(MENAFNEditorial) The number of luxury consumers worldwide has more than tripled over the past 20 years, from roughly 90 million in 1995 to 330 million at the end of 2013. The statistics come from Bain & Company, the leading advisor to the worldwide luxury goods industry, in an extensive study of 10,000 luxury consumers conducted in collaboration with Redburn Partners, Europe's largest independent equities broker, and Millward Brown, a leading consumer research agency. Their report, 'Lens on the Worldwide Luxury Consumer,' was released recently in Milan, Italy.
According to the report, a net total of 10 million additional consumers enter the luxury market yearly. The number of luxury consumers is expected to reach an estimated 400 million worldwide by 2020 and 500 million by 2030. In its analysis of approximately 10,000 luxury consumers, the report finds significant differences within the global luxury market and its consumer base, which is shifting from a historically-homogenous base of affluent consumers worldwide to a broader and highly heterogeneous class of luxury shoppers.
"The race is on to capture an explosion in worldwide luxury consumer growth," said Claudia D'Arpizio, Bain partner in Milan and lead author of the report. "But the luxury consumer of the future will become increasingly heterogeneous and luxury brands and operators need an immediate upgrade to their consumer strategies in response to this growing diversity, or else risk falling behind.
"Middle East consumers have the highest per capita spending on luxury goods, at about EUR 1,400 per year. The vibrancy of this market, however, has given light to a more cautious spending consumer, who shows high preference for well-known brands and logos. Their key luxury categories include leather goods, watches, cars and overseas holidays-with Dubai remaining the biggest market in the region with almost 30 per cent of the total market share," said Cyrille Fabre, Bain & Company partner who leads the Retail & Consumer Products practice for the Middle East
Within the luxury segment's current 330 million consumer base, 55 per cent (180 million) shift between luxury and merely 'premium' purchases, including products such as designer 2nd lines, beauty products, and small accessories. This group comprises approximately 10 per cent of global spending, purchasing an average of EUR 150 per capita annually. The remaining 45 per cent (150 million) represent 'true luxury consumers' who consistently dedicate part of their discretionary spending to personal luxury products of various nature, usage occasions and price point and make up roughly 90 per cent of global spending, purchasing an average of EUR 1,250 per capita annually. Additionally, the top 10 per cent (15 million) within this group capture over half of its spending.
Key to the report is its focus on the shift in the heterogeneous global picture for the new luxury consumer and what Bain defines as the '7 New Faces of the Global Luxury Consumer,' a comprehensive profiling of seven luxury consumer segments displaying a divergence of tastes and buying behaviors, while straddling national and generational boundaries:
1.The Omnivore (25 per cent of spending, at an average EUR 2,350 per year): These shoppers are typically new entrants to luxury. On average, they are younger than the other clusters and have a high willingness to experiment with products and brands. They are primarily women and tend to purchase high ticket items, focusing on the jewelry and watches categories. They prefer to shop in a brands' own stores and many of their purchases are made while travelling. They prefer aspirational brands, and while they have high advocacy for luxury brands, their loyalty level is relatively low. These attitudes are common among Chinese consumers from Tier Two and Three cities
2.The Opinionated (20 per cent of spending, at an average EUR 1,750 per year): These are highly-educated Generation X and Y shoppers. They favor leather goods and watches, and are highly aware of the differences between brands. They shop often within their hometown, and are influenced by online information and social networks. They dominate China's Tier One cities and are also prevalent in Western Europe and the United States
3.The Investor (13 per cent of spending, at an average EUR 1,450 per year): These shoppers pay the greatest attention to the quality and durability of luxury materials. They favor long-lasting leather goods and watches which can be handed down from generation to generation. They carefully evaluate luxury purchases with research and referrals from other consumers. The segment comprises shoppers mainly from the Middle East with a high penetration of baby boomers.
4.The Hedonist (12 per cent of spending, at an average EUR 1,100 per year): These shoppers are infatuated with luxury goods and the luxury shopping experience. They have a high affinity for brand logos and are most influenced by advertising. Much of their purchasing is within the accessories categories. Despite their interest in luxury for show, they exhibit the lowest levels of advocacy for brands, often due to cognitive dissonance sometimes following purchase. This is the only cluster represented across all nationalities and generations
5.The Conservative (16 per cent of spending, at an average EUR 1,000 per year): These are mature and mainstream shoppers, both men and women, and favor watches and jewelry from big-name brands. They shop in multi-brand stores, and are influenced primarily by what friends and family recommend. They are mainly in mature markets
6.The Disillusioned (nine per cent of spending, at an average EUR 800 per year): These are mostly baby boomer shoppers who suffer from 'luxury fatigue' and purchase leather goods and beauty products. They look for products that last more than one season, but are unswayed by brand messaging or advertising. They tend to shop infrequently, and like shopping online when they can. The segment is dominated by women and is found in the United States, Europe, and Japan
7.The Wannabe (five per cent of spending, at an average EUR 500 per year): These predominantly female shoppers look for entry-level items in beauty and shoes, valuing affordability, and are highly likely to mix and match outside of the luxury spectrum. They are impulse shoppers who demonstrate little brand loyalty, primarily influenced by what their friends say and what they see in fashion publications. They come from the global middle class, especially in the United States, Western Europe, and new consumers in Eastern Europe
The report finds that while these segments may be concentrated in specific geographies, there are shoppers from every segment in every major global luxury market. There is a global cycle from the enthusiasm of Chinese, the Middle East and other emerging market consumers to the mature caution of markets such as the United States and Western Europe to the detachment of older shoppers and consumers in Japan. But within this cycle, there are significant country-level differences. Middle East shoppers are increasingly diverse and nuanced, ranging from a high degree of sophistication and luxury experience to luxury novices. The region emerges as the number one in luxury shopping in 2013 with EUR 1,400 spending per capita, whereas the global average is only EUR 650 spending per capita. Overall, Middle Eastern consumers are among the most 'generous' nationality, with nearly half of shopping for gifting (45 per cent versus an average of 40 per cent at global level)
The study confirms that the luxury market is still in the hands of baby boomers (45 per cent of luxury consumption worldwide) whose behaviors and preferences are quite different from their children (Generation Y). Younger generations are consumers of the future and continue to maintain positive attitudes to luxury. They present the most disparate profiles: from newbies to experts, from classic to edgy, from enthusiast to detractors; the fragmentation in luxury tastes of this group makes the consumer picture ever more complex to handle
"Enthusiasm may erode over time, but brands can either throw up their hands or see this as an opportunity to re-energize shoppers," concluded D'Arpizio. "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 are not, while understanding how to delight and truly engage their current consumer base.
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