MILAN — When SDA Bocconi, the graduate business school of Milan-based Bocconi University, brought together international students and experts to debate the challenges and future of the luxury sector they had plenty to talk about and some new statistics to pour over.
During the first edition of the SDA Bocconi Luxury Forum on Friday, Italy’s luxury goods association Altagamma and Boston Consulting Group presented the fourth edition of their “The True-Luxury Global Consumer Insight” report.
As Altagamma’s vice chairman Armando Branchini explained, the survey is based on a research conducted on 12,000 true luxury consumers, who are located in 10 different countries and spend an average of 36,000 euros, or $39,200 at current exchange rate, a year per person on luxury goods.
“We selected this specific category of customers because they are those who really create trends and generate a trickle down effect on other categories of spenders,” Branchini said.
According to the research, the number of luxury spenders in the world continues to grow. Looking back at the last eight years, from 2009 to 2013, the purchases of luxury goods increased 9.3 percent and then, from 2013 to 2016, they grew 5.6 percent.
“We are expecting the compartment to grow between 4 and 5 percent between 2016 and 2023,” said Branchini, forecasting that in 2023 the true luxury spenders in the world will be 22 million and they will spend a total of 381 billion euros, or $415 billion.
Boston Consulting Group’s survey highlighted that, on a base of 20 leading companies offering personal luxury goods, the average growth between 2013 and 2016 was 3.8 percent compared to the four years before. “We really don’t know what will happen in the next years, but we expect the segment to grow between 2 and 3 percent.”
Shoes, fragrances, as well as watches and jewelry, are the categories that are growing the most, while the sales of small leather goods and silk items are decreasing.
According to the research, Chinese and North American customers will be those increasing their purchases of luxury goods the most in the future.
“We found out that in 2017, 40 percent of true luxury consumers expect to spend more on luxury goods,” Branchini added.
The latest “The True-Luxury Global Consumer Insight” report also highlighted that, in the last six years, the average price of luxury goods tripled due to the global inflation.
Are luxury costumers aware of this? Yes — 52 percent of the top luxury consumers noticed a misalignment between the products’ value and price. “This happens mostly in the U.S. and among Millennials,” said Boston Consulting Group principal Nicola Somenzi. “Two-thirds of top luxury consumers focus on the price increase and the other one-third laments a loss of exclusivity and problems with quality. The lack of status is more common in the emerging markets, while the lower-quality of materials and craftsmanship is pointed out more in the mature markets.”
And how do the big spenders reacts? Eighty-five percent of them take some measures. In particular, 25 percent of them buy from other luxury brands; 45 percent shop off-price; 10 percent do not buy; another 10 percent trade down to premium brands, and 9 percent buy a lower-priced item from the same brand.
While most of the luxury brands didn’t loose market share, 26 percent of them, especially labels offering total looks, are affected by the spending decrease.
According to the research, 64 percent of the customers trading down buy products positioned in the premium segment, while 36 percent of them go to fast fashion.
Somenzi said the market was helping give casualwear more of a luxe spin and who cited for example luxury sneakers and high-end down jackets as two of the categories growing the most in the fashion and accessories industry. In 2009, the sales of high-end sneakers and luxury down-jackets generated revenues of 900 million euros, or $980 million, and 500 million euros, or $540 million, respectively. In 2016, the two categories posted sales of three billion euros, or $3.3 billion, and two billion euros, or $2.2 billion, each. The conversions were all made at the current exchange rate.
But, where do these true luxury consumers shop? They are still attached to the brick-and-mortar, even if they are strongly influenced by the digital across the different stages of the purchasing process. In 2016, only 10 percent of them, from Millennials to the elder generations, shopped online only.
“The online commerce is growing much less faster than we expected,” Branchini said. “Experience is paramount in the case of luxury. The e-commerce is there to enlarge the customers’ base but true luxury shoppers prefer the brick-and-mortar.”
Combining true luxury consumers and top aspirational shoppers, who spent a total of 312 billion euros, or $343.2 million, in luxury goods in 2016, Boston Consulting Group and Altagamma identified 12 profiles of luxury goods costumers.
“The categories that are growing more are ‘Absolute Luxurer,’ ‘Megacitier’ and ‘Social Wearer,’” Branchini explained, highlighting that those brands that targeted a specific group, saw a positive impact on their business.