The Indian Luxury Fashion Market – 2020

Growth is slated across industries and sectors in India and the timing could never be better for the luxury industry. Luxury automobile, wines and spirits, retail, leisure, hospitality, spa, wellness, art and collectibles, homeware and interior design, luxury events, conferences, real estate, fashion and accessories, watches and jewellery, fragrances and cosmetics – the growth of the luxury sector is envisioned irrespective of the segment over the years…

From numerous perspectives, 2019 seems to be the very defining year for India. A stable and continued government; the rerun of Modi 2.0; the decisive abolition of section 376; the unhindered word wide diplomatic coup, and the newfound improved relations with America, courtesy ‘howdy Modi’, all point towards India finally arriving on the world stage. How is this all going to impact the luxury fashion market? No doubt political stability linked to an economic uplifting is key criteria for any market segment to prosper. Luxury fashion, takes one beyond the ‘need’ into a ‘desire’ quotient where in the purchase motivator is not the basic requirement but the desire to relate to someone else, to live a particular lifestyle, to develop a sense of belonging and get accepted by a particular strata of society. Here’s a quick recap on how fresh economic as well as fashion trends which shaped 2019, will lead us into a futuristic expectation for the coming year.

Global Status, Brand Value

India has been voted as the seventh most valued nation brand. With an increase in 32 percent in its brand value to $2.1 billion, India has moved up one position in the most valued nation brands list. Not only that, this surge is the highest among all the Top 20 countries on the list. In addition, India is the second most valued among these emerging economies after China, followed by Brazil, Russia and South Africa.

A Growth Driven Economy

With the sweep elections of May 2019, world leaders congratulated the Modi government. This is a clear indication of both the government and its leadership’s global appeal and is a sign of political stability in the years to come. As such, India is projected to overtake the UK by 2020 to become the fifth largest economy in the world with a nominal GDP of US $2.9 trillion.

Projected GDP Growth

The country is being propelled by strong macroeconomic tailwinds, and its GDP is predicted to grow 8 percent a year between 2018 and 2022 (exhibit). With the current government’s plans to reach US $5 trillion by 2025, it would easily place India as the world’s fourth largest economy after US, China and Japan.

Global Status – Demand for Brands

Demand for luxury goods is expected to remain strong over the next year. As per a recent report by McKinsey, over 300 retail brands are planning to open stores in India by 2020, although there will be many challenges, one of which is to gain the government’s support. Also problematic are the high import duties on luxury goods, which constitute a barrier to price parity with other countries. The recent trade wars between the US and the world have led to the US removing trade tax incentives on Indian goods imported into the country. Post the removal of GSP benefits for India, India retaliated with a hike in tariffs on 28 US goods roughly costing $200 million in additional taxes to US exporters. The bone of contention being India’s “not justified” tariff on ICT products (20 percent), motorcycles (50 percent) automobiles (60 percent) and alcoholic beverages (150 percent) as per US commerce secretary Wilbur Ross. For instance, by scrapping/ cutting tariffs on ICT Products such as high-end phones would cause a waiver of $3.2 billion in taxes, something India was prepared to do with US exporters, however, US government remained unimpressed and wanted more. While the 2016-17’s demonetization and the introduction of GST managed to dampen the economy for a short while, economic reforms initiated since then by the Modi Government has only bolstered the luxury Industry further. Additionally, as the middle class rises in India backed by rising disposable incomes, aspirations and awareness of international trends, the positive economic prospects for the country seem beyond sufficient for the growth of the luxury industry.

Indian Consumers: The Rise of Aspirations

By 2020 more than 50 percent of consumers will be considered ‘middle class’ in India and consequently, the luxury market will continue to experience significant growth to accommodate this rising new class.

This market is dominated by Millennial HENRYs (High Earning Not Rich Yet Individuals) and Gen Z, with high disposable income and are very prominent within the rising economies of the emerging markets. India is a highly attractive market for luxury brands in this regard but requires in-depth market knowledge for early and long-term success. According to Sanjay Kapoor, founder of Genesis Luxury, an Indian luxury retail conglomerate, higher incomes are likely to create a whole new class of consumer: “We are moving on toward the ‘gold collar’ worker. It’s a term that defines the well-paid, highly paid professionals, who are happy to look good, happy to feel good, and are expanding the consumption of today.”

