Luxury spending is likely to see steady growth. Learn more about the factors driving the trend.
Revenues for the luxury goods market are forecast to grow by 4 percent to 5 percent this year, and at an annual rate of 5 percent to 6 percent through 2015, outpacing global economic growth by as much as 50 percent, global consulting firm Bain & Co. reported yesterday.
The pace of luxury spending will vary by region, keeping even with GDP in China, accelerating in Southeast Asia and South America, and heading for a “summer spending dry spell” in Europe, according to the Spring 2013 update to Bain’s Luxury Goods Worldwide Market Study. Luxury revenues grew by 10 percent in 2012.
Ultra wealthy Americans surveyed by Spectrem’s Millionaire Corner last September are more apt to spend large sums of money on collectibles, automobiles, sporting events and travel than on other types of luxury goods. Close to one-fourth (23 percent) spend $50,000 or more a year on collectibles, including 14 percent who spend $100,000 or more, according to Spectrem’s $25 Million Plus Investor 2012. Close to one-third (32 percent) spend $50,000 or more a year on cars, including 18 percent who spend $100,000 or more. Roughly 30 percent spend $50,000 or more a year on travel, including 18 percent who spend $100,000 or more.
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Typical travel for investors with $25 million or more include visits to family and friends (75 percent), educational trips (65 percent), exotic vacations, such as safaris (59 percent), and cruises (57 percent). Tourism will be a key driver of luxury spending, according to Bain, as travelers seek new experiences at such destinations as Dubai, South East Asia and Australia and make more “savvy” purchases on their trips.
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Also fueling the increase in luxury spending are individuals who enjoy a high income but not a high net worth, Bain reports. These “HENRYs” – Higher Earnings, Not Rich Yet – outnumber the ultra wealthy by a factor of 10-to-one. A rising middle class in developing countries is also contributing to the demand for luxury goods.
The luxury market will also growth with increasing consumer confidence in the U.S. and the integration of in-store and online shopping experiences through mobile and more traditional Internet technologies, Bain reports. The company estimates global luxury spending will be five times larger in 2025 compared to 1995 levels.