Demand for luxury products to come from Tier II and III cities

Indians are waking up to luxury products with the entry of major luxury brands like Valentino (set to enter soon), Coach and Longchamp (already here). However, it accounts for only 1.5 percent of the global luxury trade, catering to a mere 4-6 percent of its population.

What is interesting to note is that the luxury market in India is all set to grow, and it’s not just in the metros that the boom will take place. The big share of the sales will come from Tier II and III cities. It is the upper class in these cities who are becoming aspirational. The Kotak Wealth Management Report from 2015 says that 44 percent of India’s millionaire’s live in emerging towns and cities. So, well-known brands such as Gucci, Christian Dior, Louis Vuitton, Canali and Judith Leiber can now find their customers in the deepest pockets of Tier II and III cities. Even the March 2016’s report, ‘Beyond the Metros: India’s Growth Frontiers’, from market researcher Euromonitor International states that an increasing number of consumers from Tier II cities flock to the metros for luxury purchases. Cities like Malappuram, Thiruvananthapuram, Indore, Surat, Thrissur, Ghaziabad and Kochi are expected to record a nearly threefold growth in constant terms over the next 15 years.

The luxury market in India is expected to expand fivefold in the next three years and the number of millionaires is expected to multiply three times in another five years. The luxury market in India has been growing at a CAGR of 25 percent over the last couple of years.