The rise of India’s super rich

Number of high net worth households saw a CAGR of 22% over the last five years

The Luxury Fashion Apparel Market of India

As per a McKinsey Fashion Scope, by 2022, the generic apparel market of India is expected to be worth $59.3 billion. This then makes India the sixth largest in the world, comparable to the United Kingdom ($65 billion) and Germany ($63.1 billion). Led by designer brands, store brands, personalization, advertising, and ethnicity etc., the fashion consumer market is far more diverse than ever. While the appetite for western styles is likely to increase, traditional wear is still expected to account for a 65 percent market share by 2023. The number of luxury outlets across Delhi-NCR is evidence enough of this growth. At shopping venues like DLF Emporio in Delhi’s Vasant Kunj, and Ambience Mall in Gurgaon, big brands are doing their utmost to generate attention and expand their customer base. They are trying to mainstream themselves like never before.

The Luxury Fashion Apparel Market of India

As per a McKinsey Fashion Scope, by 2022, the generic apparel market of India is expected to be worth $59.3 billion. This then makes India the sixth largest in the world, comparable to the United Kingdom ($65 billion) and Germany ($63.1 billion). Led by designer brands, store brands, personalization, advertising, and ethnicity etc., the fashion consumer market is far more diverse than ever. While the appetite for western styles is likely to increase, traditional wear is still expected to account for a 65 percent market share by 2023. The number of luxury outlets across Delhi-NCR is evidence enough of this growth. At shopping venues like DLF Emporio in Delhi’s Vasant Kunj, and Ambience Mall in Gurgaon, big brands are doing their utmost to generate attention and expand their customer base. They are trying to mainstream themselves like never before.

Quite clearly, luxury fashion brands have begun to make a permanent place for themselves in India. While major brands like the Christian Dior; Versace; Jimmy Choo, Zegna, Armani, Salvatore Ferragamo, Gucci, Christian Louboutin, Paul and Shark, Canali, Corneliani, Hugo Boss etc. have been offering their collections for many seasons, a host of noteworthy new developments are as under:

LAUNCH OF EMPORIO II; THE CHANAKYA, NEW DELHI: 

In tandem with the elitism associated with Lutyens’ Delhi, the coveted area got its First shopping mall in Chanakyapuri. The mall is all about bespoke luxury, which houses top international brands in couture. Names like Hermes, Channel, and Ralph Lauren are anchors in this mall.

RTW COLLECTION BY LOUIS VUITTON: 

The luggage major began to offer a full-edged, ready to wear collection to Indian luxury fashionistas in October 2018. Expanding into additional retail space at Emporio, Louis Vuitton too has now ventured into the wardrobes of luxury fashion lovers of India.

OPENING OF HERMES BOUTIQUE: 

Having maintained a boutique in Mumbai, the brand was always keen to begin its journey in New Delhi. The opening of the Chankaya, gave luxury-loving fashionistas a perfect address to shop their favourite bag, scarf, dress and saddlery from.

THE RALPH LAUREN STORES, NEW DELHI: 

The brand had been eyeing to enter India for many years now. However, a tie up with the Aditya Birla Group and the availability of venues at The Chankaya and Emporio, gave them the perfect mixture of partner and location. With a store each, the first line as well as the polo line of the brand are now available to discerning Delhites.

CHANEL BOUTIQUE, THE CHANKAYA, NEW DELHI:

Up until now, New Delhi’s elite only had three places to turn to when they fancied a Chanel No. 5 or a Chanel Rouge Coco Ultra Hydrating Lip Colour or even Chanel sunglasses. But if one was searching for the 2.55 handbag or a perfectly tailored tweed coat with gilded buttons, you’d come up short. Not anymore though. The iconic brand has opened a 315 square meter boutique at The Chanakya Mall in Lutyens Delhi. Shopping at Chanel is an experience in itself. From the luxurious black and white stone facade that invites you in, to the beige-carpeted flooring that creates an intimate atmosphere, every boutique emulates the same aesthetic – understated chic.

