India's economic expansion and the rising affluence of its middle class are reshaping consumer preferences, with a growing emphasis on brand and exclusivity.

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This trend reflects the evolving tastes and enhanced purchasing power of India's burgeoning middle and upper-middle classes, indicating a shift from a sole focus on affordability to a balance of quality and brand value.

As the CEO of Metro Brands, Nissan Joseph pointed out to CNBC-TV18 there is an unexpected surge in demand for high-end footwear.

“Our sales of shoes, over ₹3,000, have grown from 44% in Q1 (first quarter of FY24) to 48% in Q2 (second quarter of FY24), and we are seeing a lot of demand for premium products because middle-class incomes are rising, disposable income is rising, people see that there are good things that they can afford,” he said.

Joseph noted the shift in consumer preference post-Covid where they have started recognising the benefits of investing in premium footwear, appreciating both its aesthetic appeal and durability.

"People are realising the worth of these products. When you invest in a quality pair of shoes, not only does it enhance your appearance and feel good to wear, but it also tends to last significantly longer," he said.

However, the overall sentiment is not as robust in the economy segment. "Even in our walkway business, we are not seeing it as robust as we see it in our premium segment," he said.

Experts and analysts have all been talking about the gradual shift from mass consumption to class consumption.

"The era of mass consumption, in terms of purchases of low-cost apparel, footwear, etc., is behind us. We are in an era where affluent, well-educated people earn more money and are moving toward class consumption," said Saurabh Mukherjea, Founder of Marcellus Investment Managers recently told CNBC-TV18.

Mukherjea said the shift is further evidenced by recent trends in Income Tax (I-T) filings, which show a growing economic disparity. High-income earners are seeing a much faster increase in tax filings compared to those with an annual income below ₹5 lakh.

Kenneth Andrade, the Founder & CEO of Old Bridge Capital Management, agrees with Mukherjea that the consumption at the higher end of the population pyramid remains robust.

"Consumption is back on the table for us, especially if you go stock picking into individual businesses....what we essentially look for is which company can premiumise and take the consumer to the next level of pricing,” said Andrade, who manages funds worth over $750 million.

But like Joseph, Andrade also noted that the lower end is facing significant stress and limited demand.

This shift towards premiumisation is evident across sectors like retail, fashion, real estate, automobiles, and lifestyle.

In the automotive industry, for instance, sales of Mercedes Benz have surged 15% between August and November, despite challenges in the supply chain. The high-end car manufacturer believes this positive trend is here to stay.

Balbir Singh Dhillon, Head of Audi India, also recently noted that the company is 'operating with one of our highest-order banks in recent times'.

"This year, the luxury car industry in India will surpass 2018 volumes and reach the 46-47,000 mark, and we are looking to end the year with high double-digit growth," he told CNBC-TV18.

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The festive spirit has also illuminated the high-end real estate sector in India. Abhinav Joshi, the Head of Research for India at CBRE, disclosed that there has been a 100% increase in sales of high-end residential properties over the last nine months. This notable upswing in luxury housing transactions is credited to heightened demand for superior homes, well-developed infrastructure, and desirable neighbourhoods.

Rajeev Samant, the Managing Director and CEO of Sula Vineyards also talked about the prominent shift toward premium products. "75% of the revenue now comes from the premium segment, which is expected to grow in double-digits," he said in an exclusive chat.

India's consumer market is poised to become the world's third-largest by 2027, propelled by an increase in middle to high-income households, according to a report by Fitch Solutions' BMI, as cited by CNBC. Currently ranked fifth, India is expected to witness a 29% surge in real household spending, which Fitch predicts will elevate the country to the third position in the global market.

According to a note released by BNP Paribas in October, this trend, indicating the rich getting richer, could positively impact sectors such as automobiles, insurance, mutual funds, jewellery, multiplexes, and healthcare.

For the entire interview of Metro Brands, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com's blog

(Edited by : Shweta Mungre)

First Published:Nov 16, 2023 7:32 PM IST