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LONDON — Income inequality and “parvenus with empty wardrobes” are the perfect growth drivers for luxury, while the notion that high-end goods are immune to economic cycles is pure myth. In addition, consumption of luxury goods is “lumpy,” and confined to a handful of cities worldwide.

Exane BNP Paribas has taken an even deeper dive into the industry with a series of reports titled “All you ever wanted to know about luxury goods,” aimed at helping investors grasp the main drivers — and quirks — of the business.

The first of three reports, issued Monday, addresses the dynamics of demand and spotlights a series of trends emerging among brands including Burberry, Gucci, Louis Vuitton and Hermès.

Penned by members of the bank’s luxury equities team, Luca Solca, Melania Grippo and Guido Lucarelli, the report stated the luxury goods industry thrives on nouveau-rich types packing their closets and jewelry boxes with shiny things.

“Income inequality is luxury goods’ best friend — the explosion of income inequality in the U.S. in the Seventies triggered unprecedented demand for distinction. People who get richer acquire the means to satisfy their wishes, and are keen to show off their newly acquired fortune,” the report said.

New consumers — at all levels of income — are the most important in driving luxury market growth forward. They are very keen to show off their newly acquired status and tend to prefer, according to Exane, “loud styles and very well-known megabrands. Their most important priority is to stand out from poorer people.

“With money in their pockets and empty wardrobes to fill, their spend…is very high. Once their wardrobes fill, their spend…reduces. They turn into rich consumers who have too much of everything and tend to become far less relevant for the industry. Very rich consumers have little to demonstrate, and care much less about the status-signaling value of luxury goods products and brands. The really rich that we know care very little about luxury brands and products,” the report argues.

It adds that cheap imports and easy credit have fueled entry-level luxury consumption, sparking a “wealth effect” within American and European societies, while luxury demand from China pales in comparison to that of Japan in the late Eighties and early Nineties.

Southeast Asia, according to Exane, is the most promising new frontier for the short term, while India is a major potential market for the future, but not until steep import duties and adverse fiscal legislation are reformed. Despite some green shoots of consumption, Africa remains “a more remote prospect.”

On an economic note, recessions and sudden stops in the economy are bad for luxury goods’ companies because people tend to get or just feel poorer. “This kills spending intentions on discretionary product categories like personal luxury goods,” the report said.

Indeed, consumer confidence and the feel-good factor are key, with future expectations driving behavior. “This becomes clear when we compare European and Chinese consumers. The big difference is how Chinese and Europeans see their future — bright for the former, bleak for the latter,” according to the report.

Exane also disposes with the old chestnut that the high end is immune from economic cycles.

“Everybody cuts back in a recession, richer or poorer alike. There is no evidence that high-end products or brands are less cyclical. On the contrary, evidence points to more expensive products being even more volatile,” said the bank, pointing to “high volatility” in the top end of the art market, in yachts and private jet sales.

“Rich people — like everyone else — can feel poorer. And when they do, they naturally reduce or change their discretionary spending patterns.”

When people spend less, they also spend differently, often substituting one category with another. “Relinquishing something typically goes hand-in-hand with buying something else as a consolation. Understanding stepping back and consolation spend at different income levels is key to predicting what product categories or players could go through a recession with limited damage.”

Asked at which point in the cycle the luxury goods industry finds itself, Solca told WWD: “Global macro-economic growth has been subdued this year. We are clearly not in a recession, but in a relatively weak-ish cyclical environment.”

The report also addresses the importance of travel to luxury — and the hazards that brings. It said people on the move account for almost 50 percent of the global luxury market, due to cross-regional price gaps and convenience, while many airports now double as luxury shopping malls.

As a result, travel disruption is a major risk for luxury goods. “Terrorist attacks in Paris at the end of 2015 are causing a new major setback, as tourist luxury spend in Europe is plummeting,” the report said.

The report also describes luxury consumption as “lumpy” and concentrated in a few global cities. According to the bank, the top 25 luxury cities in the world account for about 60 percent of global luxury sales. Those same cities account for one-third of monobrand luxury goods stores.

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