Luxury retail to India
India has now overtaken China as the world’s fastest growing major economy.
According to the World Bank, India’s GDP is expected to grow 7.3% in
2018–19, and 7.5% per year over the following two years, with growth driven
by rising consumption and investment. This prosperity creates major
opportunities for Australian exporters.
One market that is experiencing transformative growth is luxury retail. A
recent analysis by Euromonitor
reports that urban consumers in India are witnessing an unprecedented rise
in their income and standard of living. Middle-income earners are now
spending 8–10% of their pay on luxury goods
, including global clothing brands, cosmetics and wine.
The result is that India is rising briskly up the world’s rankings of
luxury goods markets. Currently, India contributes just 1–2% to the global
luxury trade, but India’s market is growing by 25% per year. This means
India’s luxury goods market, currently worth approximately US$30 billion,
is poised to reach US$50 billion by 2020. 
For Australian companies, India presents multiple opportunities. At one
end, India has a fast-growing population of ultra-high-net worth
individuals; at the other end is a highly aspirational young generation
with disposable incomes. Men are becoming major beauty product consumers,
and wine drinking is becoming more fashionable.
Exporters will face challenges. In 2018, new regulations and high tariffs
helped slow growth in India’s luxury goods market. But continued
double-digit growth should provide Australian brands with great
opportunities – especially in beauty products, apparel and beverages. With
local partners, Australian brands can help shape the appetites of India’s
The luxury goods market in India covers multiple consumer segments. These
Ultra high-net worth (UHNW)
India currently takes sixth spot in Credit Suisse’s ranking of the
world’s top 20 countries
, in terms of UHNW residents. Last year, the number of UHNW individuals
in India rose 31% — a phenomenal increase in global terms.
High-net-worth (HNW) individuals.
Credit Suisse also reports that India is home to the fourth-largest
population of millionaires in the Asia-Pacific region. This number has
grown very quickly. In 2000, India was home to just 39,000
millionaires; now it is 343,000. This group spends up to 40% of their
income on luxury brands.
- The young, well-travelled middle class.
According to the Associated Chambers of Commerce and Industry of India
(ASSOCHAM), this consumer group spells particularly good news for luxury
brands across the world. It predicts that this demographic, previously
ignored by global brands, will attract global attention, aided by positive
regulation in the retail industry.
Over the past 12 months, Austrade India has noted five trends or
characteristics in luxury retail that may help Australian exporters
evaluate their potential market appeal.
India can be thought of as having a value-conscious consumer base, and
value-seeking does not stop at luxury purchases. Value can translate
into experience, service or customisation, but luxury overseas brands
may find they have to go the extra mile to please their new customers.
Value consciousness translates differently.
Consumers are brand conscious and logo-centric, as long as the logo is
prominent. For men, shoes with prominent logos sell well. Women’s shoes
do not sell well because the value is less obvious. Women are more
likely to spend on sunglasses and handbags, which are more visible.
There is premium value in local customisation, individual service and
personalisation. With the increase in consumer desire for exclusive
products, luxury brands such as Zegna, Tom Ford and Corneliani are
adopting bespoke services as an ultimate expression of luxury.
Luxury online, or digi-lux.
Luxury brands have been wary of making their products available online.
Until recently, they calculated that a digital connection would erode
the exclusivity of the purchasing experience. This attitude is
changing. Luxury retailers are reaching out online, enriching the
customer conversation with digital experiences and social media.
Global groups like Michael Kors, Kate Spade, Coach and Charles &
Keith are targeting brand-conscious aspirational buyers. These brands
enable Indian shoppers to buy status-giving products at a much lower
price than typical luxury brands. They are successfully appealing to
young Indian buyers.
Opportunities for Australian producers
Several factors in the luxury Indian consumer market play to the advantage
of Australian exporters:
Australia’s clean, green brand image.
Australia is recognised by local consumers as being a safe, reliable
and quality exporter of products and brands. Some Australian exporters
have already taken advantage of this competitive edge and are
established suppliers of skincare, babycare and haircare products.
The premium value of imported brands.
Indian consumers are highly brand conscious and prefer premium consumer
products. Branded and imported products are almost always regarded as
being of high quality.
India’s openness to boutique brands.
Fashion items that exhibit niche traits attract consumers in the
mid-to-high-income level. This provides Australian fashion labels and
boutique lifestyle designers with a potential entrée into the Indian
Exclusive online channels.
Several Australian cosmetic and fashion brands have successfully
entered India through exclusive online channels with no physical
showroom or permanent overhead.
Austrade believes there are multiple opportunities for Australian
exporters. Without downplaying other sectors, there is growing demand for
premium Australian products in skincare, fashion, babycare, male personal
care, chocolates, wine and health supplements.
The Indian cosmetics market is growing by 25% per year, and is expected to
be worth approximately US$20 billion by 2025.
There is a growing synergy in the market between beauty and health.
Organics now comprise up to one-third of the personal care category.
The male personal care market is growing fast.
The online cosmetics market is growing strongly, although it is currently
valued at just 2% of the market (or US$50 million).
