With the emerging countries getting richer and richer, luxury customers changed. We used to have Americans, Japanese, Italians or even French people traveling and buying Luxury products and services at home or abroad. The entire luxury industry, from high-end hotels to Fashion, Automobile or Jewelry had adapted to these customers.
What about now? These countries are in an endless economic crisis and the ones which are driving the Luxury revenue are not the ones you think anymore. Brazil, India, China, Taiwan, South Korea are now leading in terms of luxury purchase. These countries are the ones with money, so the luxury clientèle changed a lot. Probably faster than the luxury structure itself.
Asia Pacific will rule in terms of luxury buys
According to Euromonitor, the luxury worldwide market reach more than $ 300 billion in 2013. 33% of this figure were made by Europe. It was the biggest market for luxury in the world last year. This specific market has been growing by 3 to 4% in the past 5 years which shows that luxury has never been better.
When we take a look into other regions, Asia Pacific has a triple digit growth since 2008 and every expert aligns to say that by 2018 it will be the biggest region in the world for luxury. This growth will be of coursed leaded by China and India but also by the economic expansion of areas like Indonesia and Malaysia.
China is supposed to reach a $ 14.3 billion sales in terms of Luxury goods. 79% of this sales will be made in Hong Kong. Another interesting fact is the average age for a Chinese luxury customer who is much younger than in Europe or in any Western developed country. While the luxury customer is generally over 40 years old, Chinese luxury buyers will be between 18 to 50 years old. Millionaires in China are in average 10 to 15 years younger than their fellows millionaires in Europe or in the USA.
This gives a higher margin of growth.
Latin America is more than you think
In the other side of the world, there is another giant that is waking up gently but surely. It is Brazil. The 200 million people country is right now experiencing a huge growth. With the world soccer cup in 2014 and the Olympics in 2016, the Brazilian economy is more than ever to the top. Brazil, with its 36 billionaires and 136’000 millionnaires is clearly an interesting market for luxury. You can read our full review here.
But did you know that Mexico is actually very interesting too? In 2012, Mexico overcame Brazil with a total GDP of $ 1.2 trillion says businessoffashion.com. Several brands opened stores in Mexico in the past year.
Who is buying Luxury today and why should we care?
By having such a switch in terms of economy from western developed countries to Emerging players, the luxury customer changed. When you look into Premium hotels, or high-end services, we went from Americans, Japanese, German ot Italians to Indian, Chinese and Brazilian. This switch happened faster than we would think and most of the hotels or shops did not have the time to adapt. Why should we care? Well, because the world has changed and because these new customers have probably more specific needs than the previous ones.
While Japanese customers would embrace a more western lifestyle while traveling, Chinese would not. They have very specific needs in terms of food, services and the way they wish to be treated. As they cannot find an adapted welcome in hotels and shops, that is why 79% of total Chinese luxury purchase is done in Hong Kong.
Indian customers usually travel with family and they expect a very warm welcome specifically in hotels. Try to explain to an Indian customer in a very luxury hotel that his room will be available only at 14:00 and it is only 11:00. He traveled more than 10 hours with his wife and children and they need to wait. That’s not the ideal welcome they would expect.
Try to find a sales person who would speak portuguese in a luxury shop in Geneva, London, Paris or Munich. Difficult. Complicate for Brazilians to feel at ease.
What does it means in terms of business? Well, probably not much as these new customers will buy the goods in their local markets but they would probably buy more while traveling if the mechanics abroad would be better.
Some companies are trying to improve their presence locally as they see a bigger complexity yo adapt their original country structure.
The automobile industry will develop their local networks rather than adapt the existing show rooms in Europe or USA. The motor show of Shanghai became one of the biggest motor event in the world alternatively with Beijing. Some brands will develop special cars to be revealed there, like the Mini Goodwood limited edition by Rolls Royce.
Shanghai Fashion week is growing more and more popular and all Cruise collections take place in Asia rather than in the USA or in some exotic island in the Mediterranean sea or in the Caribbean. Brands are trying to adapt to who is buying their products but the distribution system still have some way to go.
In conclusion, only Brands that will embrace this change will be brands that will conquer future leadership in their fields of competence.
The future of luxury is already here. So let’s do something about it.
Info sourced at businessoffashion.com, Euromonitor 2013 luxury study, Wikipedia, Businessweek.com, Quartz. All content is copyighted with no reproduction rights available.