Luxury spending may rise this festive season

New Delhi: Indian consumers are gearing up for a festive season shopping spree, with keen interest in exotic travel, luxury goods and new vehicles. The new-found confidence is expected to drive increased spending across various categories, such as clothing, entertainment, personal care and leisure, showed Deloitte’s Wave 46 global consumer signal survey.

According to Deloitte, around 56% of Indian consumers polled, expressed their willingness to spend on celebratory items, while 75% reported improved finances in the past year.

“India’s booming economy is encouraging consumers to embrace premium and luxury spending. This shift extends across consumer durables, hospitality and travel, with Tier 2 and 3 markets showing significant growth. Discretionary spending is poised to increase, benefiting sectors like retail, automotive, travel and hospitality," said Rajeev Singh, partner and consumer industry leader, Deloitte Asia Pacific. However, concerns around short-term demand in rural markets persist.

Interestingly, Deloitte’s survey coincides with household savings falling to multi-year lows due to increased spending and high inflation, prompting consumers to dip into their savings.

That said, according to the report, festive season spending is expected to extend until mid-November.

Deloitte’s research report for August hints at increasing consumer confidence, with 56% of participants indicating readiness to spend on celebratory items. Besides, 49% said they can effectively handle significant unexpected expenses in the mid term, while 77% were not concerned about upcoming payments, hinting at a robust festive season.

Going ahead, 60% of the respondents expect improved finances in the next one year, while 59% expects their best years in the next five years. In the short term, consumer spending is set to rise, particularly in clothing, personal care (12%), and recreation, entertainment, and leisure (14%). These trends hint at increased spending as the festive season nears, it added.

Each sector is representing a different mood, said Singh. Automotive companies are very “upbeat" and building inventories for the festivities. “While demand for new cars has softened a little compared to same period last year (August), it is still strong. Luxury brands are getting ready big time because they feel growth will continue."

Deloitte’s Consumer Signal, or Global State of the Consumer Tracker is an online panel monthly survey across 24 countries. The survey targets approximately 1,000 adults, 18 years and older, across countries. Response data from India and South Africa are likely to be over representative of the urban, higher income populations.

Indians are also planning to travel, with domestic flight bookings up (74% in August) and international flight bookings at 58% compared to July. Demand for luxury hotels also rose 5% in August over July.

Besides, 63% of consumers planned to buy a new vehicle within six months up 4% from July, it said. In August, 77% of consumers were not worried about credit card debt, and 61% had no intention to postpone big ticket purchases. Despite the price hike in food and consumer durables, 55% of consumers were willing to buy popular consumer durable brands, while 57% would splurge on premium food and groceries, the report said.

The original article was published in Livemint on 22 September 2023