Bouncing back from the 2008 global financial crisis, many developed economy consumers are once again open to buying high-end goods and services, particularly those with an artisanal and green flavour, and affordable indulgencies. Conspicuous consumption as an expression of wealth is thriving in several developing markets as well, particularly some of the BRIC countries (Brazil, Russia, India and China) and in the Middle East, where millions of people have been lifted out of poverty. In these nations, mass consumption is a relatively recent phenomenon and economic growth remains vibrant. These markets are likely to exhibit strong demand growth for luxury goods and services over the coming years.
- Who is the rising star?
- What happened to Europe where it all started?
- Are luxury consumers the same the world over?
- When is too much simply too much?
WHO IS THE RISING STAR?
- China’s rapid evolution from a basic emerging market to a sophisticated economic powerhouse is ready to see the country become the world’s largest luxury goods market over the next decade. China has is expected to pass Japan as the world’s top consumer of luxury goods with many luxury brands rushing to put down stakes in shopping malls across China, including the second and third tier cities where growing numbers of Chinese are stepping into the middle-class and thirsting for visible logos to broadcast their ascent. The shift in consumption power is set to become more pronounced after the recent disaster in Japan where sales of luxury goods are expected to be hit hard;
- Following the explosion in demand for designer bags, Italian suits and fast cars, expensive French and Italian wines are set to be the next must-have for the wealthy Chinese consumer. Wine bars are proliferating in Shanghai, where young Chinese professionals congregate after work and regularly splurge around RMB1,000 (US$152) on a bottle of wine. “Chinese people are very aspirational and materialistic, so once they have bought the best local brand, they start looking for something even better and more expensive,” said Ch’ng Poh Tiong, wine columnist and publisher of The Wine Review magazine. Some experts allege that many people are drinking costly wine simply because it is expensive, rather than appreciating the taste;
- The market for luxury has extended far beyond China’s nouveau riche as ever more white-collar workers are also demonstrating a swelling enthusiasm for luxury. Some people with meagre incomes are even going out of their way to seek designs that have a unique way of burnishing their own heritage. To white-collar worker Zou Xiaoqing, it is not unusual for her to spend one or two-months’ salary on a Chanel bag or a pair of Prada shoes. “I buy those things for myself to celebrate birthdays or to reward myself for achievements at work,” said Zou, “Owning those big brands can really make me feel good. I don’t think it’s vanity, it’s just a matter of self expression”;
- China’s burgeoning middle class is now mainly driving growth in Hong Kong’s luxury market. The most affluent are going ever further upmarket, with some spending tens of thousands of dollars on the right bag. Zuki Ho, who owns 15 luxury handbags and once spent HK$40,000 (US$5,135), which she reports was twice her monthly salary, on a handbag, says “I enjoy being watched on the street when I’m carrying the bag.” Christina Ko, who blogs at HK Fashion Geek, said the Asian love of the luxury bag has become “a cultural fact. In the same way that Asians prefer rice to potatoes, they also prefer luxury handbags to non-branded ones.”
WHAT HAPPENED TO EUROPE WHERE IT ALL STARTED?
- Despite months of economic recession and an ongoing sovereign-debt crisis, Europe’s consumers are splurging on luxury goods again. The sudden pick-up in sales of expensive clothes, accessories and jewels, particularly in the key countries of France and Italy, is prompting Europe’s luxury goods titans to do an about-face, pouring investments into their homelands after a decade-long search for new consumers in emerging markets;
- Europe’s share of the market for luxury goods is expected to bounce back this year with a market value expected at over US$41 billion in France, Italy and the UK alone, according to Euromonitor International data. “The world is not only Asia,” said Francesco Trapani, chief executive of Italian jeweller Bulgari SpA, which is being taken over by LVMH Moet Hennessy Louis Vuitton SA. “Europe is still a very important part of the business.” The Rome-based luxury jeweller recently opened a new store in Amsterdam and refurbished its store in Naples, Italy;
- The rebound of the European luxury-goods market is, however, partly due to Asian influences; the number of high-spending Chinese tourists that travel to France and Italy every year has soared recently. Chinese visitors to France are already the biggest spenders of any foreigners on luxury goods, accounting for 29% of the total amount spent, according to data from investment research firm Sanford Bernstein.
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