Young India Checks Into High Street

A FEW YEARS AGO, about a quarter of the cars Mercedes-Benz sold in India were entry-level vehicles. Now, 25% are from the top-end of its product line, with 60% priced over ₹70 lakh.

“The maturity of the luxury consumer is changing from just owning brands to owning higher-end luxury products,” says Santosh Iyer, MD and CEO, Mercedes-Benz India. Another emerging trend is customisation, with 73% of top-end cars being customised by the automaker’s personalisation label, Manufaktur..

This year, the luxury carmaker has launched five models in India, and plans to launch seven more, including the top-end ESQ Maybach SUV and the Long Wheelbase E-Class.

In FY24, the German automaker sold a record 18,123 units in India, up 15% year-on-year. Meanwhile, rival BMW sold 22,940 units (14,172 units in 2022). Audi India sales jumped 89% YoY to 7,931 units during the year.

Indian luxury consumers are not just showing a penchant for expensive cars. Luxury sales across real estate, and fashion goods, including clothing, make-up, and accessories, are booming as well.

Take real estate, for example. According to consultancy firm Anarock Property Consultants, 58 ultra-luxury homes (priced over ₹40 crore) were sold across seven cities for a cumulative ₹4,063 crore in 2023 (till November 30), against 13 ultra-luxury homes sold for a total sales value of ₹1,170 crore in the previous year.

Tariq Ahmed, CEO, west India, Prestige Group, says the developer has seen a spike in demand for luxury homes, primarily driven by families looking for bigger or modern spaces complete with a wellness element, and from high-earning executives with large disposable incomes. “The demand we’ve seen for our projects is from large family groups that want to live in a modern home... We’re designing our homes with a wellness aspect in mind, lots of outdoor spaces, swimming pools, areas to walk in etc,” says Ahmed. In April, the company reportedly sold ₹1,300 crore worth of luxury residences at Marine Lines in South Mumbai within the first three months of pre-launch. The Prestige Ocean Towers, designed by London-based architecture firm Foster + Partners in collaboration with Indian architect Hafeez Contractor, and interiors designed by HBA London, feature four, five, and six bedroom apartments priced over ₹22 crore. Earlier this year, DLF sold 1,113 luxury apartments in Gurugram for ₹7,200 crore within three days of pre-launch.

Companies across sectors are reporting a rise in demand for luxury goods, leading to launch of new products and brands, geographical expansions, an influx of foreign companies, and opening of newer retail spaces across major cities. According to Bain & Co., the Indian luxury market is expected to grow $85-90 billion by 2030, from $17 billion currently, aided by young customers and a growing upper and middle class. “Although there will never be ‘another China’ in terms of outsize growth contribution to the industry, India and emerging Southeast Asian and African countries hold significant potential, if the luxury industry’s infrastructure (such as malls) and regulation can evolve quickly enough in those markets,” the consultancy firm says.

So, what trends are driving luxury consumption in India, and attracting companies from around the world?

Culture Reset

Designer Amit Aggarwal shares a story about a customer, who threw a royal-themed party for her 40th birthday, with the mood board inspired by Hollywood blockbuster Dune. Post Covid, affluent Indian consumers are looking at designer goods for occasions beyond weddings and engagement parties, says Aggarwal. “Smaller occasions that were considered a part of daily life have now become important occasions for celebration,” he adds.

Executives of luxury firms point to a cultural shift. “The hierarchy in family structures wherein you could own or consume luxury products only if the head of the family consumes them is still valid, but it’s changing,” says Iyer of Mercedes-Benz India. There’s also a shift from saving to spending post Covid, especially on luxury goods. “People are willing to spend more on experiences, and luxury to people is an experience,” says Praveen Govindu, partner, consulting, Deloitte India.

