A new era of aspiration seems to be sweeping across the Indian consumer landscape, seen in the growing appetite for the finer things in life encouraged by a post-pandemic consumption surge. And it's not limited to the metros and tier one cities alone, the hinterlands of tier two and three are also witnessing a surge in demand for upscale products, as luxury brands seize this opportune moment.
India’s luxury market is expected to grow to 3.5 times the current size and reach the USD $200 billion mark by 2030, according to a Bain & Company—Altagamma Luxury Study report from November 2022.
Another study found that more than 50% of luxury shoppers in India use social media extensively during the discovery stage. 85% of luxury purchasers report that having a virtual try-on feature is crucial in driving their purchase decisions, as per ‘The Next Gen Social Commerce Playbook’ by Snap Inc. and Havas Media network in July 2023.
There is a striking dichotomy between traditional luxury retail which was considered to be more exclusive and scarce as compared to modern luxury retail which is easy to access and faster to move, according to Puneet Mansukhani, partner, KPMG India.
“Evolution in the luxury retail sector has witnessed a variety of innovative strategies such as expansion of digital marketing, live streaming shopping events, virtual showrooms, the mega rise of social commerce, online influencers, and an influx of new product categories across channels,” he explains.
Passion for the posh—what’s fuelling the boom?
According to Sanjeev Jasasni, chief operating officer, Cheil India, several factors are contributing to the boom in the premium market.
“Rising disposable incomes, a growing aspirational middle class, increased exposure to global trends through digital platforms, and a desire for unique, high-quality products are driving this trend,” says Jasani.
He adds, "Consumers' preferences are evolving fast along with their disposable income and the evolving consumer mindset places value on experiences and storytelling, which luxury brands are well-equipped to deliver."
Post-pandemic, the desire to spend and flaunt has gone up across the board, despite an increase in food inflation, notes Soumya Mohanty, managing director and chief client officer for the insights division, Kantar.
She says, “The rise of e-commerce in small towns and rural has allowed people to realise their aspirations for a better lifestyle—more branded products are in use. There is an upgrade at every level of affluence.”
Furthermore, the number of UHNWIs (ultra-high-net-worth individuals) in India reportedly grew 11 times in the last decade in India, making it third in billionaire population globally after the USA and China in 2021, as per the Wealth Report 2022 by Knight Frank.
The generational factor
Interestingly, a powerful factor for the category’s growth is generational trends, as per the Luxury Study report, which notes that millennials and Gen Z (those born between 1981 and 2009) accounted for the entire growth of the market in 2022. This generational factor is one of the critical trends expected to affect the development of the luxury market during the rest of the decade as well, according to the study.
What’s also noteworthy is that India is home to the world’s largest population of millennials and Gen Zs; the two make up about 51% population, which translates into an absolute count of over 700 million, according to a study by market research firm RedSeer Consulting.
And this population is willing to spend more according to Mohanty. “In a recent study that we did to understand the mindsets of Indians, we discovered a significant chunk of young Indians who are willing to spend more as a mark of success and progress—they are nearly 1/3rd of urban India," she says.
“And while enough has been said about the young demographic, we now have a 40+ cohort that has more spending power than ever before. Comfort and style, fueled by greater knowledge and exposure through travel, social media, and the internet, are fast becoming uncompromisable for those with the means—and these include the first generation of luxury goods buyers,” she adds.
New-age marketing for the new-age user
The desire to reach and engage with the varied cohorts of consumers in innovative ways with a personalised touch has encouraged luxury brand marketers to rethink their strategies to increase brand discovery, equity building, reach, and action.
Gopal Asthana, CEO, Tata Cliq, says, “Some of these strategies include the integration of traditional and digital channels to inspire purchase decisions, marketing mix models to drive sharper targeting, leveraging new media formats like short format videos, Reels, WhatsApp, social media marketing, influencer marketing and shoppable ads among others.”
“It’s important for luxury brands today to be present across different platforms and channels, and in doing so offer a consistent experience by offering services that go beyond product purchase, leveraging technologies such as AR and VR to enhance the shopping experience, and more,” he adds.
Apart from this, personalisation is central to the entire luxury shopping experience. Hence, brands are looking at employing data to be more precise while communicating with their consumers.
Zoya, the diamond boutique from the House of Tata recently launched its first virtual jewellery store on the website, to translate the 'luxurious and indulgent experience of the offline store to the online environment'.
Amanpreet Ahluwalia, business head, Zoya, explains, “In our experience, with a high-involvement product like diamonds, the final purchase in most cases is still done offline, but people enjoy engaging in the search and shortlisting process online. Zoya has very experienced personal jewellery advisors online to help customers shortlist the right products.”
The brand typically spends around 20% of its marketing spends on digital discloses Ahluwalia.