The online market includes horizontal sellers such as Flipkart and Amazon,
and verticals such as Nykaa and Purplle.
Wine and spirits
India’s beverages market is protected by ultra-high tariffs, which means
wine and spirits importers are starting from a low-volume base.
- Growth in wine imports is strong: during 2017, imports of Australian
wines grew by 51% (in value), though importers are currently only prepared
to pay a low FOB price of up to A$3.50 per bottle.
Consumption of wine is expected to rise 30% in metro cities.
India is one of the world’s largest whisky markets, although this market
is dominated by local brands made from fermented molasses.
Indian consumers are increasingly participating in the market for luxury
clothing and apparel. From 2012 to 2017, India topped growth in the
designer apparel and footwear market globally
, nearly doubling in size (97% growth in real terms, to US$7.6 billion).
- Luxury brands are leveraging digital communications to strengthen their
- Stores remain essential to the shopping experience in designer apparel
The selfie trend is driving the aspirations of younger consumers towards
Tariffs, regulations and customs
Despite the positive outlook, the Indian luxury goods market is highly protected and can be challenging for first-time importers.
Foreign direct investment
restrictions are keeping brands out of the India. Fifty-one per cent
foreign ownership is the limit. One hundred per cent is allowed, but
only with 30 per cent local sourcing of materials. Foreign brands may
find it difficult to comply with these requirements; they may fear
dilution of their name or harm to their business models.
Tariffs on beverages are ultra-high.
The customs duty on wine is 150% on cost, insurance and freight (CIF).
Thus, the final cost to the consumer would be around 9 to 11 times of
FOB in Mumbai, around 7 to 8.5 times of FOB in Delhi and around 6 to 7
times of FOB in Bangalore. The tariff on whisky is also 150%.
Import duties on other luxury goods are also high.
For local retail of luxury goods bought from overseas, the typical
range is 30–60%. Coupled with high transportation costs, this tends to
cause a significant reduction in potential margin for retailers.
Retail infrastructure is often challenging for western brands
and street-level environments are often unkempt. This forces luxury
brands to generally launch boutiques in luxury malls or hotels through
joint ventures with local distributors.
Local talent that understands luxury retail can be difficult to
Those available for employment may appear under-skilled and able to
charge high comparative employment rates. Specialised skill centres and
business schools have been launched to address this deficiency.
Recommendations for market entry
Get to know the market
Visit your prospective market, establish a price range for your
products and understand local sales and distribution channels.
Australian companies are urged to investigate enquiries from India and
consult with Austrade for assistance. Ask for referrals to
professionals who specialise in due diligence and background checks in
Find a local partner or agent
Choose carefully and cautiously; look for a partner with a proven
record, and ensure the partner can handle import formalities.
Test the market
Be aware that everything is different in India, even between different
cities and provinces. This may mean having to adapt your product to
suit local tastes. Industry-specific trade shows are a good way to
sample Indian markets.
Channels to market
Department stores are a good platform for brand building and can attract
high-end customers who are willing to pay for luxury products. However, the
investment required to acquire counters is huge and the cost can be
prohibitive for suppliers. Flagship concessions in department stores are
still a key channel to expose fashion brands to high-end consumers and for
brand-building. Online retail has become a much more appealing and major
channel for increasing sales volume.
Shopping at professional stores for skincare and cosmetics has become
trendy among young Indians. Stores such as Sephora, Health & Glow and
Nykaa provide a one-stop-shop for consumers. These stores tend to display
products of different levels of quality and price, which can satisfy
different customers and their needs.
Recently, business-to-consumer (B2C) online retail markets have achieved
great success. Online retail is driving – and is being driven by – changes
in customers’ purchasing behaviour. The trend is more pronounced in younger
consumers, but the dominance of store-based retailing persists is also driven by ease of comparison.
Supermarkets / hypermarkets
Supermarkets are traditionally a very good platform for low to mid-range personal care products. However, higher-end cosmetics products are trying to tap into this channel as supermarkets upgrade their profile to meet the changing demands of their customers.
Cities and luxury markets
In a recent Euromonitor city-scorecard report, Delhi, Chennai and Mumbai
all scored in a list of the top 10 of Indian cities that provided good
retail venues for luxury apparel and footwear.
The surprise result, however, was the appearance of a number of Tier 2
cities where the rapid growth of globally competitive industries has
created an exceptional concentration of high and middle-income earners.
This makes some Tier 2 cities particularly attractive to overseas luxury
goods companies looking to launch in India.
Capital of India’s IT industry, Bangalore hosts the headquarters of
multiple major Indian companies, including ISRO, Wipro and Infosys.
This has helped drive average disposal incomes to the top spot in the
Hyderabad, Andhra Pradesh.
With a population of 6.9 million, Hyderabad came second on
Euromonitor’s ranking of attractiveness as a city market for luxury
apparel and footwear. It is home to US-based IT companies, including
Microsoft, Apple and Amazon.
Links and industry contacts
Government, trade and business
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