INTERNATIONAL. Luxury goods companies still have a great opportunity to appeal to consumers in emerging markets despite the global financial crisis, according to several speakers at the 2008 Luxury Briefing Conference.
The event, held yesterday in London, also touched on the key role of travel in catering to the emerging luxury consumer. Research presented by Accenture Managing Partner Richard Wildman had found that up to 80% of purchases by Asians were made when they go abroad, and as much as 30% of developed market sales (e.g. in Europe) is attributed to emerging market customers as they travel.
Wildman also pointed out that the BRIC markets (Brazil, Russia, India and China) would continue to grow in the next few years, albeit more slowly than before.
Assessing the potential of the market, he said total luxury goods sales were estimated to be around $250 billion per annum globally, with the emerging markets driving the bulk of sales in recent years, averaging around 23% from 2003 to 2008; in comparison, developed markets were flat or declining. By 2010, some 40% of total luxury sales could be generated by BRIC markets.
Wildman’s speech focused on a “two-speed world” inwhich global luxury brands were now balancing the contrasting demands of a downturn at home and rapid growth abroad – noting how one new retail outlet was opening every minute in China.
Each emerging market was unique and a deep understanding of consumer preferences, lifestyle and culture, as well as an ability to sense how the market will develop, would guide luxury brands’ expansion and brand building, he added.
Many speakers emphasised the importance of customer service. In a wonderfully optimistic speech, Villa Moda Owner Sheikh Majed Al-Sabah set out his vision for his luxury department stores, which are all based in the Middle East and cater to local customers. His multi-brand stores successfully combine local and contemporary retail design, drawn from the local souks and the best (non-retail) design talent in the world. His shops offer a concierge style of service, where customers can have gifts delivered to friends and family or alterations made to designer clothes – even those purchased in Europe.
Several speakers made it clear that consumers in emerging markets were savvy and knowledgeable and were already beginning to demand customer service standards at least as good as – or even superior to – current international standards.
The audience saw two telling videos: one showed an ordinary-looking Chinese man waxing lyrical about his collection of ten watches. Another video filmed a Russian woman discussing the merits, heritage and image of a certain high-end Swiss watch brand versus the diamond-set watches produced by French luxury jewellery houses.
The watch segment was mentioned by several speakers as a key category among Asian customers, many of whom are male and have a desire to demonstrate their wealth and status.
Luxury brand “fatigue”
Sir David Tang, the flamboyant Asian businessman and founder of Shanghai Tang, and Claire Kent, a former Head of Luxury Research at Morgan Stanley, both spoke of luxury brand “fatigue”.
During his extensive travels Tang had observed that shopping malls were beginning to look the same the world over, offering the same luxury brands. “It’s all getting very boring,” he said. Acknowledging that newly affluent Chinese “want to blow their money”, he urged a return among brand owners to creativity, personalisation and craftsmanship in new product development.
Kent predicted the imminent “bursting of the It bag bubble” and said that brands whose strategy relied on customers trading up would suffer in the downturn.
Based on her insights, she provided a list of six opportunities in the luxury market: jewellery; men’s shoes and men’s grooming; eco luxury; African culture (thanks to US President-elect Barack Obama); and high-end, healthy food for consumers “on the go”.
*A full report on the 2008 Luxury Briefing Conference revealing the latest facts, figures and trends in the luxury goods industry will be published on The Moodie Report website next week.
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