The growing Indian luggage market packs a punch

Expanding retail chains, booming e-commerce and nationwide sales networks have led to growth in an unusual sector – the Indian luggage market. The segment – which is growing around 18 per cent CAGR – is extremely streamlined and is looking at a good next few years, considering the Indian economy is on the move and Indians are traveling extensively for work as well as for leisure.
In India, luggage and handbags have, over the recent years, managed to shed their traditional utilitarian tag and have now evolved as lifestyle products. Increasing business and leisure travels coupled with rising disposable income and organized retailing have led to increased demand for luggage. Within this category, the demand for brand names has grown, as consumers aspire for goods that count as status symbols.
The overall luggage market in the country stands between Rs 3,000 crore to Rs 4,000 crore, according to market estimates and approximately 50 per cent of this is dominated by organised players.
Giving Indian retailers stiff competition are emerging international players like Tommy Hilfiger, Delsey, Tumi, Briggs and Riley, Hartmann, Timberland, Victorinox, who are tapping the evolving Indian consumer at a rapid pace. The competition is expected to intensify further as these players are estimated to make a significant contribution in the organized segment of luggage industry.
The unorganised sector is predominantly dominated by regional players, who make enough profit to hold a considerable amount of share in the economy category.
Factors Driving Growth
Over the last 13 years, India’s luggage industry has grown at an average rate of almost 13 per cent. The last financial year has recorded a growth rate of 18 per cent and is expected to reach 20 per cent in the present FY.
The growth of this industry has been impacted directly by the growth of travel infrastructure such as national highways, airports, railway stations which contributed significantly to the development of the travel industry in India. Over the years, both domestic and international air travel has shown consistent double digit growth. It is also expected that India will account for 50 million outbound tourists by 2020, thereby presenting favourable prospects for the luggage industry.
Modern retailing and new fashion trends are also expected to drive the sale of casual bags and travel luggage bags category over the forecast period FY’14 to FY’18 according to Ken Research.
Not just that, luggage has also become an important part of the wedding trousseau, with even people in tier II and III cities buying branded suitcases and strollers during the wedding season.
Millenials, who constitute a considerable portion of Indian population, travel and like to travel hands free, which in turn has initiated growth for the backpack-duffle bag category.
The rural segment of the population is also not being ignored, with major players seeking laying greater emphasis on product innovations such as handbags for women and eco-friendly bags.
Leading Players in the Organised Sector
Samsonite, V.I.P and Safari constitute approximately 95 per cent of the total organised sector of the luggage industry. Brands like Delsey, Tommy Hilfiger to name a few constitute the rest. V.I.P is the leader with an almost 47 per cent market share, followed closely by Samsonite (45 per cent). Safari accounts for the rest.
V.I.P Industries Pvt. Ltd.: V.I.P, which started its retail journey in 1971, has presence in all three segments – Premium, Mass and Economy.
The company boasts of different brands including V.I.P, Skybags, Aristocrat, Alfa and the newest entrant Caprese.
“From manufacturing only suitcases in early ’70s, V.I.P Industries now has an evolved offering of a vast range of products like polycarbonate strolleys, Nylon-based strolleys, printed luggage, handbags, backpacks, wallets and travel accessories through various brands under its portfolio. Today, V.I.P Industries is synonymous with luggage, which is the core product category,” says MD, V.I.P Industries Pvt. Ltd, Radhika Piramal.
Samsonite South Asia Pvt. Ltd.: is a subsidiary of Samsonite International S.A and was launched in India in 1997. It has become a favourite among the niche urban consumers and holds over 90 per cent market shares in the premium category (over Rs 10,000 price tag). The category accounts for around 10 per cent market share.
On the other hand American Tourister, launched in India around 2006-2007, the mass player from Samsonite bouquet is giving tough competition to the market leader V.I.P Industries.
“For Samsonite, we have luggage, backpacks, travel accessories, in brand AT, with all these, we have a very special back to school category with backpacks, rucksacks, messenger bags, bags for tods…we want to capture the entire lifetime of a consumer. From the moment you have started travelling, we want to fulfill all your luggage requirements,” says Executive Director-Marketing, Samsonite South Asia Pvt. Ltd, Anushree Tainwala.
India is currently the fourth biggest market for Samsonite after the US, China and Korea, and has been growing at a rate of 12 per cent-13 per cent per year for the last four-five years.
