Heterogeneous mix of 330 million consumers purchasing €217 billion in luxury goods globally, finds far-reaching new Bain & Company study



Changing Generational Shifts and Unprecedented Fragmentation Form Rise of the ‘7 New Faces of the Global Luxury Consumer'

Milan, January 14, 2014 – The number of luxury consumers worldwide has more than tripled over the past twenty years, from roughly 90 million consumers in 1995 to 330 million at the end of 2013; this according to Bain & Company, the leading advisor to the worldwide luxury goods industry, in an extensive study of 10,000 luxury consumers, conducted in collaboration with Redburn Partners, Europe's largest independent equities broker, and Millward Brown, a leading consumer  research agency.  Their report, "Lens on the Worldwide Luxury Consumer," was released today at a press conference in Milan.

According to the report, a net total of 10 million additional consumers yearly enter the luxury market to reach an estimated 400 million luxury consumers worldwide by 2020, and an estimated 500 million luxury consumers by 2030.   In its analysis of approximately 10,000 luxury consumers, the report finds significant differences within the global luxury market and its consumer base, which is shifting from its historically-homogenous base of affluent consumers worldwide to a broader and highly heterogeneous class of luxury shoppers.  "The race is on to capture an explosion in worldwide luxury consumer growth," said Claudia D'Arpizio, Bain partner in Milan and lead author of the report.  "But the luxury consumer of the future will become increasingly heterogeneous and luxury brands and operators need an immediate upgrade to their consumer strategies to recognize and react to this growing diversity, else risk falling behind."

Within luxury's current 330 million consumer base, 55 percent (180 million) shift between luxury and merely "premium" purchases, including products such as designer 2nd lines, beauty products and small accessories.  This group comprises approximately 10 percent of global spending purchasing an average of €150 per capita annually.  The remaining 45 percent (150 million) represent ‘true luxury consumers' who consistently dedicate part of their discretionary spending to personal luxury products of various nature, usage occasions and price point and make up roughly 90 percent of global spending, purchasing an average of €1,250 per capita annually.  Additionally, the top 10 percent spenders (15 million) within this group capture over half of its spending. 

Key to the report is its focus on the shift in the heterogeneous global picture for the new luxury consumer and what Bain defines as the ‘7 New Faces of the Global Luxury Consumer,' a comprehensive profiling of seven luxury consumer segments, displaying a divergence of tastes and buying behaviors, while straddling national and generational boundaries:

  1. The Omnivore (25 percent of spending, at an average €2,350 per year): These shoppers are typically new entrants to luxury. On average, they are younger than the other clusters and have a high willingness to experiment with products and brands. They are primarily women. They tend to purchase high ticket items, focusing on the jewelry and watches categories. They prefer to shop in brands' own stores. Many of their purchases are made while travelling. They prefer aspirational brands, and while they have high advocacy for luxury brands, their loyalty level is relatively low. These attitudes are common among Chinese consumers from Tier Two and Three cities.
  2. The Opinionated (20 percent of spending, at an average €1,750 per year): These are highly educated Generation X and Y shoppers. They favor leather goods and watches, and are highly aware of the differences between brands. They shop often within their hometown, and are influenced by online information, and social networks. They dominate China's Tier One cities and are also prevalent in Western Europe and the United States.
  3. The Investor (13 percent of spending, at an average €1,450 per year): These shoppers pay the greatest attention to the quality and durability of luxury materials. They favor long-lasting leather goods and watches which can be handed down from generation to generation. They carefully evaluate luxury purchases with research and referrals from other consumers. The segment is skewed to shoppers from Japan, the Middle East and mature markets where discretionary spending is more cautiously allocated.
  4. The Hedonist (12 percent of spending, at an average €1,100 per year): These shoppers are infatuated with luxury goods and the luxury shopping experience. They have a high affinity for brand logos and much of their purchasing is within accessories categories. They are most influenced by advertising. Despite their interest in luxury for show, they exhibit the lowest levels of advocacy for brands, often due to cognitive dissonance sometimes following purchase. This is the only cluster represented across all nationalities and generations.
  5. The Conservative (16 percent of spending, at an average €1,000 per year): These are mature and mainstream shoppers, both men and women. They favor watches and jewelry from big-name brands. They shop in multi-brand stores, and are influenced primarily by what friends and family recommend. They are mainly in mature markets, but also in China.
  6. The Disillusioned (nine percent of spending, at an average €800 per year): These are mostly baby boomer shoppers who suffer from "luxury fatigue." They purchase leather goods and beauty products. They look for products that last more than one season, but are unswayed by brand messaging or advertising. They tend to shop infrequently, and like shopping online when they can. The segment is dominated by women. They are found in the United States, Europe, and Japan.
  7. The Wannabe (five percent of spending, at an average €500 per year): These predominantly female shoppers look for entry-level items in beauty and shoes, valuing affordability, and are highly likely to mix and match outside of the luxury spectrum. They are impulse shoppers who demonstrate little brand loyalty, primarily influenced by what their friends say and what they see in fashion publications. They come from the global middle class, especially in the United States, Western Europe, and new consumers in Eastern Europe.