The real estate sector too has not remained untouched by the shift in consumer preferences towards the lavish. With the rise in disposable income, rapid urbanisation and evolving lifestyle preferences, there has been a surge in the number of luxury buyers, according to Raunika Malhotra, president—marketing and corporate communications, Lodha.
The group employs an assortment of experiential marketing and traditional advertising to reach out to discerning customers. “Along with print, digital and OOH advertising in luxury spaces, we organise exclusive events that cater to their interest and where they can connect with like-minded people,” says Malhotra.
Siroya adds, "High-end luxury real estate brands are increasingly adopting digitisation to cater to the changing preferences and behaviours of their clientele. Digital allow these brands to showcase their properties in immersive and innovative ways. Data analytics and AI-driven insights enable brands to better understand buyer preferences, refine marketing strategies, and personalise their offerings. Incorporating digital tools also allows these brands to showcase their commitment to innovation and modernity, aligning with the expectations of their high-end clientele."
Additionally, embracing technology helps luxury real estate brands stay competitive in a rapidly evolving market where digital presence is crucial for staying relevant and attracting younger, tech-savvy buyers, according to Rishabh Siroya, founder, Siroya Corp.
“Virtual tours, high-quality images, and interactive content provide a rich experience that helps buyers visualise the properties without the need for physical visits,” he says.
Siroya lists out the new-age tools employed by realty brands to target the tech-savvy consumer: AI-powered chatbots provide instant assistance, while social commerce integrates shopping into social media platforms. Blockchain ensures transparent transactions, appealing to their trust in technology. Personalised content driven by data analytics resonates with their preferences. Short-form video content on WhatsApp, YouTube engages their visual and fast-paced consumption habits, establishing a strong digital connection.
Leveraging emerging tech
In the current day and age where the business models are highly dynamic, technology transformation is a never-ending exercise.
KPMG’s Mansukhani explains, “We are seeing a large transformation investment which was earlier done at intervals of 10 years and is now coming down to five. The expectation of a quicker go-live is the need of the hour and therefore point solutions which improve efficiency in an area are more in demand. Retailers based on size and margins end up investing anywhere between 1.25 to 2% in technology to manage this demand.”
Anindita Das Veluri, director- marketing, Adobe India, adds, "It is noteworthy to see premium brands elevating their digital prowess to stand out among mass and economy counterparts. While digital adoption is widespread, premium brands are grasping the pivotal role of real-time experiences in setting them apart.”
“Significant examples from our partnerships demonstrate this trend. The Prada group leverages Adobe's services to integrate vast amounts of existing data to create unified customer profiles and deliver personalised experiences in real-time. Similarly, Aditya Birla Fashion and Retail capitalises on authorised customer data to curate captivating content, enabling personalised experiences across multiple channels.”
Furthermore, Veluri adds, that global brands like H&M, Hugo Boss, Louis Vuitton, and Burberry use Adobe to deliver highly personalised experiences across various touchpoints. “These brands are enhancing their product design and visualisation processes and creating new and inventive customer experiences, such as virtual fitting rooms, uniquely personalised e-commerce solutions, and more, to meet the increasing demand for digital content."
What does the future hold
More than a dozen international brands, including Valentino, McLaren, and Pottery Barn have debuted in India in the recent past, while several others including Roberto Cavalli, Foot Locker, Lavazza, Armani Caffe, Jamba and The Coffee Club are among those likely to establish a presence in India seeking to take advantage of the greater demand for upscale labels post-pandemic.
According to Rahul Vengalil, executive director, Everest, what marketers need to understand about the consumers is that their aspirations and motivations have changed in the last few years. “From accepting anything that is being given to them under the garb of a luxury brand, people are now asking the brands to be authentic.”
Apart from focusing on the customer experience and storytelling, luxury brands need to keep in mind the relevance to the Indian market, Vengalil notes, “A lot of brands take the global campaign and try to run it in India, thinking it works. However, we identify with luxury only if the story is relevant from an Indian context. Weddings, festivals, and rituals are an integral part of India and weaving the brand story into this mix is important. “
The level of personalisation and the focus on exclusivity is the biggest differentiator when it comes to luxury marketing vis-à-vis traditional marketing. Digital strategies hold the keys to the future as consumer willingness gradually tilts towards experience-based goods.
In the long term, we could expect luxury retailers to use data-driven insights to seize performance improvement opportunities, beat rising costs and identify new markets, products, or services, according to Mansukhani.
“Owing to higher future spends associated with e-commerce, luxury retailers are doubling down on digital solutions to expand market presence while utilising AI-powered engines to deter counterfeiting,” says Mansukhani.
"Artificial intelligence assistants have seen market penetration accelerating drastically over the past two years. Many luxury companies are also exploring the Metaverse as a novel way of engaging with their customers. A strong focus on brand protection, showcased by accelerated spending on building blockchain networks to confirm product authenticity is also observed. Brands will continue to invest in technology which will be hovering around AI, AR, and Metaverse, improving last mile and supply chain efficiency," he surmises.