January 22, 2020
Strong macroeconomic factors helped sales of luxury goods and services worldwide. Image credit: Luxury Institute
Despite elevated levels of geopolitical uncertainty over the past year, luxury goods and services brands around the world are benefiting from positive macroeconomic tailwinds conducive to growth.
Higher home values and stock prices are fueling the fortunes of wealthy consumers, while a strong jobs market with rising incomes adds additional demand for luxury offerings among the affluent, according to a new State of the Luxury Industry survey from the Luxury Institute.
The Luxury Institute surveyed more than 3,100 affluent consumers from nine countries regarding spending patterns, shopping preferences, purchase motivations and brand perceptions in dozens of luxury categories.
Minimum annual income for U.S. respondents was $150,000, and those from other countries represent similarly exclusive percentiles of income distribution in local currency within the top 10 percent of household incomes.
Here is a summary of the report, per Milton Pedraza, CEO of the Luxury Institute, New York
Milton Pedraza is founder/CEO of the Luxury Institute
Reported purchase behavior across luxury goods and services categories is highly positive and shows affluent consumers are far more likely to spend more than spend less.
The uptrend is strongest in health, fitness and wellness services, with 52 percent of affluent consumers around the world reporting spending more than they did one year prior.
Other luxury services showing high proportions of spending increases include health care (49 percent), air travel (48 percent), hotels and resorts (45 percent) and entertainment (45 percent).
Though vastly outnumbered by consumers spending more, the greatest percentage of consumers reporting a pullback in spending are in the restaurant dining (6 percent) and insurance (6 percent) categories.
Among luxury goods, the categories showing the highest proportions of consumers spending more are beauty and skincare (48 percent), fashion apparel (47 percent), automotive (45 percent), jewelry and watches (44 percent), and shoes (44 percent).
Categories in which consumers are most disposed to be cutting back are art (9 percent), wine and spirits (7 percent), and handbags (7 percent). In each of these categories, however, the propensity for higher spending is far greater than the likelihood of spending less.
Top reasons offered by consumers for purchasing luxury goods are that they last longer and keep their value (45 percent), and that they are a reward for hard-earned success (42 percent).
High concentrations of consumers in Italy (51 percent), China (46 percent), France (44 percent) and Germany (42 percent) saw that they like to surround themselves with “beautiful, exclusive, and unique products.”
Stores remain the dominant retail channel for luxury goods.
Affluent consumers report more than two-thirds (68 percent) of purchases taking place in-store, and those in France (77 percent) and Canada (76 percent) are most likely to buy luxury goods at a bricks-and-mortar location.
Regarding preferred channels for making purchases, 62 percent of consumers worldwide indicate an in-store preference, 14 percent prefer online, and nearly one in four (24 percent) have no preference.
Consumers in the U.K. (20 percent), Italy (18 percent) and U.S. (16 percent) show the highest online preference. Those in South Korea (82 percent) most widely prefer the in-store experience followed by in-store preference shoppers in France (71 percent) and China (70 percent).
BARRING ANY Black Swan events, the state of the luxury goods and services industry remains strong for 2020.
Regardless of the channel, the macro environment is highly hospitable for luxury.
However, for brands to truly capitalize on the abundant opportunity, they need to master an understanding of their customers’ stated and unstated needs and desires, and execute brilliantly, treating each client as an individual human being.
This is what we mean by omni-personal relationships. That skill is in high demand, yet in low supply right now in luxury.
Brands that aspire to high performance in 2020 need to master the skills with extreme urgency.
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