Luxury isn’t what it used to be. Sure, there are high-end quality items and experiences, but consumer behavior in this space has seen a shift over the past few years. Following the 2008 recession, most consumers expectedly shied away from making purchases on ultra fancy or expensive items in favor of keeping their financial heads above water. Yet the story for luxury purchases has shifted in the last few years, which is showing a more positive outlook.
According to research from Deloitte, there has been an uptick in luxury good purchases. Specifically, 59 percent of consumers surveyed said their spending on high-end items has increased over the past five years. This stems from emerging markets like China, Russia and the United Arab Emirates starting to move into the luxury purchasing arena, with 70 percent of consumers increasing their spending.
Within these emerging markets, we’ve seen retailers make large bets on luxury. This is evident with China’s JD.com snapping up luxury brand marketplace Farfetch for a cool $397 million this summer. In the more well-developed areas, like the United States and the European Union, only 53 percent of consumers are buying more luxury goods.
One of the key areas that people are being drawn to in terms of luxury purchases are items bought during traveling, whether it’s for work or play. Half of those surveyed by Deloitte said most of their luxury purchases are spent while out and about, rather than at local shops. This is due to the fact that hot spot destinations are more apt to have better access to high-end brands.
While the luxury industry has seen its fair share of ups and downs over the years, research from Bain & Company shows that 2017 is the year that is primed to help make a high-end purchases comeback. Although luxury revenue took a dive between 2015 to 2016, going from €251 billion down to €249 billion, there has been signs of positive growth in 2017. In Q1 of this year, Bain & Company reported a 4 percent growth in luxury goods, while it is predicting 2 to 4 percent growth for the entire year.
The surprise luxury consumers who’re popping up, according to Bain’s research, are millennials and Generation Z. Within the next seven and a half years, these two consumer groups are expected to make up 45 percent of the high-end purchasing group. With 56 percent of millennials around the world looking to spend more money on luxury items this year, according to YouGov’s “Affluent Global Perspective Study,” the industry may have a tough time on its hands.
This consumer group is shaping up to be different than the traditional high-end buyer. While 74 percent of millennials agree that high-end items show off status by communicating to the world that they have money, 72 percent say a successful career is a major way of self-identification. With the latter opinion being of much higher value than with previous generations, luxury marketers and brands are going to need to think of innovative ways to reach out to this market segment. Another factor contributing to the luxury-minded millennial, along with their penchant for a successful career, is the fact that most are waiting a bit longer to get married than previous generations. As such, millennials have more money at their disposal than Generations X, Y and Baby Boomers.
In buyer news this week, social media is proving to be a major influencer factor across all generations. Brand consulting firm Corra’s research found that when it comes to attracting consumer attention, platforms like Facebook and Twitter are the way to go among millennials, Generation X and Baby Boomers.
Meanwhile, data from JDA’s research shows that a large portion of consumers today are favoring the buy online, pickup-in-store (BOPIS) option over a quality experience. While 46 percent of those surveyed said they prefer to shop online, 50 percent shared their preference for the BOPIS method of shopping, which is up from the study’s 35 percent a year ago.
JDA’s VP of Retail Industry Strategy, Jim Prewitt, commented to Retail TouchPoints on these survey results and what it means for the future of retail. “Our 2017 Consumer Survey highlights the changing role of retail stores. While there has been speculation of a ‘retail apocalypse,’ that doesn’t seem to hold true for consumers,” said Prewitt. “No longer the only channel for shopping, brick-and-mortar stores are still a key cornerstone for a quick and easy shopping experience and the facilitator for popular fulfillment options, like BOPIS and buy online, return in store (BORIS).”