Are developing countries the next step for the luxury industry: The case of India

Abstract

What we call the luxury industry is a sector of products with high quality, a very targeted market and low diffusion. A luxury good is a good for which demand increases more than proportionally as income rises. Luxury goods are said to have high-income elasticity of demand, so as people become wealthier, they will buy more and more of luxury goods. However, this also means that if there should be a decline in income, demand for luxury goods will drop. This is evidenced in the global recession that begun in 2008. We can segment the luxury industry in different parts: fashion, tanning, jewelry, watchmakers, cosmetics, perfumers, wines and spirits. In our research we will be focusing on the areas of fashion houses, who also distribute jewelry, cosmetics, and perfumes. In particular, we will further narrow our scope into the “ready-to-wear” category – which in the fashion industry is defined as clothing intended to be worn on an everyday basis, thus separating itself from “haute couture”. Today the global luxury market is an international phenomenon. Although, still bleeding from the current global economic crisis, there are several markets that show signs of hope for the industry. Only in the past decade have luxury retailers begun to expand into the less saturated, quicker growing developing markets, such as Brazil, Russia, India, and China. However, what originally started as a logical growth step could now become the saving grace for the luxury industry. This paper seeks to dissect this potential for the luxury industry in developing countries, concentrating specifically on the case of India. Only steps behind China, the fastest growing luxury market in the world, we can analyze the luxe industry’s presence in India’s eastern neighbor as a road map to evaluate the budding promise. However, it is important to take into consideration the differences between the two giants in the process. Therefore, our aim is to understand and project the specific growth opportunities to be found in this growth market despite vast poverty, lacking infrastructure, and a looming recession.