Has the luxury boom in India finally arrived after a 20-year wait?
TRACY MA | 2024/12/06
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TRACY MA | 2024/12/06
“Global luxury market grew by 13% in 2023, but is expected to slow to 11% in 2024,” according to a report from the global asset management firm Bernstein. The report anticipates that the post-pandemic revenge spending is cooling down and the growth of luxury consumption is reverting to normal cycles.
Signs of the slowdown have long been visible. In the first half of the year, with the exception of Hermès, both LVMH and Kering experienced a deceleration or even decline in the U.S. market. In China, while the country continued to support Asia (excluding Japan) as a luxury consumption powerhouse, achieving high growth has become increasingly difficult. Consumers in Hangzhou are now scrambling for Hermès at discounted prices in Costco, and outlet malls have surpassed their entire annual sales within just the first half of the year.
The stock market has responded accordingly. Kering and Hermès both saw their shares drop nearly 1% last week. Just yesterday, LVMH lost its top spot in the European stock market by market cap (approx. $419 billion), overtaken by Novo Nordisk and its blockbuster weight-loss drug Wegovy (market cap $428 billion).
As traditional strongholds offer less promise, can luxury brands seek new markets, just like Wegovy did? Much has been said about Korea, Vietnam, and the Middle East as the next destinations for luxury, but in terms of population, economic growth, and consumer demographics, no place seems to rival the potential of India—the newly crowned most populous country in the world.
According to Knight Frank, the number of individuals in India with over $30 million in assets is expected to grow by nearly 60% over five years starting in 2022. By 2027, about 1.66 million people in India will have a net worth of over $1 million. Euromonitor International estimates that India’s luxury market will grow into one of the fastest globally, expected to reach $8.5 billion by 2023, up $2.5 billion from 2021. Bain & Co even projects India’s luxury market could hit a staggering $200 billion by 2030.
With such a massive pie, luxury brands have long sharpened their knives, ready to carve it.
- Sharpening the Knife for the “New Cake”
Launching in a new market often calls for a grand entrance. For many luxury brands entering India, the timing was strategically chosen to coincide with Diwali (October–November), the country’s most significant annual festival.
French luxury department store Galeries Lafayette is entering India through a partnership with Aditya Birla Fashion and Retail Group, bringing over 200 brands such as Armani, DIOR, and Prada.
The biggest player in India’s luxury market, Reliance Brands Limited (RBL), is expanding its partnerships with global giants like Valentino and Tiffany. French brand Balenciaga is also planning to open stores in collaboration with RBL.
Swiss family-owned luxury chocolatier Läderach recently opened its first boutique in Delhi’s upscale DLF Emporio mall and plans to launch 5–7 more stores and an e-commerce platform in the next two years with DS Group. Other luxury debuts include Swiss watch and jewelry retailer TimeVallée and Dutch salon brand Keune.
Beyond newcomers, existing brands are ramping up efforts to deepen their presence in India by appointing local brand ambassadors.
Italian jewelry house BVLGARI named Indian actress Priyanka Chopra Jonas its global brand ambassador in 2021. Louis Vuitton followed in May 2022, announcing Bollywood actress Deepika Padukone as its first Indian ambassador. In May 2023, Gucci appointed Bollywood actress Alia Bhatt as its first global ambassador from India.
In March 2023, DIOR held its pre-fall fashion show in Mumbai, showcasing a collaboration with local artisan school Chanakya and its head Karishma Swali, highlighting Indian embroidery and craftsmanship.
Luxury cars and spirits are also making their moves, generating as much buzz as luxury fashion did 20 years ago.
- Nearly 20 Years Waiting for the “Inflection Point”
Back in 2002, Louis Vuitton became the first luxury brand to enter India, followed by Tommy Hilfiger in 2003. But due to India’s then 30% import tariffs, stringent FDI rules, complex approval processes, inefficiencies, and a lack of retail infrastructure, most luxury brands refrained from launching large-scale operations.
In 2006, India began easing restrictions, allowing foreign single-brand retailers to acquire up to 51% ownership through local partnerships. Brands like DIOR, Gucci, Versace, Chanel, and Burberry started trickling in.
Most international brands had to collaborate with Indian distributors, often choosing Reliance Brands Limited (RBL), which brought about 35 premium and luxury brands—including Tiffany, Michael Kors, Burberry, Bottega Veneta, and Armani—to India by 2007.
