One often reads about how more and more commercial transactions take place online. Even the fine art market has digital auctions. But it appears that most purchasers still want to be in a store when they make the deal, a report says. The study paints a broadly positive picture of the luxury sector worldwide.
(Editor’s note: This Luxury Institute report was prepared before the virus outbreak in China, bringing with it disruptions and closures. North Asia has become an important driver of the global luxury market in recent years so it will be interesting to see what the impact will be.)
A survey of more than 3,100 affluent consumers from nine countries shows that the majority of them still want to buy their goods and services in a store rather than online, suggesting that the digital revolution hasn’t fully materialised.
The findings come from the New York-based Luxury Institute, in its State of the Luxury Industry 2020 report. Minimum annual income for US respondents was $150,000, and those from other countries represent similarly exclusive percentiles of income distribution in local currency within the top 10 per cent of household incomes.
The report said the market is broadly buoyant, helped by positive macroeconomic conditions.
Stores remain the dominant retail channel for luxury goods. Affluent consumers report more than two-thirds (68 per cent) of purchases taking place in-store, and those in France (77 per cent) and Canada (76 per cent) are most likely to buy luxury goods at a bricks-and-mortar location. Regarding preferred channels for making purchases, 62 per cent of consumers worldwide indicate an in-store preference, 14 per cent prefer online, and nearly one in four (24 per cent) have no preference.
“Barring any black swan events, the state of the luxury goods and services industry remains strong for 2020,” Luxury Institute CEO, Milton Pedraza, said. Asked by this news service about the Chinese virus outbreak in recent days and the disruptions to travel, he said: "There is no question that the coronavirus outbreak in China is a `black swan' event. How big of an event remains to be seen, but it will definitely dampen the luxury goods and services industry at least for the first half of 2020. We already see some effects on LVMH results." A report on 28 January by Reuters stated that Chinese spending could in normal times be 50 per cent higher during the Chinese New Year holiday than in a regular month.
The wording of the LI report was generally upbeat. “Regardless of the channel, the macro environment is highly hospitable for luxury. However, for brands to truly capitalise on the abundant opportunity they need to master an understanding of their customers’ stated and unstated needs and desires, and execute brilliantly, treating each client as an individual human being. This is what we mean by omni-personal relationships. That skill is in high demand, yet, in low supply right now in luxury. Brands that aspire to high performance in 2020 need to master the skills with extreme urgency.”
Consumers in the UK (20 per cent), Italy (18 per cent) and US (16 per cent) show the highest online preference. Those in South Korea (82 per cent) most widely prefer the in-store experience followed by in-store preference shoppers in France (71 per cent) and China (70 per cent), the report said.
Among luxury goods, the categories showing the highest proportions of consumers spending more are beauty and skincare (48 per cent), fashion apparel (47 per cent), automotive (45 per cent), jewellery and watches (44 per cent), and shoes (44 per cent). Categories in which consumers are most disposed to be cutting back are art (9 per cent), wine and spirits (7 per cent), and handbags (7 per cent). In each of these categories, however, the propensity for higher spending is far greater than the likelihood of spending less.
Top reasons offered by consumers for purchasing luxury goods are that they last longer and keep their value (45 per cent), and they are a reward for hard-earned success (42 per cent). High concentrations of consumers in Italy (51 per cent), China (46 per cent), France (44 per cent), and Germany (42 per cent) say that they like to surround themselves with “beautiful, exclusive, and unique products.”