Luxury-goods makers need to better differentiate their products and the way they sell them or risk being left behind, according to consultant Bain & Co.
Too often, luxury companies adopt a one-size-fits-all approach to design, distribution and communication when the people who buy high-end goods are increasingly heterogeneous, Bain said today in a study of about 10,000 luxury consumers,
“A standard approach cannot work any more,” said Bain, which conducted the study with broker Redburn Partners and researcher Millward Brown.
Companies from LVMH Moet Hennessy Louis Vuitton SA (MC) to Prada SpA (1913) have reported slowing sales as demand softens in Europe and Asia and unfavorable currency shifts weigh on growth. The industry grew 2 percent to 217 billion euros ($297 billion) in 2013, the weakest pace in four years, Bain estimates. Growth could remain under pressure for at least another six months, suitmaker Ermenegildo Zegna SpA predicted last week.
Since 1995, the number of luxury consumers worldwide has more than tripled to 330 million, Bain estimates. That base will expand by 10 million a year to about 500 million people by 2030, according to the consultant.
The top 5 percent of clients account for about half of global luxury consumption annually, each spending an average 6,500 euros a year on goods, Bain estimates.
More than 50 percent of sales are to those aged 49 or older, who outspend 13- to 33-year-olds by about four to one, according to Bain. So-called true luxury consumers aged 34 to 48 are the highest spenders, each splashing out an average of 1,600 euros a year on luxury items, the researcher said.
Younger generations, while spending less, have positive attitudes to luxury and offer potential for brands, Bain said.
Shoppers from the Middle East and China shell out the most on luxury, spending annually an average of 1,400 euros and 1,250 euros, respectively, Bain estimates. That compares with an average spend of 400 euros by North American luxury consumers and 450 euros by their western European counterparts, and together they make up more than half the client base.
Chinese shoppers are increasingly diverse and nuanced, some having a high degree of sophistication and experience, and others being luxury novices, Bain said. Italians remain eager brand advocates even though they and their western European peers are spending less on luxury, the researcher said.
Bain identified seven types of luxury customer, of which “conservative” was the most common, particularly in mature markets. Those consumers, who tend to be aged about 50, spend an average of about 1,000 euros on luxury annually, Bain estimates. They like to shop in multibrand stores, feel more comfortable buying big brands and are very price sensitive, Bain said.
“Luxury manufacturers need an immediate upgrade to their consumer strategies to recognize and react to this growing diversity, else risk falling behind,” Bain partner Claudia D’Arpizio who led the study said in a statement.
To contact the editor responsible for this story: Celeste Perri at firstname.lastname@example.org