Indian luxury products and services market is slated to grow at a compounded annual growth rate (CAGR) of over 16 per cent for the next three years, according to a report by industry body CII and market research firm IMRB.
Over the last three years, the luxury products segment has showcased faster growth than both the services and the assets segment (representing luxury houses) with a CAGR of 21.8 per cent, it noted. The entry of leading international labels across categories and an increase in geographic footprint together with sustained consumer demand have contributed to this growth.
Luxury services as a business grew at a CAGR of 15 per cent owing to a continuous increase in inbound tourist availing luxury hotel services and an upsurge in number of standalone high-end restaurants. Luxury assets have grown at a relatively slower pace at CAGR 9.4 per cent in the last three years, said the report.
From 2000 onwards, the Indian organised retail segment took a considerable leap with modern retail, which now accounts for nearly 5 per cent of the overall India retail market.
In 2007, the luxury market stood at $3.66 billion which more than doubled last year.
“The initial successes for luxury brands were severely tested in 2008, but the Indian market posted a relatively faster revival compared to other markets. Since then, it has registered a healthy CAGR of 15.7 per cent till 2012 with the estimated size of $7.58 billion,” said the report.
The economic slowdown has impacted the luxury market to a certain extent but by mid-2014 it is expected to revive and continue its growth trajectory and grow at nearly 17 per cent in 2014.
Primary contribution to the growth has come from the luxury cars segment. Luxury real estate segment is currently stagnant owing to weak investor sentiment, but is expected to revive during the second half of 2014.
In the apparels and accessories segment, luxury accessories (handbags, belts, sunglasses, luggage, cuff-links and wallets) has witnessed higher growth vis-à-vis luxury international branded apparel and Indian designer-wear.
The report highlights that the personal care segment has emerged to be recession proof largely driven by consumer loyalty. An increased awareness, a higher propensity to spend on personal hygiene and grooming, an increase in wellness and skin aesthetics clinics are driving the segment growth.
The wines & spirits segment continues to be highly fragmented in terms of distribution, but from a consumption perspective, it is one of the fastest growing categories with above 25 per cent annual growth.
Electronics & gadgets segment also continues to exhibit growth despite turbulent times; both major metros and tier II cities are showcasing good momentum for this category, as per the report. It noted, however, that growth in luxury watches segment has slowed.
Luxury car sales have maintained momentum despite the slowdown in the automotive sector as a whole. While this segment also has witnessed a slight dip in terms of postponement of purchases, it has been growing impressively at over 15 per cent annually.
Luxury hotels, travel, fine dining and spas continue to hold high aspirational value for Indian consumers but is still a discretionary spend. These services would continue to grow at around 10-15 per cent for next few years, the report added.
(Edited by Joby Puthuparampil Johnson)