India’s challenge

It may not be the new China, but it could be the next luxury bet. With spending on high-end goods amounting to between 7 and 8 billion euros last year, the spotlight is back on India after Dior’s huge show in Mumbai. A controversial market that is vast and full of potential for western fashion brands on paper. However, to date, although it has been experiencing rapid growth in recent decades, it has not yet totally taken off. Despite boasting one of the largest land areas on the Asian continent and a population of 1.5 billion, the Indian market accounts today for only about 5% of the global value for the luxury sector and shows proportionately less dynamic performance than those of emerging countries such as South Korea, the United Arab Emirates, or Qatar, which despite their small size have established themselves in the post-Covid-19 global landscape thanks to an unexpected boom.

However, the latest estimates seem positive. «There will never be another China in terms of growth and contribution to the sector, but India and the emerging countries of Southeast Asia and Africa still have significant potential, although they still need the essential infrastructure for the local expansion. Among the rising stars, India shines the brightest», Claudia D’Arpizio and Federica Levato, senior partners at Bain & company and authors of the Worldwide luxury market monitor in collaboration with Fondazione Altagamma, explained to MFF. «This country’s luxury market could reach 3.5 times its current size by 2030, driven by growing interest and evolving behaviors of younger customers toward luxury goods. The expected growth within 2030 in terms of middle- and high-income consumers for India is about 35-40 million».

In fact, according to the consulting firm’s estimates, about 5 million new local middle- and upper-class buyers are expected to join in the next seven years, more than 40% of whom will be Gen Z members, who in China will instead account for 25-30% of luxury consumers. These will be mainly men, mostly interested in products such as shoes and handbags, as well as jewelry creations. Among younger generations, on the other hand, there will be an increase in purchases of formal clothing from western brands. E-commerce will continue to be one of the key channels. «In 2022, luxury spending in India amounted to about 7-8 billion euros, while by 2030 we expect to touch 25-30 billion», D’Arpizio and Levato concluded. Most of this value will come from tourist shopping, but local consumers will also accelerate greatly.

However, catching up in terms of industrial infrastructure will be necessary to reach these levels. At the moment, the penetration of western brands in this region is penalized by the few luxury shopping malls in the area, operational complexities that require the assistance of a local partner, and custom duties that affect the import of high-end goods. Critical issues that will still need time to be resolved. «For many years, we have been talking about the potential of the Indian market for the industry, and in recent months have been seeing slight growth which could open new opportunities for the future», Carole Madjo, head of European luxury goods research at Barclays, explained to MFF. «It is definitely a possibility, but I do not expect it to happen in the short term. In general, the sentiment of companies is that India could be an interesting market, but in the short term it does not have the same priority as China, for example. Therefore, even though there is room for growth, everything is still at an early stage», the analyst concluded.

The smaller luxury numbers compare with much larger overall size of the Indian fashion market, including apparel and footwear, which in 2020 amounted to 70 billion dollars (equivalent to about 65 billion euros at yesterday’s exchange rate) and in 2025 is expected to reach 93 billion (85.7 billion euros), according to Pwc Italy data. However, it must be noted that with the event organized to unveil the pre-fall 2023 collection of womenswear director Maria Grazia Chiuri, the Lvmh’s maison aimed at a precise target, namely the so-called very important clients, the most high-end customers, a group of consumers that represents just 1% of the world’s population but that the leading luxury brands are fervently courting. They are consumers who, since they account for an increasingly large share of overall high-end spending, are also becoming a priority for Dior, and according to estimates by Bain & company, India ranks fourth in the world in the number of billionaire citizens. The hunt to win their loyalty is on. (all rights reserved)