India to witness rise in consumer spending

Led by a rise in brand awareness among Indian youth and purchasing power of the upper class in Tier II, III cities, consumer spending is expected to grow four times to 4.2 trillion dollars (around 244 lakh crores) by 2017, says a ASSOCHAM-YES Bank joint study. The report states that the Indian luxury market is estimated to be worth 18 billion dollars (around Rs 1,11,000 crores) by 2017 from the current level of 14 billion dollars (around Rs 86,488 crores) with unprecedented growth in luxury categories including fashion, automobiles and fine dining, reveals the joint study.

There has been an improvement in consumer sentiment even globally. The report points out the report that globally consumer spending is expected to reach 40 trillion dollars (around Rs 2,440 lakh crores) by 2020 with an unprecedented growth of 12 trillion dollars (around Rs 732 lakh crores) in a decade. Indian Luxury market is poised to expand three fold in next three years and the number of millionaires expected to multiply three times in another five years, said D S Rawat, Secretary General ASSOCHAM while releasing the study.

The survey conducted between September to January 2015 interacted with close to 300 executives from India, United States, United Kingdom, Italy, France and Belgium. The study further said that high internet penetration across Tier-II and III cities along with high disposable incomes shall lead to approximately 80 million transactions on the Internet by 2020. As a result, the luxury consumption is going to increase manifold in the country, highlighted the study.

About 62 percent of CEOs believe the ideal marketing strategy to penetrate in these towns is to begin retailing ‘ladder to luxury’ brands. Close to 26 percent of the CEOs believe that the biggest hurdle facing the 30 percent mandatory sourcing criteria is the product quality constraint. Over 46 percent surveyed believe that regulatory bottlenecks, red-tapism and bureaucracy are the hurdles anticipated and about 42 percent believe counterfeit goods result in a sizeable loss of revenue and serve as a major hurdle to conduct operations in India. The lack of premium retail infrastructure in the country has also led to a demand supply mismatch impacting both expansion plans as well as bottom-line margins due to higher rentals.

The study concludes saying, while China is on track to become the world’s second largest luxury market within the next five years, India too is not far behind. With positive regulations and policies for the retail industry being put in place by the government along with a burgeoning middle class which aspires to own and experience luxury goods and services, India is a market that can no longer be ignored by international brands, it added.