RETAIL

Inside the $85billion US Luxury Goods Market: Slow Growth, but Still Leading the Pack

by

Fflur Roberts

|

This is the featured image caption
Credit: This is the featured image credit
The US luxury industry has seen another year of slow growth. Euromonitor’s Fflur Roberts reveals the market changes and predictions for the world’s leading luxury goods market. The US luxury…

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

The US luxury industry has seen another year of slow growth. Euromonitor’s Fflur Roberts reveals the market changes and predictions for the world’s leading luxury goods market.

The US luxury goods market saw another year of low single-digit value growth in 2016 on the back of lower sales from wealthy international tourists, as a result of the strong US dollar, combined with weak demand from domestic consumers who have cut back on discretionary spending. The November presidential election further impacted economic uncertainty and had a knock effect for sales of luxury goods.

The US is nevertheless the undisputed king of luxury goods with the lion’s share of the global industry. Currently worth US$85billion, the US luxury goods market is expected to increase by a further US$18.5billion by 2021. Should the market achieve growth predictions, it will have expanded by almost 52% percent in just 10 years.

Modest Improvement in the US Economy

The US economy overall is improving modestly. Real GDP should increase by just under 2% in 2017 after gains of 1.6% in 2016. A buoyant housing market and steady gains in private final consumption are the main drivers. Business investment is growing slowly but could pick up, induced by higher infrastructure spending and tax cuts. Inflation was 1.3% in 2016 and prices will rise by 2.6% in 2017. The central bank is expected to gradually push up interest rates in 2017-2019.

According to the World Economic Forum, income inequality was named as one of the most important issue facing the global economy in 2017. With the US already one of the most unequal countries in the OECD and the highest amongst G7 economies— headed by a President that has been criticised for his proposed economic policies that are anticipated to aggravate this situation – concerns over the state of income inequality in US cities is rising.

“Baby boomers” – or individuals born between 1946 and 1964 – are a key consumer segment in terms of market size and capacity for luxury spending. Indeed, in 2016, those aged 50-54 accounted for the largest proportion of consumers with an annual gross income over US$150,000. By 2030, Americans aged 65+ will have become the largest group amongst the top income earners (as “Baby boomers” continue to age), requiring from companies to adjust their offerings to meet the evolving demands of this important consumer group;

Major shifts to digital

The US luxury goods market is seeing a major shift from in-store purchases to digital purchases. The luxury goods market saw retail value growth of 24% over the 2011–2016 period; it may come as no surprise that online luxury sales recorded much faster growth, at 112%.

The growth of digital commerce is largely supported by the increase of digitally-savvy consumers. According to Euromonitor International’s Digital Consumer data, the number of internet users reached 76% of the US population in 2016, from less than 70% in 2011. As more consumers research, shop and buy products online, a number of key trends are emerging.

Store-based retailers are adapting to the digital age

With the growing number of digital consumers, luxury goods brands and retailers are investing largely in building their presence in internet retailing and improving websites to provide a seamless shopping experience for consumers. Luxury department stores are especially ahead with their digital strategies. Leading department store chains, such as Barneys New York and Nordstrom, have taken advantage of their retail presence and improved online services by offering same-day deliveries, “buy online/pick-up in store” capabilities and easy exchange/return policies for products sold through their website in select US locations. These features provide improved convenience to online shoppers, alleviating stresses associated with unpredictable delivery times.

Millennials are a key demographic for online luxury sales

According to our latest research, roughly 23% of the total US population are millennials and they are a key demographic for online sales. Millennials are the first digital natives and tend to spend hours browsing fashion blogs and social media to learn about the latest fashion trends and styles. They see online retailing as easy and convenient as they are able to go directly to retailers’ websites to purchase products with styles they found on fashion blogs and/or social media.

Mobile commerce a must for luxury goods retailers

Consumers are increasingly connecting to the internet through their mobile phones. According to Euromonitor International’s Digital Consumer research, 97% of mobile telephone subscriptions include internet access in 2016. With the increasing number of mobile phone users, luxury brands and retailers will continue to experience how mobile technology can improve customer experience through mobile apps, loyalty, communication and promotion. Moving forward, luxury brands will need to accommodate consumers’ on-the-go lifestyles, making mobile commerce a must-have channel for apparel and footwear retailers now and in the future.

Fflur Roberts
Fflur Roberts

Head of Global Luxury Goods Research, Euromonitor

Fflur Roberts manages the research programme for the global luxury goods industry at Euromonitor International, which she joined in June 2000. In her current post, Fflur Roberts has direct responsibility for the content and quality of Euromonitor’s luxury goods research, which provides strategic analysis of the global market and in-depth coverage of the industry in 32 countries worldwide. With Fflur at the helm of Euromonitor’s luxury goods research the company was awarded Luxury Researcher of the Year 2016 by global media company Luxury Daily and in 2017 was on the Luxury Women to Watch list. Fflur has written extensively in the field of business and luxury and in her time at Euromonitor has authored numerous global strategic reports and is often referenced in the international press on the luxury business and has addressed luxury leaders at many leading global luxury conferences around the world. Presently Fflur is co-editing a chapter on the USA and European luxury market for The Oxford Handbook of Luxury Business (Oxford University Press, forthcoming).