Overall, even though India’s per capita GDP is a modest $2,410.9, according to the World Bank, the number of people at the top end of the wealth pyramid is rising. The latest wealth report by Knight Frank puts the number of ultra high-net worth individuals (wealth over $30 million) at 13,263 in 2024, a 6.1% growth YoY. The number is expected to jump 50% to 19,908 by 2028. Meanwhile, Goldman Sachs estimates India’s cohort of “affluent” consumers (earning over $10,000 annually) to grow to 100 million by 2027, from 60 million in 2023.

A growing affluent population, increasing brand consciousness, and the desire for status symbols are contributing to a rise in demand for luxury products, says Amanpreet Ahluwalia, business head, Titan-owned Zoya. Factors such as changing lifestyle, exposure to global trends through travel and digital media are also playing an important role. Over the past year, Zoya, which mostly stocks jewellery priced over ₹80,000, has opened new flagship stores in key metros, including Mumbai, Hyderabad, Bengaluru, Delhi and Ahmedabad, and is setting up stand-alone stores in Kolkata, Mumbai and Chennai.

New Consumer Base

Anand Ramachandran, senior vice president, business expansion, Prestige Group cites the example of a 33-year-old start-up founder who launched a company at 27 and sold it at 33, leaving him with enough money to buy a ₹40 crore apartment. Besides families with generational wealth, young, first-generation entrepreneurs with successful start-ups are a consumer group that the company has seen growing in the last two years, says Ramachandran.

Wealthy, young consumers nowadays are different compared to their predecessors, with many of them looking at the top-end or core luxury segment, says Iyer of Mercedes-Benz. A survey conducted by Deloitte found that 60-65% of respondents within the Gen Z and millennial category were keen to purchase more luxury items compared to their predecessors. With cars becoming autonomous, Mercedes-Benz is adding features such as gaming, and working with Dolby Atmos to create an immersive 5D experience for watching movies. “Even traditional navigation is no longer valid for Gen Z. They need more intuitive stuff,” adds Iyer.

“Gen Zs and millennials are becoming increasingly aware, given their exposure to social media and other online platforms,” says Govindu of Deloitte India.

Beside interest from Gen Zs, Iyer says the auto sector has seen the number of women consumers grow from 9% to 15% in recent years. “Many times, women own the second or third car in the family. From mass or premium cars, women are shifting to luxury. There’s also an increased preference for SUVs compared to sedans.”

The Boon Called E-commerce

According to a report by real estate consultant CBRE South Asia and the PHD Chamber of Commerce and Industry, luxury brands leased over 600,000 square feet of retail space in India in 2023, compared with 230,000 square feet in the previous year, while leases in malls tripled to 240,000 square feet. Multiple foreign luxury brands, which earlier had a small presence in India or none at all, are entering into tie-ups with Indian companies, including Reliance Brands and Aditya Birla Fashion and Retail Ltd. (ABFRL), to set up stores and expand their footprint. French luxury house Hermès, for example, opened its third store in India in April at the Jio World Plaza Mall, while Italian fashion house Valentino launched its first two stores in India last year. French luxury group Kering-owned Balenciaga, too, debuted in the country in 2023.

E-commerce is also becoming an important channel for local and foreign luxury goods. Designer Aggarwal says consumers are now open to buying expensive, designer pieces online. “If you’ve already engaged a customer previously in your product, they’re happy to move on to digital buying, considering they are already aware of the kind of quality you’d be offering,” he adds.

“There was always a buying power that existed in India across segments, but availability was a bit of a challenge. Access has improved through e-commerce or even brands setting up channels of purchase,” says Govindu. For instance, iconic Parisian department store Galeries Lafayette, which plans to open two new stores in Mumbai and Delhi in partnership with Aditya Birla Fashion and Retail Ltd , will reportedly have a dedicated e-commerce platform in the country.

Even as luxury companies explore multiple avenues for growth, executives emphasise on a long-term strategy for the country. “India is a market where you need to have strategic patience. We have been here for 30 years and have seen growth in different phases. Growth in the last three to four years has been significant in percentile terms. But more than absolute numbers, it is important to emphasise on the average selling price because in luxury, you don’t just focus on numbers and volume growth,” sums up Iyer.