Luxury brands had been experiencing a bit of a rollercoaster in sales with the unstable picture in Europe and the United States, but that’s expected to change in the very near future.
American and Chinese shoppers, in particular, are projected to spend a great deal more on luxury goods this year overall. Achieving these earnings may require a slightly different approach from luxury brands, but analysts paint a positive picture of the industry in general.
More Luxury Spending in a More Stable World
Although they clearly state they don’t expect gains equivalent to those from 2010 to 2014, when the United States was recovering from recession and Chinese nationals were on a luxury goods kick, analysts are optimistic about long term future growth for the luxury segment. This is, in part, due to tax cuts to the wealthiest Americans promised by President Donald Trump, but an overall lower perception of terrorism risks in Europe is also pushing the market upward.
“This is the business of happiness,” business analyst Mario Ortelli explained in the Wall Street Journal. “You buy these kinds of products when things are stable.” The S&P Luxury Index has already risen 4.5 percent this year and luxury brands across the board are reporting dramatic upticks in net profit. It’s certainly a happy time for them.
Changes in Chinese Customs
Although most of the American market for luxury goods will be coming from the same old sources, including tourism shopping, domestic shopping and eCommerce, the Chinese scene is a different story. Seeking to crack down on corruption among the country’s elite, the Chinese customs authorities have begun seizing luxury goods purchased abroad. Even customers who aren’t purchasing goods in Europe, however, are becoming more discerning and are moving the goalposts for luxury brands.
This is going to require that luxury brands not only produce high quality luxury goods, but that they bring in a more accessible line for customers who may have just entered the middle class. LVMH Moet Hennessy Louis Vuitton, for example, has created buzz among the richest in China with high-fashion label Givenchy. The company is also offering Louis Vuitton-branded wares as an “affordable luxury” brand.