The luxury goods market is recovering from a fall caused by the global recession. However, due to changing demographics and enduring consumer vigilance, upscale sellers will be facing a hard slog.
According to the consulting firm Brain & Company, after an agonizing eight-percent decline last year, a growth of four percent is expected in the global luxury goods industry sales this year to158 million euros (S$272 million). The Brain’s Luxury Goods Worldwide Market Study said that much of the growth is expected in the first half of the year, with slower improvement returning in the second half.
Retail sales in the luxury segment in the US last month climbed 15.5 percent year-over-year, following a 22.7 percent increase in March, fuelled by comparison with weak sales in 2009, according to MasterCard SpendingPulse.
Upscale retailer Saks recovered from the previous loss, with sales up 6.1 percent. It was a similar story at rival Tiffany, with a 17-percent increase in global sales in the most recent quarter and an increased profit nearly fourfold. A reported strong growth in sales in Q1 by French luxury giants Hermes and LVMH, increased largely by the rise in Asia, excluding Japan, as buyers snap up watches and other expensive goods after months of economic gloom.
However, analysts warned the luxury sector that it is too early to celebrate. In the US market, the consulting firm Unity Marketing reported that much of the growth is coming from the top two percent of Americans with incomes of US$250,000 (S$351,200) annually. In the past quarter this group increased spending by 22.6 percent.
From the fourth quarter of 2009 to first quarter of 2010, the “aspirational affluents” with incomes between US$100,000 and US$249,999 dollars increased their spending by only 1.9 percent, according to the survey.