RETAIL

Inside the $85billion US Luxury Goods Market: Slow Growth, but Still Leading the Pack

by

Fflur Roberts

|

This is the featured image caption
Credit : This is the featured image credit
The US luxury industry has seen another year of slow growth. Euromonitor’s Fflur Roberts reveals the market changes and predictions for the world’s leading luxury goods market. The US luxury…

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

The US luxury industry has seen another year of slow growth. Euromonitor’s Fflur Roberts reveals the market changes and predictions for the world’s leading luxury goods market.

The US luxury goods market saw another year of low single-digit value growth in 2016 on the back of lower sales from wealthy international tourists, as a result of the strong US dollar, combined with weak demand from domestic consumers who have cut back on discretionary spending. The November presidential election further impacted economic uncertainty and had a knock effect for sales of luxury goods.

The US is nevertheless the undisputed king of luxury goods with the lion’s share of the global industry. Currently worth US$85billion, the US luxury goods market is expected to increase by a further US$18.5billion by 2021. Should the market achieve growth predictions, it will have expanded by almost 52% percent in just 10 years.

Modest Improvement in the US Economy

The US economy overall is improving modestly. Real GDP should increase by just under 2% in 2017 after gains of 1.6% in 2016. A buoyant housing market and steady gains in private final consumption are the main drivers. Business investment is growing slowly but could pick up, induced by higher infrastructure spending and tax cuts. Inflation was 1.3% in 2016 and prices will rise by 2.6% in 2017. The central bank is expected to gradually push up interest rates in 2017-2019.

According to the World Economic Forum, income inequality was named as one of the most important issue facing the global economy in 2017. With the US already one of the most unequal countries in the OECD and the highest amongst G7 economies— headed by a President that has been criticised for his proposed economic policies that are anticipated to aggravate this situation – concerns over the state of income inequality in US cities is rising.

“Baby boomers” – or individuals born between 1946 and 1964 – are a key consumer segment in terms of market size and capacity for luxury spending. Indeed, in 2016, those aged 50-54 accounted for the largest proportion of consumers with an annual gross income over US$150,000. By 2030, Americans aged 65+ will have become the largest group amongst the top income earners (as “Baby boomers” continue to age), requiring from companies to adjust their offerings to meet the evolving demands of this important consumer group;

Major shifts to digital

The US luxury goods market is seeing a major shift from in-store purchases to digital purchases. The luxury goods market saw retail value growth of 24% over the 2011–2016 period; it may come as no surprise that online luxury sales recorded much faster growth, at 112%.

The growth of digital commerce is largely supported by the increase of digitally-savvy consumers. According to Euromonitor International’s Digital Consumer data, the number of internet users reached 76% of the US population in 2016, from less than 70% in 2011. As more consumers research, shop and buy products online, a number of key trends are emerging.

Store-based retailers are adapting to the digital age

With the growing number of digital consumers, luxury goods brands and retailers are investing largely in building their presence in internet retailing and improving websites to provide a seamless shopping experience for consumers. Luxury department stores are especially ahead with their digital strategies. Leading department store chains, such as Barneys New York and Nordstrom, have taken advantage of their retail presence and improved online services by offering same-day deliveries, “buy online/pick-up in store” capabilities and easy exchange/return policies for products sold through their website in select US locations. These features provide improved convenience to online shoppers, alleviating stresses associated with unpredictable delivery times.

Millennials are a key demographic for online luxury sales

According to our latest research, roughly 23% of the total US population are millennials and they are a key demographic for online sales. Millennials are the first digital natives and tend to spend hours browsing fashion blogs and social media to learn about the latest fashion trends and styles. They see online retailing as easy and convenient as they are able to go directly to retailers’ websites to purchase products with styles they found on fashion blogs and/or social media.

Mobile commerce a must for luxury goods retailers

Consumers are increasingly connecting to the internet through their mobile phones. According to Euromonitor International’s Digital Consumer research, 97% of mobile telephone subscriptions include internet access in 2016. With the increasing number of mobile phone users, luxury brands and retailers will continue to experience how mobile technology can improve customer experience through mobile apps, loyalty, communication and promotion. Moving forward, luxury brands will need to accommodate consumers’ on-the-go lifestyles, making mobile commerce a must-have channel for apparel and footwear retailers now and in the future.

Fflur Roberts
Fflur Roberts

Head of Global Luxury Goods Research, Euromonitor

Fflur Roberts manages the research programme for the global luxury goods industry at Euromonitor International, which she joined in June 2000. In her current post, Fflur Roberts has direct responsibility for the content and quality of Euromonitor’s luxury goods research, which provides strategic analysis of the global market and in-depth coverage of the industry in 32 countries worldwide. With Fflur at the helm of Euromonitor’s luxury goods research the company was awarded Luxury Researcher of the Year 2016 by global media company Luxury Daily and in 2017 was on the Luxury Women to Watch list. Fflur has written extensively in the field of business and luxury and in her time at Euromonitor has authored numerous global strategic reports and is often referenced in the international press on the luxury business and has addressed luxury leaders at many leading global luxury conferences around the world. Presently Fflur is co-editing a chapter on the USA and European luxury market for The Oxford Handbook of Luxury Business (Oxford University Press, forthcoming).

Related articles

RETAIL

Shoppers Want More Personalised Technology In-Stores and Online

RETAIL

Polarisation Strikes Back for the Luxury Industry: Bain

RETAIL

A Neo-Westward Movement: Luxury’s Geo-Expansion In China