Drivers for The Luxury Market
20 February 2013
When it comes to the Luxury market, we are talking of expensive products purchased from customers with a lot of money. How much money? Private bankers and available statistics suggest to assume the family savings as a main indicator. If you have savings for one million dollar, you are supposed to be rich and probably you will buy expensive furniture, lighting, appliances, interior decoration. Inside this market end, design oriented products and classic gorgeous items compete.
THE POTENTIAL LUXURY MARKET
According to available data, global private financial wealth grew by a poor 1.9% in 2011 after a more robust average growth of 8% recorded in the previous two years. North America, Western Europe and Japan all lost private wealth, while the rapidly developing markets of Asia Pacific and Latin America could sustain the double-digit growth experienced in recent years. The wealth of the ultra-rich (households with more than 100 million USD) is growing, but it’s more interesting to see how many rich people there are. Although the number of millionaire households decreased by a combined 182,000 in the United States and Japan in 2011, globally the number grew by 175,000 as many families crossed the millionaire threshold in fast growing economies, particularly China and India. Total number of millionaire households reached 12.6 million by the end of 2011. The US still had the largest number of millionaire households (5.1 million), followed by Japan (1.6 million) and China (1.4 million). In Europe, Switzerland shows the highest ratio among millionaire households and total number of inhabitants (9.5%). Only Singapore (17%), Qatar (14%), and Kuwait (12%) show a higher ratio. In absolute terms, Italy occupies the 7th position in the world ranking of millionaires (about 270,000).
ESTABLISHING A RETAIL NETWORK
At least every three years a millionaire family buys a piece of furniture. It means a yearly potential market of 1,5-2,0 million customers in the US, or some 90,000 in Italy. 15 countries (7 of which in Europe) represent about 85%-90% of the total number of worldwide millionaires. Having said this, we can assume that every company addressing the luxury market and aiming to be a worldwide player will need to establish a retail network of at least 30 flagship stores and some 600 first class retailers. But warning: the appeal of buying luxury furniture is declining in many markets. Rich people want to be cocooned and it’s not an easy job.
“YOU CAN SELL MERCEDES ONLINE”
You trust in the Internet for each purchase whose characteristics are clearly known and described. Also expensive items: some happy few buy expensive cars or Italian fashion… but still the online sale of luxury furniture is at its early steps. You can buy unusual loveseats (2000 Eur) or a Kartell item (80 Eur) at www.bouf.com (15,000 items) or some Vitra, Roset, Flos products at www.heals.co.uk. Other international brands that are frequently traded online include: Artemide, Herman Miller, Conran, Foscarini, La Palma, Magis, Swedese, Varier, Emu, Kundalini, Muuto, Skitsch, MDF, Zanotta. Products can be jointly promoted by manufacturers and designers (Philippe Starck, Tom Dixon, Orla Kiely, John Reeves and Matthew Hilton among the others). In China, Hui She Shang (The Luxury Club) offers beauty and cosmetics, watches and jewellery, fashion accessories, wines and spirits, and other luxury goods and services through its website at www.huisheshang.com and through targeted marketing and promotional campaigns. The Luxury Club has a strategic marketing cooperation with Taobao Mall (Tmall.com), China’s leading business-to-consumer online retail platform, which provides international brands access to the biggest