Factors to watch in the mix of consumers and luxury products
Bain & Company, one of the leading advisor to the global luxury goods industry expects an average of seven to nine percent annual increases in global sales to fuel luxury brands’ growth aspirations until the middle of the decade.
“Brands must develop strategies with much wider reach than ever before,” said Claudia D’Arpizio, a Bain partner in Milan. “The lessons they learned in earlier emerging markets will help, but they now must manage even broader diversity of consumer preferences, and more variations in their model of how to take products to market.”
As consumers and product trends evolve, Bain also finds that hard and soft accessories will consistently outperform even the rapid-growing luxury sector, as much as double the growth rate of other luxury categories.
Market growth is tilting to the absolute end of the luxury spectrum, with the true highest-end brands and products outperforming more accessible offerings by two to four percent a year. Within these trends, Bain has identified the top nine market-defining factors for luxury in the next three to five years:
– Chinese consumers, including their spending as tourists, now account for over 20 percent of global luxury sales. Asian consumers (i.e., adding Japan, Korea, and Southeast Asia) account for more than 50 percent
– Thirty percent of global luxury sales now occur within emerging markets;
– The average age of Asian luxury consumers is decreasing steadily, while that in Japan, Europe and the United States increases, creating a new generation of luxury consumers, but with very different tastes and preferences;
– Women are encroaching on traditional male purchases (business attire, luxury watches), as women’s spending becomes increasingly independent;
– Men are increasingly likely to seek traditionally female brand dimensions around “fashion” and “beauty” as well as product functionality;
– Luxury product usage has crept in to more casual occasions, which in turn affects the kinds of products that brands develop (e.g. casual-chic apparel lines);
– Luxury is fueled by newer and bigger money. In turn, consumers’ insatiable chase for higher quality and greater craftsmanship/materials favors absolute luxury offerings;
– Premium and fast-fashion brands are forcing luxury brands to rethink their value proposition by competing directly with lower segment luxury;
– The convergence of stores, e-commerce, social media and mobile commerce is creating an “omnichannel” experience for consumers;
– “Fast growth is bringing even faster change to the luxury sector,” concluded Bain’s D’Arpizio. “With more markets to manage and accelerating trends to anticipate, brands that struggle to respond quickly may find the markets’ rapid growth a double-edged sword.”