The report finds that while these segments may be concentrated in specific geographies, there are shoppers from every segment in every major global luxury market.  There is a global cycle from the enthusiasm of Chinese and other emerging market consumers to the mature caution of markets such as the United States and Western Europe to the detachment of older shoppers and consumers in Japan.  But within this cycle there are significant country-level differences.  Chinese shoppers are increasingly diverse and nuanced, ranging from a high degree of sophistication and luxury experience to luxury novices.  Overall, Chinese consumers are the most "generous" nationality, with about half of shopping for gifting (versus an average of 40 percent at global level).

The study confirms that the luxury market is still in the hands of baby boomers (45 percent of luxury consumption worldwide), whose behaviors and preferences are quite different from the boomers' children (Generation Y).  Younger generations, consumers of the future, continue to maintain positive attitudes to luxury and present the most disparate profiles: from newbies to experts, from classic to edgy, from enthusiast to detractors; the fragmentation in luxury tastes of this group makes the consumer picture ever more complex to handle.

"Enthusiasm may erode over time, but brands can either throw up their hands or see this as an opportunity to re-energize shoppers," concluded D'Arpizio.  "In order to do so effectively, they must understand the full range of heterogeneous luxury consumer segmentations, execute relentlessly on reaching the segments that have the highest potential, and invest in capturing the attention and imagination of new potential shoppers who could be buying luxury today but who aren't, while understanding how to delight and truly engage their current consumer base."

For a copy of Bain's "Lens on the Worldwide Luxury Consumer" or to schedule an interview with Claudia D'Arpizio or study co-author Federica Levato, please contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102; Members of the Italian media should contact Christina Brignola at email: christina.brignola@bain.com or +39.06.85250.350.


About Bain & Company, Inc.

Bain & Company, a leading global business consulting firm, serves clients on issues of strategy, operations, technology, organization and mergers and acquisitions. The firm was founded in 1973 on the principle that Bain consultants must measure their success by their clients' financial results. Bain clients have outperformed the stock market 4 to 1. With 50 offices in 32 countries, Bain has worked with over 4,600 major multinational, private equity and other corporations across every economic sector. Bain has analyzed the market and financial performance of more than 230 of the world’s leading luxury goods companies and brands. The database of companies, known as the ‘Luxury Goods Worldwide Market Observatory,’ has become a leading and much studied source for the international luxury goods industry. Bain publishes its annual findings in its ‘Luxury Goods Worldwide Market Study,’ which was first published in 2000. For more information visit: www.bain.com. Follow us on Twitter @BainAlerts.

About Redburn Partners LLP

Founded in 2003, Redburn is Europe's largest independent equities broker. It is focused on providing institutional clients conflict-free research and high-touch execution across pan-European equity markets. It has 151 staff and covers 23 pan-European sectors, and offers leading technical and systematic research, and industry and company access services. Redburn was voted #1 in the Greenwich Associates Survey 2013 of UK institutions for ‘Greatest Knowledge of Companies and Industries’, ‘Quality of Analyst Service, 'Most Creative Ideas or Themes' and ‘Most Trusted Research’, and #1, globally, in the 2013 Institutional Investor Survey for execution cost-effectiveness. Majority owned by its Partners and employees, Redburn has offices in London, New York and San Francisco.

About Millward Brown

Millward Brown is a leading global research agency specializing in advertising, marketing communications, media and brand equity research. It has been a true pioneer in brand tracking since 1973, we have conducted more than 18,000 brand tracking studies. In addition, it has tested more than 80,000 campaign in 86 countries across 5 continents with its Link™ platform, and maintains Firefly, the world's largest qualitative network for brand research.