CHANGING LUXURY TRENDS:

The fashion and business scenarios are driven by trends that not only shape the sector but also the changing pattern of consumptions. Here’s a look at the key trends across the Indian luxury fashion scenario which could be a great check list for any future sensibilities:

1. Being Over Having: The new luxury consumer favours ‘experience over ownership’. They truly believe in the YOLO (you only live once) theory and focus more on experiences rather than big ticket product purchases.
2. Personalization & Customization: A major shift in expenditure is being seen towards customization, be it in products, services, holidays, homes, experiences, content or travel. The rising popularity of ‘reality shows’; ‘Netflix’ like web series, speciality restaurants, designer residences, bespoke clothing, footwear, cars and even weddings is evidence of such a phenomenon.
3. Sharing Over Owning: The sharing economy has never had it better. Luxury brands and products have had to struggle to keep pace with this growing phenomenon to avoid being side lined. Why buy anything when you could share or rent an Uber, a wedding dress, a fully furnished apartment, a luxury sofa, and movies to even companions that would suit your mood / need / temperaments.
4. Refurbished Luxury: For those who wish to have the feeling of their own ownership, reusable luxury has become an acceptable norm of the day. From just cars, this trend has now graduated to dresses, bags, accessories, home products and appliances etc. Special websites have sprung up as aggregators, curators, re-furbishers who on one side assist a bored owner to help liquidate and make space for a new purchase, while at the same time help another aspirant indulge in affordable high-end luxury.
5. Green is the New Black: ‘We do not inherit the planet from our fore-fathers but borrow it from our children’ has never had a deeper meaning than now. Sustainability, environment friendly consumers, compassion for other living beings is forcing luxury brands to go back to their innovation boards. Lab grown diamonds, artificial furs, scientifically curated leather, sustainable building materials; energy efficient homes, solar powered lights etc are slowly but surely replacing animal skins, fox furs, mined diamonds, traditional building materials and energy guzzler appliances. Recently, Raymond Group, India’s leading fashion and textile manufacturer and retailer, has unveiled the eco-friendly Ecovera – a range of fabrics manufactured by using R|Elan, the latest technology from Reliance Industries Ltd (RIL). The Ecovera range will soon hit 1,500 stores across 700 cities. It is made from R|Elan GreenGold, the greenest fibre in the world. R|Elan GreenGold is made by recycling post-consumer waste PET bottles, using bio-fuels and energy-efficient processes.
6. The Rise of the ‘Fit’ Customer is another megatrend fuelling the demand in active wear and sportswear. Worldwide, there is a cultural shift towards sports including running as part of a growing emphasis on fitness, especially among the urban population. Technology is getting integrated as part of wearable. There are smart clothing items in the market with embedded health sensors and medical monitors. Outside of apparel too, fitness wearable that sync to smart phones have gone mainstream.
7. Craft Over Brand: No longer can a luxury brand sell itself by pure brand appeal. While branding plays its own role and is crucially important, the young ones question the necessity of paying extra just for the brand value. The craftsman, detailed crafting, rare techniques, handmade, uniquely rare creations that emit emotions, story and feelings is the order of the day.
8. Forget Leather, the Future of Luxury Fashion Is All About ‘Fish Skin’: While leather goods have always been a benchmark of the beta luxury consumer, the availability of top-quality leather being scarce, luxury brands are finding ‘fishy alternatives’. For their collections and fashion shows, John Galliano, Prada, Christian Dior, Louis Vuitton and Salvatore Ferragamo are all sourcing fish skin at premium prices from Atlantic Leather, a UK based fish skin specialist company.
9. Street Fashion is Also Luxury: For luxury fashion houses, there’s a new ultimatum as they look to win over a younger set of customers – find a way or risk irrelevancy. The relaxed, casual stance of the Millennial consumer is invading boardrooms and in keeping with demands, hoodie style shirts, baggy pants, oversized clothing is being offered by all luxury brands. A trend initiated by Louis Vuitton’s and Virgil Abloh via ‘Supreme’ is being taken on by the new look Burberry, thanks to Riccardo Tisci. “Gucci did it. Yves Saint Laurent did it. Givenchy did it. These designers — Alessandro Michele, Hedi Slimane, Riccardo Tisci, Demna, Virgil — they’re all turning the definition of luxury on its head” said Yu-Ming Wu, the Co-founder of Sneaker Con and founder of Sneaker News, a street wear specialist reporting portal. ‘These designers are turning the definition of luxury on its head’.
10. Sneakerisation of Luxury: Leading and supporting the forefront of this streetwear-ication of luxury is also the trend aptly named as ‘sneakerisation of luxury’. Global sales of sneakers – or trainers – rose 10 percent to 3.5 billion euros last year, outperforming a 7 percent rise in handbags, according to consultancy Bain and Co. From red carpet to Oscars, from Louis Vuitton to Gucci, all luxury brands have now invaded the ‘sneaker culture’. Sneakers with suits, sneakers with dresses, even sneaker stilettos heels! Seems sneakers with almost everything is the trend of the day.
11. Online Luxury Continues to Grow: More and more luxury sales are taking place online and could make a significant impact on physical store sales in the longer term. Luxury online sales jumped 24 percent in 2017, reaching an overall market share of 9 percent. Bain estimates that by 2025, online sales of personal luxury goods will make up 25 percent of the total market. In India, still at a nascent stage, online luxury sales are being fuelled by reusable luxury, rent a luxury product and luxury service providers.
12. See Now, Buy Now to Capsule Collections: In order to try restricting the inux and invasion of fast fashion brands into the luxury domain, traditional luxury brands introduced concepts like ‘See now – Buy now’ a few years ago. However, the latest experiment by Burberry is around the concept of ‘Capsule Collections’ where smaller doses of fresh collections will be added to the stores regularly.
13. Experiential Luxury: With experience being supreme, physical retail has tried to keep pace with the digital onrush by bringing in aspects of virtual reality, augmented reality to on demand luxury. Men’s wear retailers offer more than just clothes – from coffee to a soothing drink to a salon to a meal, men are pampered with their favourite relaxants while sales may or may not occur. On the other hand, hotels, travel locations are offering virtual reality enabled appeal of five senses where ones hotel room could convert from a beach to a now filled mountain top environment on push a few buttons.
14. Rise of the Selfie Culture: Rise of this self-obsessive, look-good-all-the-time culture driven by the selfie generation has turbocharged sales of beauty items, perfumes, cosmetics and skin care products. The likes of Sephora are growing upwards and seeing growth trends across emerging markets and across e-commerce portals.
15. Phygital is the New Retail: From Omnichannel retail, to now Phygital retail, the humble shop has taken a quantum jump in evolution. From shop anywhere – any time to a concept of combining the features of physical and digital retail, the customer never had it better. Shoppers are being offered a seamless experience where no human interaction is the order of the day. No long queues, no sales pitch, no cashiers – just pick and go is now a reality. From Amazon go in Seattle, USA to the Decathlon store on brigade road, Bangalore or a WatAsale store in small town Kochi, India, the surreal, cashier-less, checkout free store is now a reality. Luxury brands have so far adopted features like a magic mirror to entire product history to iPad-based checkout to 3D size scanning etc. The days of the seamless luxury stores are not far away either.
16. Affluence & Connectivity Has Changed Everything: Last but not the least, rising affluence and supersonic connectivity has changed everything. Luxury is no longer about the super car, or the dream holiday or the designer handbag as is still desired by but remains elusive to many. After all supersonic connectivity ensures all these or more on hassle free on demand service. Rising affluence and the amazing lifestyles made possible by connectivity have shifted the frontiers of luxury. The one fundamental truth that remains unchanged however is that ‘Luxury at its heart, has always been and continues to remain all about ‘Status’.

