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The Luxe Life

The Luxe Life

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Published by Indicus Analytics
There is no clear definition of either luxury products or luxury consumers. In fact, the various expressions used when describing the luxury market only add to the confusion. Broadly, in the Western world, luxury consumers are defined as the top 2-5% of earners or the 10% of income.
The Bureau of Labor Statistics (BLS) classifies the 111 million households of the United States into equal-sized quintiles based upon household income. The lower cut-off for households in the upper quintile, about $75,000, provides a reliable definition of the luxury market—households with income within the upper quintile of the BLS's model. The average income for those households in the upper quintile is $1,21,367.

In the Indian context, there are three defining levels of incomes at which consumption of luxury products and services take place. At Indicus, we define these levels as

* Luxury consumers – HHld income > Rs 1 million pa

* High end luxury consumers – HHld income > Rs 2 million pa

* Super luxury consumers – HHld income > Rs 5 million pa

Notice that although in exchange rate terms, Rs 1 million is only $25,000, in terms of value of good and services it can buy, it is closer to $80,000-90,000. Thus when a household crosses the threshold of Rs 1 million, it is in consumption terms already equivalent to the upper quintile of the US households.

Our research indicates that there are about 4 million households (21 million people) in urban India that can be classified as luxury consumers. Of these, 1.4 million households (7.3 million people) are high-end luxury product/services consumers And, 1,65,000 households (9,17,000 people) are super luxury product/services consumers. The numbers of rural luxury product consumers are estimated to be less than 10% of the urban numbers.

While India is still emerging in terms of number of luxury consumers, there are no more than a handful of countries on the planet that have more luxury consumers. In five years, India will scale past many of the G8 nations. It is the fastest growing market in terms of number of consumers, and by 2020, only China, the US and Japan will have more consumers in the high-end luxury and super-luxury categories than India.

India is at an inflexion point and the demand for luxury products is set to grow at near about 20% pa plus (in value terms) for an extended period of time lasting a couple of decades. During the next five years, this growth is expected to be at 25% pa.

The current market size for luxury products/services is estimated to be of the order of $2.5 billion.

The growth patterns suggest that now is perhaps the most opportune time for marketers of a whole cluster of goods and services under the 'luxury' umbrella.

While there are several characteristics of luxury consumers that are common across countries and cultures, there are a distinct set of attributes that define the bulk of the luxury consumers in most emerging economies, including China and India—the 'nouveau riche syndrome'.

It must be remembered that India is an economy where large-scale wealth creation is a relatively new phenomenon and people in large numbers are climbing up the income ladder. A very typical behaviour pattern (which has also been observed in emerging Asia, including China) is the need to announce 'the arrival' and consume conspicuously. This is music to the ears of luxury product marketers. The large numbers graduating to high income levels and the sustained growth rates indicate that the market is not going to dry up any time soon. Further, considering the fact that India has a base of 18% of the world’s population, one can imagine that within a couple of decades it will outstrip most other markets in size by a considerable margin.

Yet, in some ways, there are unique dimensions to this phenomenon not seen anywhere else in the world—the grand weddings, supercharged festivals, and the like. The impact is already being seen across several categories of products and services—housing, t
There is no clear definition of either luxury products or luxury consumers. In fact, the various expressions used when describing the luxury market only add to the confusion. Broadly, in the Western world, luxury consumers are defined as the top 2-5% of earners or the 10% of income.
The Bureau of Labor Statistics (BLS) classifies the 111 million households of the United States into equal-sized quintiles based upon household income. The lower cut-off for households in the upper quintile, about $75,000, provides a reliable definition of the luxury market—households with income within the upper quintile of the BLS's model. The average income for those households in the upper quintile is $1,21,367.

In the Indian context, there are three defining levels of incomes at which consumption of luxury products and services take place. At Indicus, we define these levels as

* Luxury consumers – HHld income > Rs 1 million pa

* High end luxury consumers – HHld income > Rs 2 million pa

* Super luxury consumers – HHld income > Rs 5 million pa

Notice that although in exchange rate terms, Rs 1 million is only $25,000, in terms of value of good and services it can buy, it is closer to $80,000-90,000. Thus when a household crosses the threshold of Rs 1 million, it is in consumption terms already equivalent to the upper quintile of the US households.

