India's Luxury Market Likely to Grow 20% Next Year

India's luxury market is likely to grow 20 percent in the year ahead driven by increased digital interaction between retail and consumers, global exposure and brand consciousness, according to the CII-A.T. Kearney Report on Indian luxury. The country is expected to remain insulated from the "impending global downturn" and the investment is likely to continue in the India luxury space, the study said.

The luxury market in India grew 20 percent year on year this past year, reaching $5.8 billion, the report estimated. It noted that jewelry, electronics, cars, stationery, fine dining and travel segments outperformed during the past year, with growth of between 22 percent and 40 percent. The jewelry segment experienced a growth rate of 30 percent due to increasing prices of gold and diamonds.

The report said that apparel and accessories, watches and personal care also recorded good growth of between 24 percent and 30 percent. Only the realty and yachts segments lagged this past year, it added.

The report analyzed that luxury has gone beyond Delhi, Mumbai and Bangalore to Chennai, Hyderabad and Pune. Similarly north Mumbai and Gurgaon are two new distinct catchments that have emerged.

However, the key challenge still remains: Effectively reaching the target consumer. It said that talent and infrastructure remains a challenge for the Industry. The regulatory structure has also largely remained unchanged over the past year, with the recent news about 100 percent foreign direct investment (FDI) in single brand retail creating hope amongst global brands.

The report observed that consumers have less reservations towards buying luxury goods than in the past. It also cited price parity with Dubai and Singapore being attempted for goods as the need for ''Indianization'' is being realized by players, and such efforts are visible for the apparel, watches and automobile industries. Retailers and brands are making money at the store level, but now they need to find ways to invest further and gain higher margins. The companies would benefit from choosing smaller store formats and by keeping rent and overhead in check, the report added.
-Rapaport