As an economic boom propels more people in India into the ranks of the wealthy, they are acquiring a taste for the good life. India’s luxury sector is small, but is growing by nearly 20 percent a year.
Two brothers, Rituraj and Rajat Chowdury, are at New Delhi’s DLF Emporio Mall, to pick up a gift for their mother’s silver (25th) wedding anniversary. A few years ago, they might have chosen a piece of jewelry, but this time they have opted for a handbag with a designer tag. “I bought a purse, a bag, a Burberry bag," said one of the brothers. "We wanted to give her something special.”
There is a small but steady stream of customers at the mall where several designer brands have set up shop in recent years. Some are shopping for Armani suits, others for Jimmy Choo shoes or Louis Vuitton handbags.
Sanjay Kapoor is managing director at Genesis, which markets several luxury brands. He says frugality was the mantra (motto) for an older generation, but that is changing.
"There’s load of wealth being created. And, [with] that wealth - people are going to spend. You have built your base. You have bought your home. You have bought your second home. You have bought a car. You have built a security. Then people are spending for today. They are living for today. In the older days people would save for education, for homes," Kapoor said.
In addition to growing numbers of affluent business people and successful entrepreneurs, the customers for luxury brands include young people catching up on global trends.
Not all are wealthy. But even those earning $10,000 to $20,000 a year often want to own a designer watch, handbag or footwear.
Last year, sales of luxury goods grew by 20 percent to reach $5.75 billion. It is expected to triple in four years to more than $15 billion.
However, India’s luxury sector still makes up a tiny slice of the global market and trails behind the other Asian economic giant, China.
Retail analysts say steep import duties of up to 30 percent slow the growth of the luxury sector by making branded goods more expensive than in some outside countries.
Neelesh Hundekari, head of Indian luxury retail at consultancy A.T. Kearney, says Indians may buy a Porsche car in India because it is difficult to import, but may prefer to pick up a Louis Vuitton handbag in Dubai.
"They would like to find a good bargain even if the absolute price of the product is pretty high. They would worry about the last $100, even if they are buying something which is worth several thousand dollars. If they can actually get it from overseas without paying the extra price, then they won’t get it from here. An interesting contradiction to that is cars," Hunderkari explained. "Yes, if there is something which is absolutely not available and people want it, they will pay for it."
India also lacks suitable infrastructure to sell luxury goods. Its crowded cities have few upscale shopping areas outside of five-star hotels. Only two shopping malls - one in Delhi and the other in Bangalore - exclusively sell luxury brands.
As a result, most luxury brands have a presence only in the larger cities such as Delhi, Mumbai and Bangalore, even though there are many customers in smaller towns.
The country head of Louis Vuitton in India, Tikka Shatrujit Singh, says they have stores in three cities in India compared to 16 in China. That is an impediment, but he remains optimistic about a country where a huge, young population is beginning to savor luxury.
"Cities need to develop. Malls need to come up. That is one constraint for growth. We need to see a 100 more luxury malls opening up in India, or at least 20 more or 30 more," Singh stated. "The game-changing moment will come when the middle class starts to buy."
Luxury brands like Louis Vuitton are pinning their hopes on people like Neha Agarwal, a professional in her thirties. She is looking for a handbag with a designer label because she wants to be trendy. "Because it is the next 'in' thing in India and people who can afford it are doing it," she said.
Only the bigger luxury brands have come to India so far, but many more are expected to enter as the numbers of brand-smitten Indians continues to rise.