Our research indicates that there are about 4 million households (21 million people) in urban India that can be classified as luxury consumers. Of these, 1.4 million households (7.3 million people) are high-end luxury product/services consumers And, 1,65,000 households (9,17,000 people) are super luxury product/services consumers. The numbers of rural luxury product consumers are estimated to be less than 10% of the urban numbers.

While India is still emerging in terms of number of luxury consumers, there are no more than a handful of countries on the planet that have more luxury consumers. In five years, India will scale past many of the G8 nations. It is the fastest growing market in terms of number of consumers, and by 2020, only China, the US and Japan will have more consumers in the high-end luxury and super-luxury categories than India.

India is at an inflexion point and the demand for luxury products is set to grow at near about 20% pa plus (in value terms) for an extended period of time lasting a couple of decades. During the next five years, this growth is expected to be at 25% pa.

The current market size for luxury products/services is estimated to be of the order of $2.5 billion.

The growth patterns suggest that now is perhaps the most opportune time for marketers of a whole cluster of goods and services under the 'luxury' umbrella.

While there are several characteristics of luxury consumers that are common across countries and cultures, there are a distinct set of attributes that define the bulk of the luxury consumers in most emerging economies, including China and India—the 'nouveau riche syndrome'.

It must be remembered that India is an economy where large-scale wealth creation is a relatively new phenomenon and people in large numbers are climbing up the income ladder. A very typical behaviour pattern (which has also been observed in emerging Asia, including China) is the need to announce 'the arrival' and consume conspicuously. This is music to the ears of luxury product marketers. The large numbers graduating to high income levels and the sustained growth rates indicate that the market is not going to dry up any time soon. Further, considering the fact that India has a base of 18% of the world’s population, one can imagine that within a couple of decades it will outstrip most other markets in size by a considerable margin.

Yet, in some ways, there are unique dimensions to this phenomenon not seen anywhere else in the world—the grand weddings, supercharged festivals, and the like. The impact is already being seen across several categories of products and services—housing, t

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Categories:Types, Research
Published by: Indicus Analytics on Dec 31, 2010
Copyright:Attribution Non-commercial

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12/28/2012

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SourceFinancial Express31
st
December, 2010
 
There is no clear definition of either luxuryproducts or luxury consumers. In fact, the variousexpressions used when describing the luxurymarket only add to the confusion. Broadly, in theWestern world, luxury consumers are defined asthe top 2-5% of earners or the 10% of income.The Bureau of Labor Statistics (BLS) classifies the111 million households of the United States intoequal-sized quintiles based upon householdincome. The lower cut-off for households in theupper quintile, about $75,000, provides a reliabledefinition of the luxury market²households withincome within the upper quintile of the BLS'smodel. The average income for those householdsin the upper quintile is $1,21,367.In the Indian context, there are three defininglevels of incomes at which consumption of luxuryproducts and services take place. At Indicus, wedefine these levels as* Luxury consumers ±HHld income > Rs 1 millionpa* High end luxury consumers ±HHld income > Rs2 million pa* Super luxury consumers ±HHld income > Rs 5million paNotice that although in exchange rate terms, Rs 1million is only $25,000, in terms of value of goodand services it can buy, it is closer to $80,000-90,000. Thus when a household crosses thethreshold of Rs 1 million, it is in consumptionterms already equivalent to the upper quintile of the US households.
 
O
ur research indicates that there are about 4 millionhouseholds (21 million people) in urban India that can beclassified as luxury consumers.
O
f these, 1.4 millionhouseholds (7.3 million people) are high-end luxuryproduct/services consumers And, 1,65,000 households(9,17,000 people) are super luxury product/servicesconsumers. The numbers of rural luxury product consumers areestimated to be less than 10% of the urban numbers.While India is still emerging in terms of number of luxuryconsumers, there are no more than a handful of countries onthe planet that have more luxury consumers. In five years, Indiawill scale past many of the G8 nations. It is the fastest growingmarket in terms of number of consumers, and by 2020, onlyChina, the US and Japan will have more consumers in thehigh-end luxury and super-luxury categories than India.India is at an inflexion point and the demand for luxury productsis set to grow at near about 20% pa plus (in value terms) for anextended period of time lasting a couple of decades. During thenext five years, this growth is expected to be at 25% pa.The current market size for luxury products/services isestimated to be of the order of $2.5 billion.The growth patterns suggest that now is perhaps the mostopportune time for marketers of a whole cluster of goods andservices under the 'luxury' umbrella.

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