PARIS — Meet Yummy — the young urban male who is poised to fuel the luxury goods sector for years to come.
So says a report from investment firm HSBC released today. It argues that luxury consumers are getting consistently younger, with blogs and social media driving brand visibility and providing a better customer experience.
HSBC cites a survey published by Bocconi University, that predicts that by 2019 the majority of luxury clients will be between 25 and 30 years old.
This is particularly true in China, where consumers of premium goods are 14 to 25 years younger than their European and American counterparts, respectively. Other emerging markets — including Brazil, Indonesia, Vietnam and African countries, most notably Ghana and Nigeria — boast similar demographics to China.
Contrary to stereotypes, HSBC argues that younger clients are also more demanding and have higher expectations. “It’s not so much a question of consumer loyalty, but more one of brand innovation,” says the study, written by Erwan Rambourg, Antoine Belge and Cathy Chao, adding that this is the reason why “luxury goods companies cannot ignore digitalization.”
To wit: In 2013, Millennials (aged 18 to 31) in the U.S. spent an average of 52.7 hours a week online, while U.S. Baby Boomers (aged 49 to 67) stayed connected for 35.7 hours a week.
Meanwhile, in China, 16 percent of the population was officially using the Internet in 2007, versus 44 percent in 2013. While shopping online, 40 percent of them indicated in 2012 that they were interested in luxury purchases, a sharp increase from 22 percent in the year-ago period, which coincided with a quick increase of brand recognition and knowledge, according to HSBC.
Urbanization is an equally strong force. “As a consequence…the swelling middle class will quickly become more sophisticated which will lead to changes in their consumption. This phenomenon will benefit luxury brands as they are often used as a way of displaying social status,” say the analysts.
HSBC estimates that Russia’s middle class will account for 40 percent of the population by 2015, versus 70 percent by 2030, which is also the figure they project for China. India, Brazil, Turkey, the Philippines and Egypt are expected to experience similar growth.
Interestingly these young urbanites, keen on premium goods, are predominantly male.
An exception is China, where the study has observed a reverse trend. According to a Bain report, 90 percent of all luxury purchases in 1995 were made by men. Today, following greater financial independence of women, female customers account for 50 percent of luxury spending in China.
This is no surprise, as Forbes credits China with having the largest number of self-made billionaire women, with half of the senior management positions resting in female hands. In comparison, the global average stands at 24 percent, according to a study conducted by Grant Thornton.
Elsewhere, men are setting the tone. “Whether it is cosmetics, outdoor sports, fashion or accessories, male purchases have really started to impact overall growth rates,” the study notes.
At Burberry, for example, men’s wear accounted “for more than half of the growth in mainline store revenue” in its fiscal year 2012-13, while “retail sales of men’s tailoring grew by nearly 70 percent in the same period.”
HSBC analysts argue, however, that it will be a challenge for luxury brands, especially the established ones such as Ermenegildo Zegna, Corneliani and Canali to hold up against younger, newer rivals, citing a growing need “to develop a more diversified product offer.”