According to a presentation by McKinsey & Co., India’s wealth is concentrated in just eight cities, far fewer than in China. However, while Shanghai and Beijing are already bigger luxury markets than most American cities, Mumbai and New Delhi will get there in the next few years, the consultants said. This market certainly has potential. Still, there are challenges: Rampant poverty, security issues, insufficient quality staff, and high duties compared to other emerging nations that result in many middle class Indians spending more on luxury goods overseas than at home.
Above all, there is the infrastructure challenge. There are only three luxury malls in India, compared to many more than that in each of Hong Kong, Shanghai and Beijing alone. There are also poor road conditions which mean some top-end cars would be wasted here. An Audi executive at the event said the German auto company sells a few thousand cars each year in India, compared to about 250,000 in China. I think everyone recognizes 80% to 90% of the growth in the luxury goods sector will be in Asia. Most of that will be in China, but India will represent a growing chunk too,” said Ajay Dua, the former secretary of India’s Ministry of Commerce & Industry. “Poverty is still much more prevalent in India than China.”
There are plenty of those at the conference who nevertheless believe India can emulate China’s rapid rise as a luxury market, even if it can’t quite, for now, match it in terms of absolute sales. McKinsey’s Laxman Narasimhan noted that India is outpacing China in some areas, notably jewelry and expenditure related to weddings — traditional areas of high expenditure. And the overall Indian luxury market is expected to grow to $30 billion by 2025. Sanjay Kapoor, managing director of Genesis Luxury Fashion, an Indian retail company that stocks local brands and also distributes and sells global brands such as Canali and Jimmy Choo in India , says he is planning to open 35 new stores across the country. He believes the right approach to the Indian luxury market is “to be aggressive.”
A leap of luxury: Luxury’s evolution in India