According to Bain & Company, this market continues to grow steadily at an annual rate of 5%. Sustainability and experience will play a crucial role in the market.
The customer experience and networks built around the product will become more valuable.
The global luxury market is characterized by including 9 goods and services which include high-end cars, personal luxury goods, hotel services, fine wines and liquors, private jets and gourmet food, among others.
And while there are countries with higher consumption rates in each of these segments, overall the total luxury goods market registers 5% annual growth, considered stable in recent years.
According to the most recent market study carried out by the specialized consulting firm Bain & Company on this type of consumption, sales of high-end automobiles continued to dominate the market. They had an increase of around 5%.
Similarly, luxury experiences in hotels and restaurants continue to be very attractive for consumers, with sales growth of 5% and 6%, respectively.
However, as reported by Bain, the consulting firm specializing in the study of this particular market, the personal luxury goods segment achieved a positively unusual growth pattern.
After consecutive years of strong sales performance, personal consumption of these goods grew overall by 6% in 2018, resulting in a total of 260 billion euros in sales.
Additionally, this amount is expected to skyrocket to 276 billion euros by the end of 2019.
According to the study, this increase was mainly due to the acceleration of domestic spending of consumers in mainland China.
Another variable that influenced this increase has to do with increased European tourism, which, despite socio-political turmoil in countries such as the United Kingdom and France, drove positive growth in the region during the holiday season.
Overall, shoes and jewelry were the main growth categories in this segment, gaining 7% each, followed by the purchase of handbags and beauty products.
Watches, on the other hand, remained stable while clothing sales suffered, mainly due to the decline in sales in men’s fashion.
Under these growth rates, Bain & Company’s experts identified in their research what they call the five megatrends that will mark the personal consumer goods market in the coming years.
Among these trends are identified factors such as new generations, purchasing power, digital irruption, among others that are explained in detail below.
The first trend defined by Bain has to do with what it calls the presence of a new generation. The study determined that the Chinese Z generation will be consolidated as the population with the greatest spending force -classified as impulsive purchasers- and significantly increasing the historical averages of consumption in this item.
This phenomenon will demand that companies are able to transfer the attractions of their products to the purchasing styles of younger audiences, without losing the essence and identity that has reached the company that produces and markets these products during its trajectory.
The second trend is marked by “access over ownership”. According to the consulting firm, a paradigm change is expected when it comes to acquiring garments.
Consumption will increase access to, for example, clothing rentals and the so-called second-hand market.
The third phenomenon that will be noted in the demand for luxury personal goods is related to responsible consumption, which today has an impact on all social and economic activities.
The consultant explains that different sustainable production practices, value offers that include social responsibility approaches, environmentally friendly processes and, in general, circular fashion strategies will tip the balance when acquiring a product of the highest range.
“This behaviour, which is based on a vision focused on the care of the environment, decent human work and animal welfare, has gone from being an accessory factor to being positioned as a true purchasing criterion of the modern consumer,” says the specialized study.
For Federica Levato, partner of Bain & Company and co-author of the study, “previously there were very few companies that decided to bet on disruptive practices that would guarantee greater care for the environment and the sources of raw materials.
From his perspective, “this element has now become a common denominator of the offer, as companies that do not include sustainable components in their strategies have seen a considerable impact on the loyalty of their customers”.
The fourth trend identified in the global luxury personal goods market is called “Beyond the Physical”.
For experts, it is clear that digital will interrupt the entire value chain of luxury goods consumption and will require a comprehensive redesign of the technology ecosystem, with an emphasis on generating product experiences.
Bain & Company notes that although electronic sales channels have been positioned for the different facilities they represent for the user and the elimination of barriers inherent to the physical format, digital commerce must take its differential to complement the benefit of the product and offer the customer an interaction with the brand that generates loyalty.
NETWORKS ARE KEY
Finally and as a last tendency it is mentioned that above volume and price will be the construction of community and clientele networks.
In the firm’s opinion, this will be the new measure to establish the value of a product, beyond the same good and its brand.
Positioning oneself in the imaginary of contemporary audiences will require more than an outstanding final product.
The new consumer characteristics that have been identified value the ecosystem associated with brands, even as much as the quality of the good they acquire.
In this way, the analysis warns, companies that manage to consolidate a kind of social harmony around the values transmitted by their brand will not only achieve an increase in sales in their products, they will also consolidate a real competitive advantage.
“It is important to highlight the role that insurgent brands will play in the luxury sector,” explained Levato.
“These will challenge established brands, promoting a paradigm shift focused on creativity factors that go beyond the product itself, and that will end up impacting all stages of the business, creating a more direct and continuous relationship with consumers,” added the study co-author.