The luxury world is abuzz with the budding Chinese consumer, but brands might be overlooking the opportunities still to be had in the U.S.
The well-heeled American shopper is spending on high-end cars, but still holding back, relatively, on personal luxury goods and “experiential” indulgences such as alcohol, travel, hotels and home furnishings, according to new research from The Boston Consulting Group.
The U.S. is home to 39 percent of the world’s households with net worth over $30 million and 29 percent of households topping $1 million, but accounts for only 19 percent of global spending on personal luxury goods such as apparel and accessories and cosmetics, said the consultancy. The U.S. also commands only 24 percent of the experiential luxury market, although it is well-developed in the auto arena, making up 37 percent of the global luxury car market.
Altogether, the total amount of luxury spending in the U.S. equals about 2.8 percent of the country’s GDP, less than Europe’s average of 3 percent and Italy’s leading tally of 3.2 percent.
“The fair share of the luxury market [in the U.S.] should be probably in between 30 and 35 percent,” said Jean-Marc Bellaiche, senior partner and managing director at the consulting group.
Bellaiche said people who have money, but don’t live in major cosmopolitan areas such as New York or San Francisco, could simply be more attuned to high-end cars than other goodies. And Americans might also be turned off by the Euro-centric stance of so many high-end brands.
“There are of course American luxury brands, but most of the market is run by European brands and mainly Italian and French brands,” Bellaiche said. “There is less admiration of American people toward Italian and French craftsmanship…the heritage and history are not values that are highly praised in the U.S., while the Japanese and Chinese and Europeans are really interested in the story of the brand.”
The consultancy pegged the global luxury market at $1.09 trillion euros, or about $1.45 trillion at current exchange. Apparel, leather goods and accessories, watches and jewelry and cosmetics make up about 20 percent of the market, while luxury cars make up roughly 25 percent, and the overwhelming balance, or about 55 percent, comes from expenditures on experiential luxury.
The emphasis on the experiential is important and Bellaiche said luxe companies would do well to pay attention to the good life beyond personal luxury goods, whether it be a resort spa business or a line of high-end kitchen wares.
“We are moving from a world of owning to a world of being,” he said. “It’s improvement of your day-to-day life, it’s not about an object.”
Bellaiche said this shift in emphasis was being driven by the aging consumers who are looking to fully appreciate their lives, Gen-Y shoppers who are chasing instant pleasure and a general search for purpose in luxury consumption.
A closet full of handbags might not, after all, equal fulfillment.
“People will ask, is [this] really the ultimate way to be happy?” Bellaiche said.
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