Safari Industries (India) Ltd.: 1974 was the year when Safari Industries started its journey, though it has become a dominant player only in past few years. This company is rapidly spreading itself through mass-premium section and is planning to revamp the entire portfolio for more aggressive expansion. It has recently acquired Genius Leathercraft and with that the brands like Genius, Magnum, Activa, Orthofit, all came into the Safari basket. It has also decided to foray into school bags segment.
According to Sr VP Sales, Safari, Indranil Roy, “Our Company is one of the 100 fastest growing companies in India. There is a tremendous scope for this company to be a Rs 1,000 crore company in next three-four years.”
Domination of Unorganised Sector
The Indian luggage industry has been largely dominated by the unorganised segment with maximum contribution in terms of revenue for the past. Currently, the organized consumer luggage industry size in India is only Rs 1,900 crore, which leaves the majority revenue space to the local players.
The price point of these regional brands is something that worries branded players, who can’t bring down prices without putting their profit margin under pressure.
Radhika Piramal of V.I.P says, “Consumers buy local products at low prices resulting to low quality which can be avoided if the consumer opts for a good brand. Hence, educating consumers and robust brand building is a two-fold approach that can help increase usage of branded products. Our entry price point brands Alfa and Aristocrat are sweetly priced and distributed through our large distributor network to take share from local players even at small town retailer level.”
The growing trend of branded over unbranded luggage is also helping the organised sector.
As Anushree Tainwala says, “People are slowly realising the benefits of branded luggage over poor Chinese or unbranded luggage. Either you travel for work or for leisure, the quality and satisfaction an international brand can provide is something one is considering before making a luggage purchase.”
Urbanisation in India is a reality today and this phenomenon drives the growth of branded luggage to a large extent.
“As far as regional players are concerned, Safari Industries have tried to understand how they operate and what their business model is. We will try and see how to emulate them,” says Indranil Roy.
While Safari industries have already acquired local brands like Genius, Samsonite is also scouting for local brands to acquire, which will help the company strengthen its position in tier III cities.
Rise of Modern Trade
As per Nielsen’s West report, the proportion of consumers who claim to shop at Modern Trade ‘occasionally’ has grown from 54 per cent last year to 66 per cent in 2016. Hypermarkets have become a favourite destination for the urban shoppers and as almost all the luggage brands are visible there, they can easily pick up their choice.
Radhika Piramal describes the phenomena by saying, “Luggage has been purchased primarily through traditional brick and motor mechanisms comprising of dealer outlets, company owned stores and franchisees. However owing to the changing times and needs, modern trade channels will continue to lead the growth. Luggage is already among the better performing categories in non-food across most chains and with increasing preference for branded luggage, it should continue to be so for the next few years.”
Leading hypermarkets of India have also registered growth in this sector. From a category point of view, for Big Bazaar, daily travel is around 30 per cent and outdoor travel category is 70 per cent. Last year, the daily travel grew over 50 per cent. Major growth driving products are school bags, backpacks and hard trolleys. Big Bazaar is expecting a growth of over 35 per cent this year too.
As per HyperCITY though, luggage as a category constitutes only 4 per cent of total sales, though it has been growing at an average of 55 per cent for the last five years. With almost 1,000 sq. ft. area dedicated to this particular category in any HyperCITYstore, they are expecting 40 per cent growth in the next FY.
The picture is pretty much the same with Metro. Luggage there constitutes 10 per cent sales of the non-food segment. With 20 per cent average growth in the last five years, Metro is eyeing on at least 25 per cent growth from this category in the coming year.
“Modern trade is surely going to be the future drivers of growth. General Trade and CSD will definitely be there, but they will not drive the growth beyond a point,” says Indranil Roy. Though hypermarkets are an important channel for Samsonite, but not all brands of the company can be bought here.
“One can only buy American Tourister in hypermarkets. We feel that the premium segment still wants to visit exclusive brand outlets to purchase Samsonite products, because the kind of experience they are going to have at exclusive stores will not be there in mass channels,” says Anushree.
The Lure of E-Commerce
Apart from being present in hypermarkets, luggage retailers are also tapping online marketplaces including Flipkart, Amazon, Jabong, Snapdeal, Shopclues, Myntra, Junglee. Safari is also revamping its own online portal and Samsung has been using e-commerce to sell furniture for a long time now.
Skybags from V.I.P are available on the company’s online portal, as well as on other e-marketplaces, while the mother brand V.I.P is available on Snapdeal and Amazon.
Projected Revenue
In FY 2016, the projected revenue of Indian luggage market is going to be approximately Rs 77.775 million, according to Ken Research Report.
If the organised sector can hold its growth momentum, then the luggage industry is going to be the leading player in the consumer durables category in the next couple of years.