Rich increase spending on luxury experiences
The luxury market, including things such as yachts, frocks and
safaris, is set to hit $1.5 trillion this year, roughly matching the
entire economic output of Spain or Australia, as the income inequality
gap widens across the globe.
Luxury goods and services have proved a rare bright spot in
consumer goods, as the ranks of the wealthy grow - especially in markets
like China and Brazil - and seek the status symbols to go with it.
However, money is increasingly going on luxury experiences, from
spas to safaris, rather than tangible products. Spending on experiences
grew 50 per cent faster than on goods last year, according to Boston
Consulting Group.
The management consultancy expects the overall luxury market to
expand seven per cent this year, a deceleration on the past two years'
12 per cent but still comfortably ahead of projected growth in global
economic output.
“The gap in income inequality is growing, which is unfortunate, but
as a result there are more and more millionaires every year,” said
Jean-Marc Bellaiche, a senior partner at BCG and co-author of the latest
report. Millionaires, he adds, account for an estimated 45 per cent of
the market.
Some analysts have questioned how long the inexorable rise of
luxury can continue as swaths of Europe are engulfed in economic and
financial turmoil and the US remains fragile.
Even China, accounting for 10 per cent of the market domestically
and a further 12 per cent through overseas purchases according to
Altagamma, is seeing slower economic growth.
Hong Kong retail sales in April, the latest month available, were
dampened in part by mainland Chinese visitors scaling back lavish
purchases, according to Donna Kwok, greater China economist at HSBC.
However, Bellaiche expects the country's new rich to continue
snapping up the trappings of wealth. By 2020, he estimates the number of
Chinese middle-class - with annual incomes in excess of RMB60,000
($9,400) - will almost treble to 140 million.
He also anticipates 330 Chinese cities will exceed Shanghai's
average GDP per capita by then. “And Shanghai today is clearly a city of
luxury like London or New York,” he said.
The survey also highlights the growing trend towards luxury
experiences is swallowing an increasing amount of the luxury spend. The
market is worth $770 billion, or more than half the total, and growing
at a faster rate.
This is the case even in the newly rich countries, which
Bellaiche says raises challenges for luxury providers. While a Rolex
watch, for example, can be the same in Beijing or Zurich, expectations
of service vary widely around the world.
Luxury is a bright spot for Europe too. The continent represents
70 per cent of worldwide luxury manufacturing, including gourmet food
and drink, and the industry directly and indirectly employs 1.5 million
people, according to Altagamma.
Source : http://gulfnews.com/business/retail/rich-increase-spending-on-luxury-experiences-1.1034374
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