Category: Media & Culture / April 9, 2013 1:42 PM EDT
Global luxury goods makers currently grappling with China's clampdown on conspicuous consumption are increasingly looking to break new grounds in India which holds great promise with its burgeoning middle class and big pool of dollar millionaires.
A rapidly growing pool of cash-stuffed entrepreneurs and professionals with disposable incomes are drawing global luxury brands to India.
In the high-end malls of western Mumbai city and New Delhi, fashion conscious consumers are totally at ease wearing ethnic saris with Jimmy Choo shoes and Louis Vuitton handbags.
Despite this growing purchasing power, there are many obstacles, which need to overcome.
Speaking from Singapore, Mykolas Rambus, CEO of a global prospecting company that monitors habits of the ultra-wealthy, said India lacks the infrastructure for people to make use of their luxury purchases.
He added that luxury brands will need to tailor their products to suit the Indian market.
"One of the challenges I think about the market place in buying in India let's say versus buying in mainland China is gentrification - a funny term we've heard about, whether it be in the U.S., whether it be in Europe or other markets. If you're in Mumbai and you are looking for where to drive around that new fancy Lamborghini or to wear that new flashy suit, there aren't as many pockets where you can really, so to speak, enjoy one's luxury. That's very different in China so I think it will be a challenge for luxury manufacturers, the brands to figure out what offerings make sense for the Indian market," Rambus said.
India has a strong heritage of luxury consumption. It's a country where generations of women covet silk saris and diamond-encrusted gold jewellery, a country where the early maharajas built exorbitant collections of precious metals and more recently, luxury cars.
Such items are a sign of status in this deeply divided nation.
Alpana Kirloskar, a shopper at a mall in New Delhi, said that the desire for luxury brands was linked to peoples' self-confidence.
"For a special occasion when you're going out for a party or a special occasion you like to feel good and you like to feel happy so it gives you more confidence if you wear a branded item," said Kirloskar
With a growing economy and a population of 1.2 billion people, India is on paper an ideal location to set up shop.
In reality nearly 70% of India's people live on less then (US) $2 a day and in the capital alone there are around 50,000 children living on the streets without access to basic health care and sanitation.
The bulk of the nation's wealth is confined to a fraction of the population.
However, Sanjay Kapoor, managing director of a luxury brand marketing company, Genesis Luxury, said that producers only needed to capture a tiny fraction of India's vast population in order to gain access to a significant market.
"India is one of those large markets, 1.2 billion people. Even if 1% of them is consuming luxury that's a population of 12 million itself, which is the size of many European countries right?" said Kapoor in the millennium city Gurgaon in northern Haryana state.
He argued that wealth from the rich trickles down to the poor and that if the market is not there for wealthy consumers they will spend their money abroad.
"I think as wealth gets created in a country there is a trickle down effect, which is important. If you don't create the market people will shop for these products overseas. You might as well get the money in India duty paid et cetera, et cetera. So yes if you look at it moralistically it doesn't sound so great that you have a lot of people below the poverty line yet you have luxury malls like Emporio. But on the other hand these people are going to spend money one way or the other whether in India or overseas," said Kapoor.
Experts estimate India's luxury market to be worth around $6 billion and growing at a rate of 15-25% a year.
But poor infrastructure, high duty and complex legislation are making it harder for new brands enter the country.
Existing brands are also struggling to spread beyond isolated pockets in the nations key metropolitan cities.
(Video Source: REUTERS)