A year later, Hermès opened its first boutique in a five-star hotel in India. By then, the key players—LVMH, Kering, and Hermès—were all present. Yet, most luxury shopping was confined to retail areas inside a handful of luxury hotels.
Their performance in India wasn’t promising. In 2012, Bvlgari considered exiting due to distributor conflicts, followed by Dunhill and Versace, which ended their distribution agreements.
That same year, India further relaxed FDI rules, allowing 100% ownership by single-brand foreign retailers. Roberto Cavalli, Damiani, Jimmy Choo, Christian Louboutin, and Zegna followed. In late 2013, Richemont opened its first self-operated store in India.
From LV’s 2002 debut to 2013, luxury brand store numbers remained in the single digits. Few financial reports stood out, and despite media claims from 2015 to 2019 that India had reached a “turning point,” no brand delivered impressive data—until 2019.
That year, Hermès India announced a net profit of $2.5 million, up 55% YoY. According to a report from the New Think Tank, the Indian luxury market had reached $5.6 billion in 2019.
After years of battling high import taxes, limited retail spaces, and convoluted policies, India’s luxury market finally appears to be on a real upward trajectory.
- HNWIs, Young Demographics, and the Pandemic: A Perfect Storm
High-net-worth individuals (HNWIs) form the backbone of luxury consumption, while younger generations serve as the growth engine. The former is less affected by economic cycles and offers revenue stability. The latter brings new preferences, trends, and purchasing power.
India now embodies both.
Credit Suisse’s Global Wealth Report 2022 revealed that the U.S., Japan, China, Canada, and Australia saw the greatest wealth declines. In contrast, India, Mexico, Brazil, and Russia saw significant gains. India’s millionaire count is expected to double from 796,000 in 2021 to 1.6 million by 2026.
India also has the world’s largest millennial and Gen Z populations (born between 1981–2009), making up 51% of the population—over 700 million people. RedSeer Consulting notes these cohorts will be crucial in shaping the next decade of luxury consumption.
COVID-19 played a transformative role. With international travel restricted in 2020, local HNWIs began purchasing luxury goods domestically. This created an opportunity for luxury brands to expand.
India’s massive internet and smartphone penetration also enabled digital luxury retail. About 70% of internet users access the web via mobile, providing fertile ground for e-commerce.
In February 2023, Vogue India declared that Indian luxury had reached its “mature moment.”
- Is This the Real Inflection Point?
India’s consumer base, infrastructure, and cultural dynamics now appear more favorable than ever. But for this to truly be the long-awaited inflection point, luxury brands must shift their approach:
1. Embrace Local Culture: Western luxury fashion isn’t always the pinnacle in India. Traditional apparel and jewelry are deeply rooted in consumer identity. Brands must align with Indian aesthetics and tastes.
Examples include Hermès planning to release saris, Bottega Veneta launching “Indian Knot” editions, Canali designing Bandhgala jackets (Indian-style collared blazers), and DIOR collaborating with Indian artist Kalyani Chawla on embroidered bags.
2. Rethink Pricing Strategies: Indian consumers are highly price-sensitive. “They don’t hesitate to spend on gold or diamonds but hesitate on an LV bag—unless it’s an India-exclusive,” says Edward, a luxury sales advisor in India.
This sensitivity, combined with a lack of luxury retail infrastructure, means brands may need to open in mid-tier malls or make pricing concessions to appeal to the rising middle class. Chanel, for instance, opened a boutique in a regular mall—Select Citywalk in Delhi—as early as 2013.
3. Go Digital: Meta reports India now surpasses the U.S. as Facebook’s largest active user base. The pandemic normalized online shopping, and digital platforms—e-commerce, livestreaming, etc.—are essential supplements to India’s limited physical retail infrastructure.
Finally, a word of caution: India is known as the “graveyard of foreign companies.” As of July 2022, 1,777 foreign companies—including Ford, Chevrolet, and Citibank—have exited India. While no luxury brands have pulled out recently, there’s concern whether profits earned in India can be repatriated—a concern famously summed up as: “You can make money in India, but don’t expect to take it out.”
- Aditya Birla Fashion & Retail Group
- Reliance Brands Limited (RBL)
- Chanakya
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