Southeast Asia and India emerge as next luxury beauty hotspots with US$7.6B growth potential

16 Oct 2023 --- Global consultancy Kearney and LuxAsia, an omnichannel brand-builder, have released a whitepaper titled “Unlocking hyper-growth in Asia’s luxury beauty landscape.” It highlights the opportunities, challenges and solutions facing luxury brands in Asia today.

The whitepaper reveals that Southeast Asia (SEA) and India are poised to be the next “gold rush” in luxury beauty, reaching a market potential of US$7.6 billion by 2026, with a projected 11% CAGR between 2021 and 2031. This growth is expected to continue, with the market size almost tripling in ten years. 

“SEA and India should be on the agenda of every global luxury beauty CEO. These markets are poised to lead the next stage of growth in luxury beauty,” says Siddharth Pathak, senior partner, head of consumer industries and retail for Asia Pacific at Kearney.

“To emerge successful in a competitive landscape, brands should have a cohesive strategy to cut through the noise and tap on the power of digitalization, data analytics and ecosystem support to improve their offerings and overall resilience.”

The “golden window” opportunity
In contrast to China, Japan, Singapore and South Korea, other markets in SEA and India are relatively unsaturated, with a limited presence of international luxury beauty brands, compelling local labels and significant upside potential for increased per capita spending on luxury beauty. 

Kearney recommends that brands lend their focus across all channels.As these economies mature, the upper and middle classes are projected to surpass one billion people in 2026, with more consumers expected to trade up from mass to luxury. Therefore, this presents an opportunity for luxury beauty brands to enter the market now and potentially flourish in the future.

The report unveils that SEA and India are nearing an inflection point and are poised to enjoy a decade of double-digit growth in luxury beauty. These market conditions trigger the proliferation of local beauty brands, which tend to play in the masstige category, leaving the luxury beauty segment as an opportunity for international brands.

“This golden window to capture accelerated growth cannot be missed. New-entry brands need to act urgently to secure the platform to grow. Existing market brands ought to rejuvenate their omnichannel presence, adding greater operational agility, to better navigate market developments,” says Dr. Wolfgang Baier, group CEO at LuxAsia.

“Backed by our track record, deep omni-network and brand-building expertise, LuxAsia stands ready to partner with all luxury beauty brands for long-term growth and success in SEA and India.”

No longer “one-size-fits-all”
However, due to diverse market ecosystems, Kearney and LuxAsia assert that achieving growth remains tricky in SEA and India. The whitepaper names six significant challenges luxury beauty brands face in the region: Multidimensional omni-retail networks, heterogeneous local product preferences, divergent marketing approaches, challenging regulatory frameworks, costly and idiosyncratic supply chain landscapes and partner selection amid information asymmetry.India and SEA demonstrate economic promise for luxury beauty brands.

Correspondingly, the report outlines six execution imperatives to tackle these challenges effectively. These include optimizing the retail footprint to create multi-touchpoint experience hubs, harnessing continued e-commerce growth unique to each market, forging capabilities to ride social commerce acceleration, building deep local consumer understanding through data aggregation and analytics, leveraging logistics partners to build a robust and flexible network and winning with the right omnichannel brand-building partners.

Kearney explains that in the past, the operating model for luxury beauty in emerging markets was straightforward: Partner with an in-market importer in each country who would register and bring in the brand’s products and then distribute them to different retailers and points of sale.

Today, the situation is “far more complex.” A one-size-fits-all operating model no longer suffices. Success now depends on fine-tuning a brand’s strategy in each market.

The companies suggest the following for achieving success for luxury brands in SEA and India: 

• Brands have to be across all channels. 
• Each brand needs a different strategy.
• The strategy for a brand will be different by market.
• There is no longer a Southeast Asian consumer or an Indian consumer. 

By Sabine Waldeck