India's luxury market, once dominated by traditional high-end brands, is changing over time. With a growing middle class, increased global exposure, and evolving consumer preferences, the category is expected to clock in unprecedented growth. However, the critical question remains: which segment holds the key to India's luxury future – traditional luxury or the rapidly expanding realm of affordable luxury?
The rise and rise of premiumization
As per Deloitte reports the luxury market in India is projected for 20 per cent annual growth rate, with the market expected to reach $200 billion by 2030. This rise is due to a boost in premiumization, as consumers increasingly seek quality and brand recognition, and a growing middle class wielding greater spending power.
The choice between luxury vs. affordable luxury
Traditional luxury: This segment caters to the elite, the high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs), who value exclusivity, superior craftsmanship, and status symbols. Brands like Louis Vuitton and Chanel exemplify this approach, focusing on heritage and rarity. The positioning is built upon brand legacy, and the pricing is premium, reflecting the exclusivity.
Affordable luxury (Masstige): Bridging the gap between mass-market products and high-end luxury, this segment offers premium quality at more accessible price points. It targets the aspirational middle class and young professionals, who seek prestige without the exorbitant price tag. This segment is driven by a desire for quality and brand recognition, with a focus on delivering value.
While both segments present opportunities, affordable luxury appears to hold the greater potential for growth in India. The growing middle class, projected to significantly increase in size by 2030, with a substantial rise in households with annual incomes between $8,500 and $40,000, is the primary driver. This demographic shift indicates a vast consumer base eager for premium products at accessible prices.
In fact, the rise of affordable luxury is reshaping India's fashion and lifestyle landscape. Brands are increasingly adopting premiumization strategies, introducing high-quality products that cater to aspirational consumers. This trend is evident in Hindustan Unilever's shift, where two-thirds of new product launches in the past two years have been in the premium segment. This shows a clear movement towards the masstige market.
Masstige growth drivers
Rising affluence is one of the biggest catalyst for growth. The addition of over 7,000 new millionaires annually gives rise to demand for luxury goods, broadening the consumer base for both luxury and affordable luxury segments. Increased international travel and digital connectivity have also increased awareness and desire for global luxury brands, creating a more informed and aspirational consumer base. Add to it are the online platforms that have democratized access to luxury products, reaching consumers beyond metropolitan areas and expanding the market's reach.
In fact, now the Tier II and III cities present untapped potential, with consumers increasingly seeking luxury products without relocating to major metros. And the growing pre-owned luxury market offers avenues for brands to engage with cost-conscious yet aspirational buyers.
However, the sector does face regulatory hurdles, such as strict regulations requiring local partnerships, can deter foreign luxury brands from entering the Indian market. And India's vast cultural and regional diversity necessitates tailored marketing strategies, complicating brand positioning and requiring deep market understanding.
Thus India's luxury market is at a crucial juncture, with affordable luxury expected to lead growth in coming years. Brands that position themselves to cater to the aspirational middle class, while navigating regulatory and cultural complexities, stand to gain a significant foothold in this dynamic landscape. The ability to adapt to the Indian market, while still maintaining brand integrity, is the key to success.
