Luxury Is Back In Fashion!
Luxury is a state of great comfort or elegance, especially when involving great expense. Luxury's definition is very subjective and individualistic, but it also redefines itself with changing times and circumstances. To some, luxury can be an expenditure that goes beyond the 'necessary'. The notion that luxury is a surplus is familiar to many people. However, 'luxury' is often used to define prestigious brands and those in the top category.
The luxury category had taken a severe beating during the pandemic. However, it has rapidly recovered to pre-Covid levels thanks to the easing of Covid restrictions – another significant change inspired by lockdowns, home upgrades, and the merging of living and working spaces. Purchases of experience luxury – Fine art, luxury cars, and fancy yachts have surged to 2019 levels with renewed consumer interest across segments. International travel and spending on luxury experiences are rebounding.
The market for personal luxury goods, one of the critical growth drivers, has made a rapid and V-shaped recovery since 2022. Personal luxury goods sales have smashed their pre-Covid record, with the market forecast at 30 per cent; it is likely to finish by a percentage or two over 2019 numbers.
Let's evaluate the changes in macroeconomic conditions and consumer behaviour that will fuel the luxury category.
The need for economic reforms
The luxury goods sector in India is still developing, with steady yet constant growth. It will present opportunities for companies investing in the category. Its demand will remain strong over the next year; however, it has yet to gain the government's support. High import duties on goods remain a barrier to price parity with equivalent products available in other countries. Furthermore, the introduction of GST has stifled the growth of this segment. The economic prospects remain bullish for India, encouraging a steady rise in aspirations among urban consumers with a higher disposable income to buy luxury products.
A growing number of Ultra HNIs
The super-rich is a fraction of the overall population in India, and the list has started expanding recently. India is a saving nation. Personal and business investments are a priority for the UNHIs over other expenditures, accounting for 45 per cent of total income. Personal and family-centred expenses like holidays, apparel, jewellery, events, home décor, etc., have traditionally been substantial. They will continue to be at the top, contributing to 3/4ths of their total spending.
The Internet has given greater exposure to luxury products
There is a lack of premium real estate and an environment for luxury brands in offline retail. Luxury brands' showrooms remain confined to malls and hotels in India, leading to fewer retail outlets. Moreover, the Indian high street markets are overcrowded and cluttered. Hence, they are not able to provide the right ambience for any luxury brand. This weak infrastructure is one of the significant challenges to the Indian luxury retail market.
However, the pandemic has paved the way to overcome this challenge for luxury retail brands.
Here's how. The pandemic enabled the exponential growth and penetration of the internet. Additionally, a large segment of youngsters eager to experiment and comfortable making online purchases remain hooked on it. The average time spent on the web has also helped increase knowledge about luxury goods and services. Luxury products retailing on portals or apps have also helped the brands expand their visibility, reach and availability. Apparels and accessories like jewellery and watches, personal care products and even electronics tapping into the female workforce have seen a considerable sales uptick. Large brands actively engage in social media analytics and use paid advertising and high-end influencers (celebs, fashion icons, movie stars) to target consumers. Luxury brands have become content providers. Such social media strategies aid in brand recognition and appeal which is essential for luxury brands.
Consumers are worldly-wise
The millennial generation in India is highly tech-savvy and keen to travel. This generation will be more open to spending and experimentation with various brands and styles that the previous generations have avoided. With a large chunk of India's population below 30 years, and most of them in the Double Income No Kids (DINK) and the High Income Not Rich Yet (HENRY) categories, this upwardly mobile population will desire to live a good lifestyle.
Pre-owned products are making luxury accessible
With the growing demand for luxury products, many startups have flourished in the country, catering exclusively to pre-owned luxury products. Online shopping startups like Luxepolis and Confidential Couture also guarantee the products' authenticity. These startups refurbish upscale lifestyle products and sell them online to aspiring customers who otherwise would not have bought them.
Luxury brands have faced tumultuous times in the last two years, emerging from the crisis more robust and resilient. The luxury segment holds immense potential for both international and home-grown luxury brands. Brands like Forest Essentials and Kama Ayurveda have set an example by leveraging the rich Ayurveda heritage of India and now have a global following. For a nation that is inching to become the most populous country in the world, the time is ripe to create and export more Made in India, luxury brands.
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