Havas Media releases a study on Luxury Brands

LuxHub focus: Luxury super brands still dominate for luxury consumers, with 64% preferring them to niche luxury brands

• The average personal spend on luxury goods was estimated £21,126 last year, or 21% of household income, but considerable differences are seen across countries.
• Net spend on luxury goods is expected to grow by 7% in 2015.
• Over half of luxury goods (52%) are purchased at discounted prices; the US has the highest amount of discounting.
• Just over half of respondents (57%) feel luxury brands should engage with social media; however, among Millennials, 72% hold this belief.

These results form part of a global survey from LuxHub, Havas Media Group’s newly launched luxury consulting boutique. The analysis took in the views of the notoriously hard to reach affluent luxury goods customers, all within the top 10% of the household income bracket in each of the USA, UK, China, Russia, France, Italy, Germany, Spain and Saudi Arabia/UAE markets. The survey looked at luxury trends for personal spend across retail, travel, home furnishings, auto, jewellery and art and analysed 40 of the top global brands.

Luxury ‘super brands’ still have the edge

Global luxury power brands are preferred to niche brands by 64% of respondents. Geographical differences show that in China 83% prefer super brands (the most widely recognised brands being Louis Vuitton and Chanel), and in the US 73% prefer them (top brands being Mercedes and Chanel) vs. only 43% in Spain.
Quality matters more to people in the UK vs. other markets

The swings in both brand ranking and preference by country can be explained by differing cultural definitions of luxury. UK luxury shoppers, with an average spend of £28,243, defined luxury in terms of quality (78% vs. a global average of 63%) and personal reward (44% vs. a global average of 26%). When it comes to luxury products conferring social status, this was important for only 20% in the UK vs. an average of 37% across the markets.

Germany, Italy and Spain were the only three countries out of the nine to define luxury as exclusivity over quality.  Overall luxury perceptions are driven by quality, exclusivity and the desire to express taste and style.

Average personal spend on personal luxury across the 9 markets is £21,126.

The affluent luxury consumer spent an average of £21,126 on luxury in the past year. The highest spend was seen in Russia at £36,078, UK at £28,243 and France third, spending on average £27,402 per year. 

Among men and women combined, the most popular category for luxury shoppers is clothing & accessories purchased by 89% last year, with an average spend of £1,625. This is followed by travel, purchased by 87% with an average spend of £3,791. While only 30% purchased an automobile, average spend among those who did buy one was £27,630.
Amount spent on the categories studied shows significant differences according to the country. For example, the average spend on cars is £27,629 whereas in France it is just over £10,000 higher at £38,492.  The average spend on travel is as high as £6,356 in the UK and as low as £2,121 in China.

Luxury spend to rise by 7%. Supply side – expensive products that people want - is a key driver for growth.

Overall growth rate forecast for the industry of 7% (33% expecting to spend 28% more, 8% expect to spend 36% less and 59% expect to spend the same amount as they did last year). This growth of luxury is in line with the growth projection of GDP for China in 2015 (7%) and non-oil GDP growth in Saudi Arabia (5-6%) but considerably higher than the low single digit GDP projections in Europe and the UK.

When looking at these results however, some very positive indicators can be found. For example, amongst the 33% who expect to spend more on luxury, 44% say this is largely due to seeing more items that they want – demonstrating that the supply side of luxury is a key driver for the sector’s share of wallet.  The leading driver is an expectation of increased disposable income (49%).

Shopping in physical stores is still the favoured method for shopping for luxury goods for 49% of respondents, while 24% shop mainly online. Statistics show that the move by a quarter of the respondents to shop online is not being matched by competency from the brands. Over half of respondents (57%) felt that luxury brands should engage with social media, mainly because they feel that this is how brands in general are communicating nowadays. 

Millennials are more comfortable engaging with and buying luxury goods in the digital sphere. Among Millennial consumers aged 20-34, 72% felt luxury brands should engage with social media, versus 51% of those 35 to 54 years of age.  29% of Millennials prefer to shop for luxury online versus 19% of the 35 to 54 year age group, and only 44% of millennials prefer to shop for luxury in physical stores, versus 50% of those aged 35 to 54.

Discounting trend highest in US, Germany

Over half of those surveyed revealed that they purchase luxury goods at a discount rate, including sales and outlets. The UK luxury shopper shows the highest percentage of full price purchase with 55% purchasing at full price, equal with niche brand loving Spain. This compares to the US luxury shoppers who purchase an average of 67% of their luxury goods at a discount.

Tammy Smulders, LuxHub Global Executive Director who oversaw this research comments, “This discounting culture shown in the survey is one that interests many of our clients. The fact is, there are simply more luxury products available in the market today. As a reaction to the recent economic challenges, we saw many luxury brands introducing accessible diffusion lines with different styles and price points, creating something for everyone. In addition, the trend of introducing new lines came as a reaction to the globalisation of luxury and the need for more accessible entry price points for the emerging luxury consumer.

The discounting culture came into common practice, and now the global trend for discounting is here to stay.  Despite this, our survey also points to an optimistic future for luxury with a projected increase in spend of 7 percent. It is our view that this discounting culture, coupled with more sophisticated targeting, data management through CRM and storytelling is actually stimulating shopping and there are a wealth of opportunities out there for agile, smart luxury brand marketers."

Isabelle Harvie-Watt, Global CEO LuxHub says: "This global survey highlights differences between cultures, which show how important is to personalise the shopping experience for people in their own countries. What is now critical is the ability to implement culturally relevant strategies that also work in the actual locations where customers engage with the brand. For example, today more than half of the luxury purchases from the Chinese consumers are made outside of China, mostly in Europe and USA. This means luxury brands need to create culturally tailored content, services and experiences that can be implemented anywhere in the world ."