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Nov 2, 2011
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Brand-addicted Indians propel luxury sector

Nov 2, 2011

NEW DELHI, Nov 2, 2011 (AFP) - India's luxury sales are expected to expand by a scorching 20 percent annually until 2015, according to a new report, as brand-smitten consumers snap up big names to flaunt their wealth.

Mumbai's skyline / Photo: Corbis

Luxury sales were slow to take off in India a decade ago, disappointing retailers who had rushed into what they hoped would be the next China -- a vast market of over a billion people with an eye for status symbols.

But now Indian consumers "are quickly catching up with global trends", according to Neelesh Hundekari, head of Indian luxury retail at consultancy AT Kearney and author of the recent "Indian Luxury Review" report.

Global labels are jostling to make their mark in India where 153,000 dollar millionaires -- and many thousands just a notch below -- have created a luxury market in a nation also home to untold millions living in poverty.

India's luxury sales grew by 20 percent to reach $5.75 billion in 2010, despite high tariff barriers, a lack of retail infrastructure and costly rents, according to the AT Kearney report.

That figure is expected to rise at a similar pace annually to reach $14.72 billion by 2015 -- around half of the forecast $27-28 billion for the sector in neighbouring China by the same date.

"We expect this strong Indian upward trajectory to continue," Hundekari told AFP, with the market propelled by increasingly affluent and "brand conscious" shoppers.

Indians are buying everything from high-end handbags, jewellery, electronics and cars to expensive wines and spirits, with all the big names present in the market from Gucci and Chanel to Porsche and Ferrari.

Hermes has just launched a limited-edition sari range, while international high-end brands are spreading from niches in the lobbies of five-star hotels to branches in new shopping malls.

The vast DLF Emporio mall, which opened in 2008, was built on rough ground on the outskirts of Delhi with a mission to sell only luxury goods -- it now houses names including Giorgio Armani, Louis Vuitton, Cartier and Dior.

"This is just a beginning where the big boom is waiting to happen," said Sanjay Kapoor, managing director at Genesis Luxury, which distributes brands like Bottega and Cavalli.

For many Indians, who are casting off the mantra of frugality espoused by independence hero Mahatma Gandhi, wealth is a novelty that they "like to flaunt", Hundekari said.

"If they spend money, they want to get social recognition. They are not buying for intrinsic satisfaction -- their primary motivation is to show off."

The Internet and social media are also making it possible for luxury firms to connect with once hard-to-reach consumers in smaller cities and rural areas.

Angela Ahrendts, chief executive of iconic British brand Burberry, told an industry conference in Delhi last month that some 500,000 Indians are among its 8.5 million Facebook fans.

Also fuelling the lavish spending is the large amount of so-called "black money" on which people have paid no taxes.

"They need to do something to do with it," said one analyst who did not wish to be named.

India's luxury market is still weighed down by a combination of 35-40 percent import tariffs on luxury goods and bureaucratic red tape.

"World-over, customs duty varies from 15 to 20 percent, but in India, it's much higher, making brands very expensive," said Pradeep Hirani, chairman of designer retailer Kimaya Fashions.

Some Indians shop abroad for cheaper luxury prices but many of the well-heeled do not want to wait.

Global luxury firms are pushing India to cut import taxes on prestige goods and to lift a 51 percent cap on foreign ownership of Indian units that they say undermines their brand value.

India is "looking at how we can make it for you people to come here", Commerce Minister Anand Sharma told the Delhi conference, adding that the government was considering raising the foreign investment retail cap.

by Penny MacRae

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