Luxury Shopping - The Top 7 Trends
Wealthy travelers shopping abroad or at airports and the importance of a digital presence emerge among the biggest trends identified in luxury shopping right now. A booming second-hand market should not be overlooked either.
With more than 330 million luxury consumers worldwide, the overall luxury industry continues to show healthy growth, despite moderate global growth. Demand for luxury goods – the "core of the core" of luxury – continues to buoy the market. The overall market for luxury goods has tripled in size over the past 2 decades to 223 billion euros in 2014, according to Bain & Company's 2014 Annual Luxury Study. With an organic growth rate of 5 percent reported during the third quarter of 2014, according to Credit Suisse figures, the growth remains healthy within the context of the of the broader economy. The luxury-shopping sector does, however, evolve as wealthy consumers think, research and spend differently. Seven top trends are listed below:
Wealthy Travelers Support the Sales of Luxury Goods
The global luxury goods market is currently fuelled by international travel and tourism. Chinese travelers continue to represent the fastest growing nationality for luxury and dominate the predictions. Chinese tourists actually spend much more on luxury products abroad than what they spend locally – notably because luxury products trade at a premium locally. Chanel has, for example, recently addressed the Chinese-European price differential, pledging its worldwide prices will not fluctuate more than 10 percent above its global euro benchmark.
Duty Free Shopping Benefits as Result
Duty free shopping has increased by an average annual rate of 26 per cent since 2009, according to the shopping tourism firm Global Blue. Luxury brand owners are thus expanding their presence at international airports, where busy affluent travelers take the time to shop between the security check and their gate. The rapid rise in Chinese travelers just mentioned is another reason behind the surge in duty free shopping. Data from Ipsos' 2015 Chinese Luxury Forecast survey shows that more than half of the respondents from mainland China indicated that they had shopped at duty free stores when traveling abroad in 2014, citing dissatisfaction with the service offered at luxury retail shops at home as a reason.
Digital Presence More Important Than Ever
Luxury shoppers use social networks such as Facebook or Twitter, but mainly to carry out research about products or to retweet other people's posts. Sites and apps such as Pinterest and Instagram that engage visually are probably social media channels that are better adapted for the luxury industry. Luxury shoppers tend to use these various channels depending on the situation. Twitter is for instance often used to follow live events live, Facebook to search for on-going promotion campaigns, and blogs or forums to read other users' comments about specific products or their in-store experiences. It is interesting to note that the most widely commented luxury category on social networks is not ready-to-wear apparel or fashion accessories, but cars, according to a McKinsey study. The use of well-known or lesser-known on-line ambassadors, representing a brand, is one way to attract the attention of luxury shoppers in the various social media channels.
Online Sales of Luxury Goods Continue to Rise
The Internet has radically changed the path to purchase, with e-commerce being both the next big opportunity and challenge for luxury brands. The number of online shoppers is growing fast, with affordable luxury goods in focus. Even if online shopping is still dominated by the younger generations, the older generations are catching up and well may turn into a lucrative client segment in the near future. Accessories and apparel dominated the luxury products bought online in 2014, representing more than half of total online sales, tracked by beauty and hard luxury products such as watches and high-end jewelry, according to Credit Suisse research.
Growing Appetite for Luxury Electronic Gadgets
The main driver behind the increasing demand for luxury electronic gadgets continues to be the insatiable appetite for smart phones. Competition among high-end smartphone producers such as Apple and Samsung is intense. Sales of luxurious cell phones made by Vertu, Tag Heuer, Dior and Versace, remain strong despite price tags starting at a couple of thousand dollars. The most exclusive phones cost several million dollars depending on the number of diamonds incrusted in their covers or whether they are made in solid gold.
Trading Down Rather Than Up
Ultra-affluent households – defined as those with annual incomes exceeding 250,000 US dollars – are today cutting their spending on luxury items. The marketing consulting firm Unity Marketing specializing in the affluent consumer segment has tracked a steady decline in ultra-affluent purchases of luxury brands in fashion accessories, clothing and apparel, prestige beauty and jewelry over the past four years. The same trend has also been spotted in emerging markets such as China. "This general downward trend coincides with recent statements by a number of luxury houses pointing to a slowdown in Asia's economic environment, of which China is a key market," said Credit Suisse analyst Julia Dawson. "In addition to this, we note a shift in demand toward more affordable luxury and High Street brands, potentially the result of changing tastes, a rising share of female wealth and a higher number of the Millennials in the customer mix," she added. Looking across the brand landscape, top earners continue to focus on brands with big-ticket items such as Audi, Chanel and Ralph Lauren, Credit Suisse's Emerging Consumer Survey 2015 shows. "However, brands such as Zara, H&M and Adidas underpin our view of a trend toward affordable luxury along with changing tastes among previously premium brand consumers," Dawson said.
Second-Hand Market Sets Off
The second hand-market for luxury brands has taken off in recent years, driven by the online revolution. The second-hand market for upper premium brands represented 16 billion euros last year, according to Bain & Company's 2014 Annual Global Luxury study. This market on the one hand threatens new product sales, but on the other hand turns luxury goods into durable products with an increasingly set resell price, increasing their value. The second-hand market also enables mid-income, aspirational luxury shoppers to afford the most expensive brands.