Until now, showing off was more of a male thing: for many representatives of the so-called stronger sex, flashing status symbols like fast cars and conspicuously expensive watches is, it seems, important. But women are catching up.
“As a result of their increasing economic independence, more and more women are encroaching on what has traditionally been male territory,” says Josef Ming, a consumer goods expert and partner in Bain & Company, an international management consultancy firm.
Jointly with the Fondazione Altagamma, an Italian association of luxury goods producers, Ming conducted a study on the market for all things expensive and beautiful. The increase in the number of women buying top-end products is one of the results the research yielded. Women are no longer content with just expensive clothes and accessories: they want the luxury watches and sports cars, too.
For the luxury goods clientele, the fact that Europe is currently in crisis mode appears not to be a matter of much interest. That too emerges from the “Luxury Goods Worldwide Market Observatory” report based on input from 230 of the world’s leading producers of luxury goods. “The turbulence in the Euro zone and the fears of economic collapse do not impact demand for luxury goods,” says Ming.
According to his prognosis the sector will grow during 2012 by seven percent, turning over more than 200 billion euros – and that doesn’t include limos, furnishings, yachts or real estate.
Driving the growth is mainly demand from Chinese consumers both at home and abroad. What they spend on luxury goods now accounts for over 20 percent of the sector’s global turnover. And it is mainly a younger clientele that is spending a great deal of money on watches, jewelry, fashion and the best wines and spirits.
Marketing to a new generation
While the average age in established markets like Europe and the U.S. – which keep on growing as before — is going up sharply, the opposite is true in Asia, where average age is going down. “A whole new generation of luxury customers is emerging with new preferences and tastes,” says Ming. “And producers have to adjust to that.”
One of the ways adjustment is called for is in distribution. A younger average age impacts the way this rich clientele behaves. So, just as it is increasing in other market sectors, on-line buying of luxury items is on the rise. “The companies have to create the necessary structures for that,” Ming says, adding that those that fail to react quickly and flexibly enough to this dynamic could rapidly lose market shares.
According to the study, the new dynamic can be attributed to the globalization of the luxury sector. “Business is now no longer limited to just a few regions in the world,” says Ming. This is reflected in the expansion plans of many purveyors who are targeting countries like Indonesia and Malaysia, Azerbaijan and Kazakhstan, Mexico and South Africa, Turkey and Vietnam.
Another factor is that markets that had already been penetrated like Russia and India are showing signs of new life. Based on all of this, the Bain study predicts average annual growth rates of about seven percent for the years to come.
The main winners in the current boom are European firms. European products account for over 70 percent of the world luxury market, according to figures provided by the European Cultural and Creative Industries Alliance (ECCIA). And the luxury sector’s relative importance to economies is on the rise as well: in the last few years, the luxury industry grew faster than the general European economy. So the sector sees itself as one of the motors of economic growth.
ECCIA estimates that the sector accounts for a good three percent of European GDP, and some 1.5 million jobs (including suppliers and trade).
