The Super-Rich want exclusivity, will not settle for second best
OPINION I The Times of India
India has been evolving as one of the world’s most dynamic consumption environments and is expected to maintain steady, sustainable economic growth in the years to come. Luxury spending is gradually returning to pre-pandemic levels as customers adjust to the new normal. One of the major outcomes has been a shift in buying behaviour with consumers increasingly opting for online platforms. This has further aided the country’s luxury e-commerce boom. In the last two years, e-commerce has bolstered the growth of luxury products and services by expanding their reach and therefore making them more accessible.
These consumers are made up of first-generation entrepreneurs, families that have been in business for decades, the neo-rich who have made it big thanks to killings on the market, techies, and rural landowners. In fact, the list of sub-categories that fall under the larger grouping of the upper rich households is almost endless. Apart from a few exceptions, there's little to distinguish individuals in these households from the rich in developed countries. However, the super-rich crave exclusivity in what they buy (and where they buy).
Let’s take the real estate market where super-premium apartments in posh enclaves are being pegged at prices that go into a few crores. Since the pandemic, prospective home buyers are carefully examining factors related to sustainability and their future well-being before making a purchase. The work-from-home culture, staying indoors for extended hours and learning-from-home models have made buyers realise the importance of spacious with dedicated workspaces, study rooms, gymnasiums, entertainment zones, private gardens, spacious decks or balconies and other ultra-modern amenities for hassle-free living. Also, these affluent buyers are well exposed to global benchmarks who aspire to be members of the exclusive club of like-minded ultra rich individuals are ready to walk the extra mile to invest in their dream houses that match their affluent lifestyles.
The other category that is witnessing high growth among consumer durable goods is the luxury car. Sales have reached pre-pandemic levels in this category and demand is set to grow even further, with an estimated growth rate of 8-9 per cent by 2030. The other segment within the luxury car market that is making waves with the new generation is the launch of electric vehicles. The advanced technology that supports electric vehicles makes it an attractive buy. Consider some figures from our pan India surveys (PRICE’s ICE 360 survey, 2021). In response to a question: ‘Are you planning to buy a car in near future? nearly 4 million households reported that they are planning to buy a car within a year. Out of this, about a third belong to the upper middle class and about a quarter belong to the rich category consumers. One further probing "What shall be the upper limit of price in which you are likely to buy new car?" Interestingly about thirty per cent of such potential consumers had reported that their budget to purchase a new car priced over Rs 10 lakh and followed by half of them mentioned a budget in the range of Rs 5-10 lakh and the remaining fifth is having a budget of less than Rs 5 lakh.
There is a strong reason for this surge in demand and the confidence in continued growth and demand for luxury goods and services in India. Rising incomes and the expansion of the middle-class and high-income segments will reshape future consumption. By 2030, India will add about 75 million middle-class and 25 million rich households, taking the total share of these segments will be 56%.
These households are currently driving nearly three-fourth of the incremental spending by upgrading to premium offerings or adding luxury categories of consumer goods and services. Price points similar to those today will continue to be important.
The profile of well-off households is typically one where the chief wage earner is in his middle years, is married with young children, lives in a joint family and is a well-educated professional in the corporate or business world. Most chief wage earners are in the 36-54 years age group. As the focus of the segment is on joint family households with young children and ageing parents, these households are generally larger in size—more than 80% have four members or more. While usually, these households have senior members including parents, they also have extended family members who come to study or work in the cities.
This segment is relatively well educated: more than one-third of households have at least one graduate while one-fourth have a postgraduate member. The rest have finished schooling and have gone in for diplomas or certificates in technical skills. With a variety of educational achievements, the job profiles are varied.
A large segment of the chief wage earners is Grade 1 salaried – working at the supervisory, officer, or executive level or are self-employed. This could mean professionals including doctors, lawyers, chartered accountants, etc., or those with vocational skills and who have their own businesses in retail, trade or transport. All this added to the pool of ever-increasing middle-class and rich individuals creates a bigger pool of prospective consumers. Economic growth, better Infrastructure, connectivity and transit network development in tier 2 and tier 3 cities and developed rural pockets of the country has meant an increase in demand for luxury goods and services within these localities which are now catching up with prosperous metros.
With the Indian economy expected to grow at 6-7%, future Indian consumers will be richer and as young and diverse as they are today. At the same time, innovation and technological development will further elevate consumption models to the next level.