower the burden on each brand in terms of operating costs.

Luxury Industry Challenges Other options include mini high streets, collaborative efforts Fundamentally there are four key challenges that any luxury with competition for both retail and supply chain and airport player faces in India. Indian companies can capitalize on the regulatory ix restrictions imposed by the Indian government to enhance We believe that the critical factors for success in this market their presence in the market. Everything about our country is different - the con- with new formats such as a luxury discounter liquidation sumer, the challenges and also opportunities for luxury channel that can help open the market by getting consumers players.

While we believe there is a clear from that taken by other developing economies. Several opportunity to make an impact in this market, a systematic, luxury players have managed to seize opportunities in the smart and careful approach is what will differentiate the win- market early.

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CII AT Kearney Luxury report


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