Monday, June 11, 2012

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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