Millennials and Gen Z, especially the affluent young Indians from Tier 2 and 3 cities, are driving luxury spending in India, Sanjay Khanna, Chief Executive Officer and Country Manager of American Express Banking Corp India (Amex India) has said.
One clear emerging trend is that young aspirational Indians —with higher disposable incomes empowered by the economic growth —have got heightened taste for luxury and this has been propelling luxury spending in the country, Khanna told businessline in an interview.
There is now a distinct shift in both geography and demography with lot more people from Tier 2 and 3 towns are purchasing luxury goods and keen to experience luxury services.
In tune with its strategic imperative of “owning the premium segment”, Amex India is now well positioned to ride this shift in trend and meet the expectations of affluent customers.
Till a decade back, demand for luxury goods and services (personal goods, travel, cars, hospitality, wines and spirits, gourmet food and fine dining) was largely confined to metros and third and fourth generation entrepreneurs.
This has been changing with the emergence of many first generation entrepreneurs and skilled professionals in information technology industry. Growth of entrepreneurship and deeper e-commerce penetration too has accelerated the shift.
“With a lot of people, especially in the ‘work from anywhere’ high-tech domains, moving back to their hometowns in Tier 2 and Tier 3 cities and towns, during and post lockdowns, we are witnessing an upsurge in luxury retail spending in those geographies as well,” Khanna said.
India’s economy has grown 7-fold in the past two decades, from about half a trillion US dollars at the end of 2002 to about $3.4 trillion currently. This economic growth has turned many first generation entrepreneurs into ultra high net worth individuals and enhanced the buying power of several young Indians living in Tier 2 and Tier 3 towns.
Khanna, who assumed the role of CEO and Country Manager of Amex India in September last year, said that Amex has been focussing on maintaining its “premium positioning” and has always been constantly innovating to create different products for different segments of consumers.
“We have created a suite of premium products to meet the different needs of the affluent segment. ‘Premium’ positioning means different things for different segments - for the ultra-affluent, UHNW (Ultra High Net Worth) base, premium is reflected in the exclusivity and access we provide. In the mid-market segment, premium refers to the badge-value and the association of partnerships and offers brought by American Express,” Khanna said.
“As a global brand, serving the Indian premium customers, we have a suite of premium products that come with special privileges, accelerated rewards, extraordinary service like platinum concierge services, special offers from high-end brands, airline partners, hotels, and complimentary access to premium airport lounges in over 140 countries”.
Khanna said that Amex India is seeing several trends converging to boost luxury spending in India.
“Revenge travel” and post covid lockdowns resulted in a significant uptick in luxury travel experiences, with growth of in-trip fine dining, mostly sought during international trips as well as luxury retail spending, he said.
“This phenomenon is borne out in our global travel trends report, which shows that ninety-five percent of surveyed Indian millennials and ninety-two percent of Indian Gen Z agree that they would pay more for luxury customised itineraries featuring different destinations,” he added.
Khanna said that the value-conscious, badge-oriented premium consumers in India are now evolving and opting for bespoke products as they are using brands as self-expression. Consequently, brand conscious consumers are readily spending on designer bags, watches, automobiles if they provide bespoke services and experiences, even if they come at a higher cost, he said.
“We are constantly innovating and investing in capabilities and partnerships to enhance the premium lifestyle experience for our consumers. For instance, our partnership with premium players like Tata Cliq Luxury, Taj and Oberoi hotels, House of Masaba and more, has enabled us to create exclusive offerings for our Cardmembers”, Khanna said.
India’s luxury market—for both goods and services—has seen a stupendous growth in recent years and is now estimated to be about $8 billion.
A recent Bain & Co study has projected that India’s luxury market could reach a staggering $200 billion by 2030.