The number of luxury consumers worldwide has more than tripled over the past 20 years, from roughly 90 million consumers in 1995 to 330 million at the end of 2013, according to an extensive study of 10,000 luxury consumers, conducted by Bain & Company 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 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% (180 million) shift between luxury and merely “premium” purchases, including products such as designer second lines, beauty products and small accessories. This group comprises approximately 10% of global spending, purchasing an average of €150 per capita annually. The remaining 45% (150 million) represent "true luxury consumers" who consistently dedicate part of their discretionary spending to personal luxury products of various natures, usage occasions and price points, and make up roughly 90% of global spending, purchasing an average of €1,250 per capita annually. Additionally, the top 10% of spenders (15 million) within this group capture over half of its spending.
The 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 "Seven 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:
- The Omnivore (25% 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 watch 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-2 and Tier-3 cities.
- The Opinionated (20% 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 hometowns, and are influenced by online information and social networks. They dominate China’s Tier-1 cities and are also prevalent in Western Europe and the United States.
- The Investor (13% 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 that 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.
- The Hedonist (12% 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 a purchase. This is the only cluster represented across all nationalities and generations.
- The Conservative (16% 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.
- The Disillusioned (9% 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 shop online when they can. The segment is dominated by women. They are found in the United States, Europe and Japan.
- The Wannabe (5% 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 the reflects the enthusiasm of Chinese shoppers and other emerging-market consumers to the mature caution of consumers in 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 gifts (vs. an average of 40% at global level).
The study confirms that the luxury market is still in the hands of baby boomers (45% 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 email@example.com or +1 646 562 8102. Members of the Italian media should contact Valeria Falcone at email: firstname.lastname@example.org or +39.06.85250.350.