What to Expect from India's Luxury Industry in 2018


Abhay Gupta | January 09, 2018

Since 2014, the luxury industry in India has been affected by several key developments including the rise of digitisation, reduced restrictions in FDI policy and women's empowerment. Abhay Gupta anticipates the success factors of the luxury market in India for 2018.

May 2014 saw a regional, controversial, political figure walk into the power corridors of New Delhi with a never before witnessed sweeping victory. A grim and challenging economic condition coupled with several other crisis situations welcomed Mr. Modi. Surely, the luxury industry could not have been at the top of the government's agenda?

However, some of the key developments that unfolded have both directly and indirectly affected the industry positively and negatively:

Digitisation of financial services and demonetisation 

The attempt at weeding out the alternate economy from the system came as a big blow to various sectors. Luxury, however, was gainfully impacted during the initial window of relaxations. Cash transactions peaked for a few hours when accessories, jewelry, watches, real estate and other high-value goods ended up being replaced by stashed away cash. After this period, there were mixed reports with respect to a positive or a negative impact. Most brands feel that the initial slowdown was replaced by more balanced, cashless transactions bringing in more control and ease of doing business at storefront levels.

Unified national tax on goods and services

The single factor driving the most mixed emotions post-demonetisation was the implementation of GST. With multiple slabs, a plethora of paperwork and confusions galore, GST started with a resistant trade blockage in general. Luxury brands operating in malls found their overall costs decreasing due to inputs being credited for GST paid at imports and rentals to real-estate players. With a uniformity of taxes across stores in various states, the margins could be healthier too. Clearly, if implemented well, GST could give a boost to the luxury trade. The government's endeavour to rationalize GST slabs is also a welcome move for sectors like fine-dining and hospitality.

Join Luxury Society to have more articles like this delivered directly to your inbox

Reduced restrictions in FDI policy

Whilst FDI was technically opened up in 2012, complex sub-clauses on sourcing norms, investment size, location, etc., had restrained brands from announcing their plans. However, with current relaxations on sourcing restrictions, more brands are announcing their arrival into the country, the latest being Uniqlo. 

Ease of doing business

With several positive announcements with respect to new company formations, single window clearances and faster clearances of permits, etc., (new business owners can now expect to receive all clearances and permits in ten days or less), the ease of doing business index has seen a tremendous improvement. As a result of such reforms, Moody's has upgraded India’s sovereign rating to Baa2 from Baa3, putting India on similar lines as the Philippines and Italy. As a collective result of the above, over 250 to 300 international brands have announced their plans for India.

Women's empowerment and GES

The three-day 8th Global Entrepreneurship summit, jointly organised by India and the USA, saw Modi’s vision of women's empowerment get a further boost. Led by Ivanka Trump, the summit brought to the forefront Modis’ booster schemes of ‘Make in India’; ‘Stand up India’ and ‘Skill India’. Indian entrepreneurs are now able to access funds, certified talents and mentors with ease. The growing list of Indian origin premium to luxury brands is a witness to this. Several Indian brands have now entered the list of the top 100 luxury brands in the world. Three Indian companies - Gitanjali Gems, Titan and PC Jeweller - have been named on the list of the top 50 luxury goods firms globally, which was topped by Louis Vuitton.

Creation of mass affluence

With increased focus on infrastructure development, employment generation and growth in smaller cities is imminent. Rapid urbanization is leading to increased awareness and a new demand for premium to luxury goods. Brands like Zara and H&M; have now become household names in most middle-class families in tier II and even tier III towns. Luxury brands have begun to seep in via trunk shows, private sales and events organised to attract the rich and affluent classes.

What could be the success factors for new entrants in 2018?

The luxury goods market in India is one of the world’s most diverse, exciting and challenging markets. Brands and retailers that want to capture a share of this fast-paced business need to learn to adapt, or risk missing one of the next greatest and untapped opportunities for the luxury business.

1. Learn, adapt and educate the market: India is a vast demographic giant. A ‘one size fits all’ strategy will not work. Diverse strategies are needed in handling different demographics in order for brands to be unbeaten in the luxury sector. Luxury experiences, both in-store as well as online have become of prime importance for consumer acquisition and retention. A deeper research into the ethnicity of the region can be a great help. A region-wise marketing and communications campaign could pay rich dividends.

2. Focus on value proposition of your brand: all Indians are extremely value-conscious. Ensure you communicate your value systems clearly and loudly. Provide closeness, uniqueness, and product and brand acquaintance with appropriate messages. Educate this new Indian customer with your value proposition; reach out – engage – inform – indulge – entertain and then retain.

3. Indians are digitally savvy: don’t ignore the digital medium. The R-O-B-O (research online – buy offline) phenomenon is perhaps the deepest in India. Recent reforms towards a ‘Digital India’ have ensured that the power of the net is freely available to a larger populace.

4. Train, educate, invest and believe in your staff: with so many varied customers, a key challenge is talent! One cannot be too sophisticated to scare away the new customer, and at the same time, one cannot be too ordinary to not make an aristocratic customer shy away! Driving this balance in line with the brands' cultural customer experience is perhaps the biggest operational challenge for any franchisee or brand.

5. Believe in the market and stay invested: India is a long-term paradise. A brand needs to be patient, keep its control in place and let the brand and customer relationship evolve. There is no shortcut to success – no quick gain method in this market.

6. Collaborate, don't compete: a relatively easier method that can work in the brands' favour is to collaborate with a like-minded, but differently skilled Indian brand and add value for each other. Recent examples of such associations include Christian Louboutin and Sabyasaachi and Swarovski and other various designers. 

India | Innovation