India Embraces Luxury as China Turns Cool
Makers of expensive items like handbags, shoes target new patches of wealth outside megacities
As sales growth slows in China, luxury-goods brands are now focusing on India to tap the rising number of millionaires who are indulging in conspicuous consumption. Photo: Junho Kim for the Wall Street Journal.
AHMEDABAD, India—At a fashion boutique in one of India’s industrial boomtowns, the wives of factory owners and textile exporters sipped tea and mulled spending hundreds of dollars on a handbag covered in thousands of gold-colored crystals.
Shalini Garg, whose husband is a property developer, plopped down $2,000 for a clutch with an inlaid chevron design. She said she likes to have a fancy bag when she makes an entrance at parties. “I usually hold it for an hour and send it back to the car,” she said, noting that it was rather heavy.
As sales growth slows in China and other big markets, luxury-goods makers are increasingly looking to cash in on patches of new wealth sprouting in often-unexpected parts of India, where there is a growing appetite for luxury brands.
Most of the smaller cities where the wealthy are located are also where key industries have taken root. Ahmedabad hosts textile, pharmaceutical and chemical factories.
The hunt for these customers is sending big name brands into India’s heartland, as they seek to sell handbags, high heels and other glamorous goods in India’s second- and third-tier cities, which may have populations in the millions, but where you are unlikely to find a Starbucks or a Gap—much less a Manolo Blahnik boutique.
“There is a growing demand for luxury products because people want to look better, feel better,” said Sanjay Kapoor, managing director of Genesis Luxury Fashion Pvt. Ltd., a company that sells luxury brands such as Canali, Furla, Burberry and Jimmy Choo in India. Indians are “more aware of trends now.” There is no taboo in India on leather goods despite prohibitions in some states on consumption of beef.
An increasing number of the people in this creamy layer—at least 44%—of the economy are from outside its megacities, according to a Kotak Wealth Management report.
Knowing “where the rich live…that’s critical,” said Genesis’s Mr. Kapoor.
The number of millionaire Indian households worth 250 million rupees ($3.8 million) grew by 17% from 2014 to 2015. That figure is expected to more than triple to 348,000 households over the next five years, with a combined net worth of 415 trillion rupees, according to the Kotak report. They make up less than 1% of a population where 20% of people make less than $2 a day, and the majority make $10 a day, according to a study by Pew Research Center.
In Ahmedabad, about 500 miles southwest of Delhi in India’s Gujarat state, the Judith Leiber brand, with bags costing thousands of dollars that are coveted from Tokyo to New York, held a two-day sale in July in a small fashion boutique that mostly stocks Indian designers’ wares.
A shop assistant showed off a series of clutches, including one shaped like a pyramid and others in the form a camel and a rose, resting them on his hip and turning them slowly so their crystal beadwork would catch the light.
Such forays are becoming increasingly common. Purses from Valentino, watches from Etienne Aigner and shoes from Christian Louboutin have all appeared in pop-up shops everywhere from Indore in Madhya Pradesh to Nagpur in Maharashtra.
Most designers follow the trunk-show model because the wealthy prefer to shop discreetly and it is less intimidating for some first-time wealthy shoppers if the brands arrive at their doorstep, without the need for any travel to big-city boutiques.
There are obstacles to setting up luxury stores that sell these brands in second-tier cities. Some sellers say the malls there aren’t nice enough. Import duties and luxury taxes levied on high-end goods drive Indians to shop abroad, analysts say.
Judith Leiber, which has stores in Delhi and Mumbai, estimates that close to one third of its sales in India come from trunk shows, said Varsha Ahuja, the company’s brand manager in India.
India’s luxury market is set to more than double to $5.6 billion by 2019, research firm Euromonitor predicts. That is still small compared with the $23 billion sold in China last year. But it is growing rapidly.
Luxury sales in India rose 25% in 2014 from a year earlier, compared with 7% in China, Euromonitor said.
Shoes, watches and bags are a hit with wealthy Indian consumers. But other kinds of luxury goods are a harder sell. Many Indians prefer traditional dress to Western clothing. Indian jewelry, too, follows local traditions instead of international tastes.
Indian socialites’ spending habits are increasingly similar to their counterparts in Europe or the U.S. Indian women, young and old, enjoy Judith Leiber bags because they pair well with formal Indian dress that tends to be brightly colored and extravagantly embroidered.
Judith Leiber’s trunk shows in India were modeled after American fashion designer Bill Blass’s afternoon-tea shows for high-society ladies in Texas in the 1980s, saidSangeeta Assomull, chief executive officer of Marigold Luxury Brands Pvt. Ltd., the Indian retail company that sells Judith Leiber in India.
In Ahmedabad, Judith Leiber relied on Avani Bhansali, the daughter of a well-to-do cotton-factory owner whose boutique stocks top Indian designers in one of Ahmedabad’s more upscale neighborhoods. She knows the city’s A list and can scare up a crowd of local socialites with one WhatsApp blast.
At the Judith Leiber event in July, many of the customers were trying to get their hands on one of 10 clutches that had been made for early launch in India. The price tag for the gold, rose-shaped minaudière: $4,995.
Mrs. Garg said she didn’t realize she had so much competition for the bag in her city: “I thought no one spends in Ahmedabad,” she said. “But clearly they do.” Before buying her chevron clutch, however, she asked for a discount—and got 10% off.
Pooja Agarwal stepped into the Bhansali shop where the trunk show was held, carrying a blue Prada tote. She used to pick up all her bags on trips abroad but is happy to shop closer to home. Her friends and neighbors are much more brand-conscious than they used to be, she said. “Before people here dressed simply—not drably, but now they are more label-conscious,” she said. “They know about both Indian and international brands.”
Ms. Bhansali’s latest trunk show at her shop was this month, when she stocked labels such as Jimmy Choo and Paul Smith. “There is a lot of money here, a lot of demand,” in Ahmedabad, Ms. Bhansali said. “But not enough supply.”