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Discuss the Trends in Luxury Product Category Globally

October 16, 2012

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Luxurious brands prosper despite the world economic crisis. They showed 15 %

growth - more than at any other category. Moreover, there is a boom for the luxury brands in

Asia. According to the experts in the field of the global strategy of Deutsche Bank, the

middle class of Asia will become the main buyer by 2030.

Bernard Arnault is the biggest seller of the branded clothes, watches and perfumery in

the world. He is the crusader of haute couture, who came to win the developing countries,

such as India and China where the Louis Vuitton boutiques appeared in 1992. Now he wants

to spread the bags from Fendi or perfumes from Guerlain in the Eastern Asia.

There is the situation that a group of people who can afford themselves to buy the

luxurious goods continues to dominate in the developing countries. The rapid growth of sales,

noted in this segment in the emerging markets in recent years, testified to an entry to the

undeveloped earlier markets, with the subsequent delay caused by the saturation of the

market by the goods. The quantity of families with a high level of income continues to grow,

but this growth is insufficient for ensuring the combined growth by 30-40 %, expected by the

majority of experts.

“Our global HNWI data also indicates a shifting emphasis to the East. There are now

18,000 centa-millionaires in the region covering South-East Asia, China and Japan.

This is more than North America, which has 17,000, and Western Europe with

14,000” (Shirley: 2012).

The Asian countries (including Japan) provided 25% of profit for the luxury brands.

The buying power of the population in China, India and the Middle East is much higher than

in Europe and the USA. The economies of the Asian developing countries experience a real

boom. The majority of brands were initially aimed at the millionaires but later they became

affordable for the ordinary people.

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In 2009 18 % of the world middle class lived in the USA and 36 % - in Europe. By

2030 two thirds of world middle class will live in Asia. Asia as the market of consumption

will replace not only the West, but also the other emerging markets. It is the real possibility

for business development.

However, emerging markets is the risky territory. The demand for luxury is cyclic and

at present, despite the world crisis, it is at its peak. However, the superheated economy

gradually cools down.

The majority of economists exaggerated the size of the luxury goods segment in the

emerging markets. China is still the country with the largest emerging market, with 1.6

million families which can be called “rich” (defined as having the annual income at the rate

of more than 150 000 US dollars). However, it is still less than 4.6 million families in Japan

and only a small share out of 19.2 million rich families in the USA. The quantity of the rich

families in India makes only 0.7 million and 1 million in Brazil.

“As income growth picked up speed and wealth amassed in the 2000s, China became

the new engine for global luxury sales. According to Bain’s report, luxury sales in

China have been growing 20% to 35% annually in Euros since 2007, even in the

stressed years of 2008 to 2009. In 2010, luxury sales in China grew by 35% and are

estimated to grow another 35% in 2011” (Zeng: 2012).

The transition of these countries to the countries with prevailing “middle class” will

become the reality within the next two decades. Despite the fact that there will be a similar

transition in the other regions to emerging markets, Asia will occupy a leading position in this

transformation.

It is clear that the growth of a middle class in Asia is not the unique change which we

should expect. We are in the middle of a social and demographic shift which will both

destroy and create the markets of consumer goods.

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There should be social media strategies that are relevant to luxury brands. Crisis

forced the luxury brands to reconcile to the fact that the Internet and social media enters their

lives. Besides, they had to create the Internet shops.

The industry of luxury cannot ignore any more both existence and influence of the

Internet on buyers. Even the snobs of the fashion-industry - Hermes and Chanel - sell the

goods via the Internet, at the same time entertaining the visitors of the websites by all

possible ways.

More than a half of a budget is paid for the digital mass media, media announcements

(including online videos and mobile announcements). The brand marketers and advertising

agencies counted up that about 10 % of the investments share of a luxury brand is paid to the

social media; the advertisers consider that this share will reach by 22 % in the nearest future.

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References

Cooper N. (2012). “Emerging Luxury Strategies: Insights from BrandZ”. Warc Exclusive.

Available at:

http://shiftfiles.com/files/194275E_MillwardBrown_EmergingLuxury_BrandZstrategi

es.sflb.pdf

Gibley M. (2012). “Cheap China Transitions to Luxury”. Available at:

http://advisoranalyst.com/glablog/tag/luxury-goods/

Morhy E. (2012). “Luxury Brands and Social Media: A Frenemies Story”. Forbes. Available

at: http://www.forbes.com/sites/erikamorphy/2012/06/18/luxury-brands-and-social-

media-a-frenemies-story/2/

Shirley A., Gilmore G., Shiel, V., Bailey L., Roberts J. (2012). “The Wealth Report 2012. A

Global Perspective on Prime Property and Wealth”. Available at:

http://www.thewealthreport.net/The-Wealth-Report-2012.pdf

Wagstyl S. (2012). “Burberry: Chill Winds From China, As Well As From the USA and

Europe”. The Financial Times. Available at: http://blogs.ft.com/beyond-

brics/2012/09/11/burberry-chill-winds-from-china-as-well-as-from-the-us-and-

europe/#axzz29S4DBRRW

Zeng L. (2012). “S&P Dow Jones Indices. Measuring the Business of Luxury Living”.

Available at: http://us.spindices.com/documents/research/sp-global-luxury-index-

measuring-the-business-of-luxury-living-201205.pdf