While prestige beauty in India continues to grow at a rate of more than 20% per year, the lack of quality retail is still holding back the market, according to BW Confidential. In 2012, the premium beauty market in India was worth $315.3 million, according to industry sources, which represents growth of 20% over 2011.

“All prestige beauty sectors have been growing—skin care, make-up and fragrance, but growth rates would be higher if we had more quality retail,” commented one industry player. “The main issue is that there are still a limited number of developers who understand what luxury is,” said Gopal Asthana, business head at department-store chain, Shoppers Stop, a leading premium beauty retailer which now has 55 locations across the country. “Although the premium beauty market is growing at between 20% to 25%, it is from a small base. In addition, since organized distribution is limited, a lot of consumers are buying abroad; they are only slowly getting accustomed to shopping for premium beauty at home,” he added.

Indeed, there is still a lack of high-street locations for luxury products and the prestige stores that the category requires in shopping malls. The largest cities in terms of prestige beauty sales are New Delhi, where the Select CityWalk and Ambience Mall are key destinations; Mumbai, with InOrbit Mall and Palladium as the biggest traffic drivers; and Bangalore, which is home to malls UB City and One MG Road.

There has however, been progress in the retail scene in India over the past five years. Over the past 12 months, new shopping malls with prestige beauty offerings opened in Chennai and Pune. But perhaps the biggest retail news was the entry of LVMH-owned Sephora, which opened its first store in the country in partnership with Indian retail group Genesis Luxury in New Delhi’s Select CityWalk in December 2012. Some 15 new brands launched in the country for the first time at the 3,229 square-foot store, including Benefit, Stila, Bliss, Peter Thomas Roth and Ouidad.

To read BW Confidential’s full report on Indian retail click here.