A booming economy is leading to a thriving middle class in India and retailers are beginning to explore the potential of the new market – both at home and abroad.
India’s growing middle class, strong economy and youthful, globally focused shoppers represent an opportunity for international brands. Thanks to the market’s notorious complexities, India has been overlooked by some brands in favour of other, fast-growing emerging economies. Now, however, that could – or should – be set to change.
As the country’s young population looks ever more frequently towards western trends, brands should cast fresh eyes over Indian shoppers’ potential – both in its home market and beyond – to ensure they capture the spend of this burgeoning demographic.
Indian consumers love anything that is international or global. They love international brands and they love global content
Mary Turner, Koovs
The growth rate of India’s economy is impressive. Between 2019 and 2023, the OECD forecasts GDP growth of 7.3%. In comparison, China’s economy is expected to grow by 5.9% in the same period. Accompanying this economic boom is the emergence and growth of India’s middle class, who have money to spend on luxury.
“India is a huge market with a lot of untapped potential,” explains Georges Berzgal, vice-president and managing director EMEA at Pitney Bowes, which provides ecommerce technology to companies expanding internationally, including retailers. “The middle class has been growing very fast. It is emulating other emerging markets, such as China and the Gulf Co-operation Council [Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates].
“When you start seeing a growth in disposable income and people have paid for the basics, the next step is to buy luxury. It is a status symbol.”
Indian trade body Assocham predicted India’s luxury market was set to reach $30bn (£23bn) by the end of 2018 and is anticipated to expand fivefold in the next three years.
While big, luxury brands hold a significant lure for Indian consumers, smaller premium names can also benefit from rising middle-class incomes. Richard Donner is chairman of British shirting brand Double Two – which has five concessions, five kiosks in large offices in various cities and a flagship store in Bangalore. He explains that luxury labels are not the only brands favoured by Indian shoppers.
When you start seeing a growth in disposable income and people have paid for the basics, the next step is to buy luxury
Georges Berzgal, Pitney Bowes
“There are a lot of fakes in India,” he explains. “So Indian shoppers are wary of the very big names and look for names that they know, that their families know or brands that have a distinctive national identity. They are going more for that than the really big-name brands at the moment.”
“There is also a tremendous link to the UK,” he continues. “There is a feel-good factor about Britain – they aspire to an ‘English’ look.”
He explains that as the middle classes continue to grow, demand for brands with an international reputation for quality is likely to increase, as this demographic seeks to demonstrate its success: “In India, when people get a bit of money, most will spend it on clothing. It is important to immediately look prosperous and successful. That’s a very big part of the Indian psyche.”
“India is a country of first-generation wealth. There is old money but the new economy is ‘Generation Wealth’,” adds Mary Turner, CEO of Indian ecommerce site Koovs. “The significance of that is the desire for value, but also for trends and quality, is really embedded into the demands of the shopper.
“Indian consumers love anything that is international or global. They love international brands and they love global content.”
Footsteps in the market
In April, footwear retailer Kurt Geiger announced it is opening its first Indian store, in Delhi, this autumn in partnership with local retail company Genesis Luxury. A second will open in Mumbai by the end of 2019.
The launch takes advantage of Kurt Geiger’s British background and premium reputation – aspects that appeal hugely to India’s young middle classes.
“A brand such as Kurt Geiger has its design working as a silent brand ambassador,” explained Sanjay Kapoor, founder and president of Genesis Luxury at the time of the announcement. “The brand has iconic British style and urban wearability that is sure to resonate with all the fashion leaders of India.”
Despite the opportunities, India remains a difficult country to crack. Complex import rules, duties, lengthy shipping processes, cultural nuances, vast distances and a relative lack of infrastructure all contribute to the challenge for retailers.
Moving into the market is a significant step for a business, and requires a great deal of specific expertise and investment.
“India is a complicated market to deal with relative to other markets. Some of that has to do with regulations on importation, high duties and taxes,” stresses Pitney Bowes’ Berzgal. “It really is hard to import goods to India.”
He notes that one way brands can combat this is via partnerships. In the online space this could involve selling via marketplaces, such as Myntra or Flipkart. Retailers can leverage the local knowledge of these businesses on the regulatory environment and in-built logistical capabilities to facilitate ecommerce.
The younger generation is coming in independently and want to feel like independent European shoppers
David Perrotta, Planet
Other brands, including Double Two and Kurt Geiger, enter the market with Indian physical retail partners.
However, India’s booming economy is also beginning to impact the UK home market. As the Indian middle classes grow, they are also travelling overseas. The government’s “Visit Britain” statistics showed a 32.6% increase in visitors from the subcontinent in 2017 year on year.
This figure is only set to rise, and India is now one of the fastest-growing outbound tourism markets in the world – second only to China. The United Nations World Tourism Organization estimates that India will account for 50 million outbound tourists by 2020.
Shopping is rated by Visit Britain as one of the top three activities for Indian tourists. In the third quarter of 2018, 175,000 Indian visitors came to the UK, spending an estimated £170m – a year-on-year increase of 26% – the International Passenger Survey reported.
There should be some seasonal targeting from retailers to appeal to increasing numbers of Indian tourists
Artjom Hatsaturjants, New West End Company
International payments company Planet has documented that sales to Indian shoppers in the UK have grown steadily for four consecutive years.
“We are seeing a new breed of traveller coming across – more financially savvy and wanting to have the brands such as Hugo Boss and Ralph Lauren,” says David Perrotta, UK country manager and group head of customer experience at Planet. “Rather than coming with tour guides, the younger generation is coming in independently and want to feel like independent European shoppers [as though they are at home, not tourists].”
Yet Perrotta warns that UK retail is not yet geared up for Indian shoppers: “The UK market in general has accommodated for Chinese, Middle Eastern and Russian consumers. You can go into a retailer and see a Chinese or Arabic salesperson. Brands have invested in having localised staff.
“When it comes to India, the retail sector is not particularly accommodating – especially to this new generation who are coming in with cash and are ready to spend. A lot of emphasis needs to be around how to improve that.”
He suggests approaches as simple as awareness – ensuring shop assistants engage with Indian shoppers in the store, taking an interest in their country and in their backgrounds: “The importance for retailers is that there is this new wave coming in. Treat them like an international high-value customer.” He adds that cultural training for staff can increase average transaction values by 35%.
Artjom Hatsaturjants, senior insight analyst at New West End Company, which represents businesses in London around Oxford Street and Regent Street, suggests retailers could expand their culturally inclusive approach: “With regards to Chinese visitors, we have Mandarin speakers in stores, and shops take payment systems that are prevalent in China [such as Alipay]. Those measures could be extended to Indian shoppers during the peak months for visitors.”
However, he notes that retailers in the West End are not currently catering to the Indian shopper spend. Despite growth, India remains a small proportion of international sales for West End retailers – making up 2%-3% of international sales, increasing to 5%-6% in the June and July as holiday months.
“Given the pattern, there should be some seasonal targeting from retailers to appeal to those increasing numbers,” he notes. “The proportion of Indian shoppers hasn’t actually jumped up that much in recent years, but definitely a seasonally targeted campaign would make sense for some retailers.”
Be it in India itself, or closer to home, the booming Indian middle class appears to be a sector that retailers should begin to consider more closely. Given the tightening purse strings of UK consumers and slowing economies in once mega-spending regions such as China, retailers should be considering where next to focus their international energies to ensure future growth – and India’s potential can certainly not be ignored.