In cars, the demand for sports utility vehicles (SUVs) continues unabated — 2024 will see at least 18 launches, majority of them in the sub-4 metre compact category, and electric avatars. The new SUV list is full of models that will hit Indian shores for the first time — some with mass appeal like the Kia Sonet facelift and Hyundai Creta facelift, to marquee products such as the Ferrari Purosangue and Maserati Grecale, and everything in between.

In the battle to lure India's fashion shoppers, the country’s three retail giants — Reliance Retail Ventures Ltd. (RRVL), Tata-owned Trent and Aditya Birla Fashion and Retail Ltd. (ABFRL) — are premiumising their portfolios and actively snapping up rights for brands in expensive couture-to-high-end labels.

While Reliance Trends is RRVL's value format, the company has launched multiple formats in the premium category such as Azorte, Cover Story, Centro and White Crow. White Crow for instance is a multibrand premium format in Tier-II and III markets which houses brands such as Superdry, Red Fleece and GAS. Its online brand, Ajio, which competes with the likes of Walmart-backed Myntra, has a segment called Ajio Luxe which offers over 80 luxury brands. Ajio also has Ajio Gold, which includes bridge-to-luxury brands such as DNMX, GAP and Netplay. Apart from this, RRVL's Reliance Brands retails over 85 luxury and premium brands such as Armani Exchange, Burberry, Canali, Clarks and Coach. The retail major is also creating premium segments in categories such as lingerie, where it has five brands, all premium — Zivame, Clovia, Amante, M&S and Hunkemoller.

"Covid has changed consumption, especially at the higher end. Cost of travel has gone up tremendously, so people who were earlier buying in Dubai or Singapore are now buying in India. Prices are more or less similar, 3-5% higher than rest of the world," explains a senior Reliance Retail executive.

Similarly, Aditya Birla Fashion and Retail Ltd. (ABFRL) has been foraying into smaller markets with premium menswear brands such as Louis Phillippe, Van Heusen, Reebok, Forever 21 and American Eagle. Van Heusen Innerwear also sells lingerie products at an average price of ₹750 to ₹2,000 (in fact, traditional lingerie brands such as Jockey have also been on a similar premiumisation drive). Like Reliance, ABFRL is also sprucing up its international brands portfolio by roping in the likes of Ralph Lauren, Ted Baker, Hackett London and Fred Perry. The company is also premiumising through its acquisition of ethnic labels such as Masaba, Shantnu and Nikhil and Jaypore.

Tata Group's Trent Retail has always followed a private label, premium strategy for its brand Westside, which explains its 139% growth between FY19 and FY23. "Its own label business gives a 40-45% margin which allows these businesses to break-even," explains a senior retail expert. In addition to Westside, Trent recently launched its premium ethnic wear format, Samoh, with average pricing between ₹3,500-5,000.

Leading shoemaker Bata, meanwhile, is re-entering premium price points with fresh portfolios in formal and casual footwear. Not only is it doubling up its focus on brands such as Hush Puppies and Red Label, it recently partnered with American lifestyle brand, Nine West, to retail its footwear across stores. While Metro's premium focus has yielded results, the Indian shoe market has also seen the entry of D2C brands such as Fizzy Goblet and Oceedee. Priced at an average of ₹3,500, these brands are clicking with millennials.

Tata Consumer Products' profitability has gone up 37.83% in the last three years on the back of its strategy of premiumising. The company has even premiumised a commodity product like Tata Salt by launching Tata Salt Immune which contains zinc, and Tata Pink with natural minerals. The revenue of the salt portfolio grew 27% YoY in FY23. TCPL also launched its direct-to-consumer brand, Sonnets, for premium coffee. Instead of the usual masala and elaichi tea variants, it went back to the drawing board and launched Tata Tea Premium Street Chai, which celebrates unique tea drinking traditions across the country. Other variants include Tata Tea Gold Saffron and TeaVeda (Assam tea with Indian spices). Its ready-to-eat category, which contains millet-based foods, is priced 15-30% higher than its mass brands and is growing faster.

The biggest category outlier in the premium segment last year has been beauty. While Falguni Nayar's Nykaa started the trend, the industry at large has latched on to the opportunity. From SS Beauty by Shoppers' Stop to Tira by RRVL and salon brand, beauty and personal care has become an integral part of business models.

Margins in beauty are north of 45-50%, which makes it an attractive business for retailers, says Venu Nair, MD and CEO, Shoppers Stop. "We launched Estee Lauder, MAC and Bobbi Brown in India. As the customer is becoming more aware of beauty, we realised she is also looking for a beauty exclusive environment. We launched SS Beauty to focus on service and makeovers," adds Nair. In the race to premiumisation, India has also replaced France as the world's biggest buyer of Scotch whisky by volume, according to Crisil Ratings.

Why The Change

Come 2030, over 40% of the workforce will comprise millennials. It is a generation which seeks comfort, is earning substantially more than its predecessors and is willing to pay a premium for a high-quality lifestyle. According to a report by Deloitte, India witnessed a significant rise in per-capita income, from $1,400 in 2014 to $2,200 in 2022. This economic growth has led to the emergence of a rising middle class, projected to expand by 110 million households (from 190 million) between 2021 and 2030, equivalent to one-half of the current households in the European Union.

In line with the growth in per capita income, the switchover to premium products is also gaining momentum. Nyrika Holkar, executive director, Godrej & Boyce sees a trend of premiumisation such as demand for larger capacity refrigerators and smart kitchen appliances. "Customers need premium products at affordable prices. They are aware of new technologies and features that get embedded in the products," says Holkar.

Rajiv Bajaj, MD, Bajaj Auto, says premiumisation will be a priority for the company for achieving the targeted growth. Bajaj Auto has an 8% market share in the premium segment, above 200cc, and has an average cost upwards of ₹1.7 lakh. The Pulsar RS200 (₹1.43-1.78 lakh), Dominar (₹1.92 lakh), Husqvarna (₹2.19 lakh onwards) and KTM (₹1.78 lakh onwards) are high-end offerings along with the latest addition of Triumph Motorcycles (`2.33 lakh onwards). The automaker, which sells bikes in the range of `61,000 to `2.5 lakh, is doubling its capacity for manufacturing premium bikes to 35,000 per month by FY24 end.

Tier-II and III cities are propelling the next phase of growth in the retail sector, fuelled by shifting consumption patterns and increased purchasing power, according to the Deloitte report. In 2022, these cities accounted for over 60% of the country's total ecommerce orders, outpacing Tier-I markets. Tier-III towns saw 65% order volume growth, while Tier-II registered 50% growth. Tier-1 cities saw 10% growth.

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