Looming store closures by Macy’s, J.C. Penney and Sear Roebuck and Co. represent a grim example of the general tenuousness of consumer spending. Tick up a few notches in socioeconomic standing, however, things appear a bit brighter. Roughly 10 million shoppers enter the luxury market every year, according to a new report from Bain & Co. The report “Lens on the Worldwide Luxury Consumer” illustrates a bright spot in an otherwise depressed consumer environment. With most research data all but confirming a so-so holiday shopping season, the luxury market is showing signs of robust health, as consumers in that market appear more than willing to spend.
Bain & Co. set the luxury consumer base at about 330 million shoppers worldwide. It expects the total to climb to 400 million shoppers by 2020 and to nearly half a billion shoppers by 2030. Underpinning this growth is participation by wider demographics in the luxury market, including shoppers who do not typically qualify as wealthy or affluent.
What dynamics are driving this growth? As the Bain & Co. report shows, a diversified consumer base and a more proactive tack by luxury retailers is setting the course for strong positive developments in the luxury consumer market.
Baby Boomers Define Luxury Marketplace, But For How Long?
Forty-five percent of luxury shoppers belong to the Baby Boomer generation, according to Bain & Co.’s survey. However, Bain sees this percentage dropping precipitously over the next 10 years as Generation Y ages and affluent members of this generation enter their peak earning years.
This changing of the guard requires an energetic response from luxury retailers in order to continue generating interest in their respective brands. Claudia D’Arpizio, the report’s author, said in a press statement.
“Enthusiasm may erode over time, but brands can either throw up their hands or see this as an opportunity to re-energize shoppers,” she said. “In order to do so effectively, they must understand the full range of heterogeneous luxury consumer segmentations, execute relentlessly on reaching the segments that have the highest potential, and invest in capturing the attention and imagination of new potential shoppers who could be buying luxury today but who aren’t, while understanding how to delight and truly engage their current consumer base.”
A New Class Of Luxury Shoppers
In its report, Bain & Co. identifies a number of consumer profiles that will define the make-up of the luxury market over the next few decades. Most populous is “The Omnivore,” constituting 25 percent of the study’s 10,000-strong participant base. The Omnivore spends an average of $2,300 on luxury goods per year and is prone to shop at a luxury brand’s retail location.
At the bottom of the rung is “The Wannabe.” This type of luxury shopper, who spends an average of $500 annually, is more influenced than not by fashion magazines, popular opinion or financial concerns. Other categories in the Bain & Co. report include “The Investor,” “The Opinionated” and “The Conservative.”
Luxury Market Looks Ahead
A more diverse shopper base means retailers may face rising competition among one another to drive interest in their brands. Tools such as marketing personalization may come to the fore, as the Bain & Co. report points to a prevalence of positive attitudes toward loyalty in the luxury market.
“The race is on to capture an explosion in worldwide luxury consumer growth,” D’Arpizio said in the release. “But the luxury consumer of the future will become increasingly heterogeneous, and luxury brands and operators need an immediate upgrade to their consumer strategies to recognize and react to this growing diversity, else risk falling behind.”