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Inside India: New wealth set to boost luxury retail

India’s growing economy is creating new wealth. Research released last week by think-tank NCAER concludes that high-income households outnumber poor households for the first time. But before luxury brands start licking their lips, remember this is Indian high income. Using the NCAER definition, high-income households have a combined annual income of INR1.80 lakh (INR180,000, USD3,900).

India’s millionaires
While high-income households are not in the market – yet – for luxury goods, the numbers at the tip of India’s wealth pyramid are swelling. The Capgemini-Merrill Lynch World Wealth Report recently found that the number of millionaires in Asia-Pacific equals Europe’s for the first time. India and Hong Kong are driving this growth; India is now home to 126,700 millionaires, up 51 percent on last year.

Boost for lifestyle brands
Although India’s share of the global luxury market is just 2 percent, compound annual growth rate (CAGR) is expected to be 25 percent through to 2015. Lux-growth is already having an effect. The influx of rupee-rich consumers is boosting high-end lifestyle product sales.

Sales of luxury cars are revving up, with Mercedes-Benz reporting record India sales for July. The company sold 521 vehicles compared with 288 for the same month in 2009: although volume is still low, this represents growth of 80 percent. Looking at sales during January-July this year, the company has seen growth of 75 percent compared with the same six months last year.

The mobile phone market has also witnessed an increase in demand at the top of the market. LG, which sells Versace’s designer phones, estimates the premium mobile market is growing at 20 percent annually and has a market value of USD20 million.

Delhi – a new luxury capital
The retail landscape is also changing to accommodate rich-retail desires. Developer DLF has opened an Emporio mall in Delhi. The location is no accident: according to BusinessWorld’s The Marketing Whitebook 2010-11, five neighbourhoods in Mumbai and Delhi and one in Punjab account for 65 percent of potential luxury customers in India.

Emporio is pioneering Indian luxury retail, its four floors occupied by many of the leading luxury brands. Interestingly there is a hierarchy: the ground and first floors are home to international luxury – Dior, Giorgio Armani, Gucci, Louis Vuitton – with floors two and three displaying domestic high-end brands.

The mall is built around a central atrium containing a cafe. A concierge desk and team of efficient, well-trained staff leave you with the impression that you are visiting a five-star hotel rather than a shopping mall. Service standards within the individual stores and in the public spaces are equally high.

The shopping experience from entry to exit sets a new standard for Indian retail. While Emporio only caters for the relative few, it has raised the standard for retailing in India, providing a credible answer to more established international luxury capitals.

Dominic Twyford is the founder of India Insights, a retail consultancy in India offering clients insights into the Indian consumer as well as issues affecting their brands and businesses in the country.

Inside India is Retail in Asia’s regular column dedicated to showcasing opinions about the Indian retail industry.