In a Nutshell, The Opportunities Are Huge & There’s Room for More

The Indian market offers great opportunity. Despite some challenges that include inequality, infrastructure, and market fragmentation, we expect that strong economic growth, scale, and rising tech savviness will combine to make the country the next big global opportunity in fashion and apparel. Companies should make contingency plans for a potential shake-up of global value chains. The apparel trade could be reshaped by new barriers, trade tensions and uncertainty. Growth is slated across the industries and sectors in India and the timing could never be better for the luxury industry. Luxury automobile, wines and spirits, retail, leisure, hospitality, spa, wellness, art and collectibles, homeware and interior design, luxury events, conferences, real estate, fashion and accessories, watches and jewellery, fragrances and cosmetics – the growth of the luxury sector is envisioned irrespective of the segment over the years. That is the position and power of the Indian economy and will be over the next few years. With global powers looking at the Indian Dream to take shape, the projections of the luxury industry are expected to far outshine global projections. As stated by NITI Aayog Chief Executive, Amitabh Kant in 2016: The luxury market in India has the potential to grow from $18.5 billion to $50 billion by 2020 and to $180 billion by 2025. With the recent push for doubling the economy size to the US $5 trillion, it is very much possible that the luxury industry will double in size to over $360 billion by 2025. At the same time, India’s e-commerce market can potentially grow more than fourfold to $150 billion by 2022, according to a report by Nasscom and PwC India. As the nation grows, India will become the world’s third most economically strongest nation after the US and China by 2030. We believe that India is set to become a US $10 trillion economy by 2030 and overshoot the $5 trillion target.