The Rise of Luxury Spending and High Income Earners in Emerging Markets

Strategy Briefing

About This Report

Feb 2015

The global picture of wealth is changing and the number of high income earners in emerging markets is rising rapidly. This briefing will provide some insight into the profiles and spending habits of high income earners and long-term forecasts for wealth distribution, helping the luxury industry develop a more strategic plan for growth. Similarly, it will present some key questions about the latest innovations and growth strategies in the context of the global luxury goods landscape.

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The Rise of Luxury Spending and High Income Earners in Emerging Markets

Global luxury goods exceeded US$337billion

Driven mainly by strength in emerging economies sales of luxury goods exceeded US$337 billion worldwide in 2014 representing a year-on-year real value gain of over 3% on 2013.

This growth has been in the face of profit warnings and disappointing results from some of the world’s leading luxury brands, continued troubles in the Eurozone and political instability in several of the key emerging and developed markets, such as Russia and Hong Kong.

Clothing leads total sales but accessories are most dynamic

Whilst designer apparel will clearly continue to lead global sales with a share of 40%, luxury jewellery and timepieces and luxury accessories are forecast be the most dynamic.

Market polarisation

Over the 2009-14 review period, market polarisation was apparent in luxury accessories. As the appeal of this category is widening, more brands are offering both lower price point, entry level products (referred to as “affordable luxury”) as well as higher price point, top end products (referred to as “absolute luxury”).

Demand for products like luxury bags and watches will remain robust, with these products representing a clear statement of wealth and status across both developed and emerging markets.

Certain “absolute luxury” brands, such as Hermès, have shown great skill in navigating risky operating conditions with discreet branding and an untarnished reputation for exclusivity.

Growth in affordable luxury

However, the new focus for brands such as Michael Kors, Tory Burch and Kate Spade will be on the emerging middle class and their pent up demand for affordable luxury. Whilst demand for “affordable luxury” has previously been driven by Western consumers, growth in China (as well as other key emerging markets) will continue as consumers in these countries look for more affordable ways to fulfil their luxury needs.

Introduction

Scope

Luxury Goods Global Overview

Luxury goods p ower on
Hard l uxury and accessories l ead g lobal g rowth

Top Earners in Emerging Markets

China joins the top f ive
Low average i ncome but strong growth in high e arners
High income earners drive consumer expenditure in key categories
The world of wealth
Top 10 largest high income p opulations
A tale of two p owers: China plays catch-up
Emerging markets with largest high income populations

Developing Targeted Portfolios

Characteristics of high income earners in emerging markets
Younger age g roups dominate emerging market wealth
This is a man’s w orld….
Narrowing gap in male and female incomes across emerging markets
E-commerce and digital m edia c omes of a ge
Regional disparities r eveal s tark d ifferences in e-commerce
Online sales of luxury deeper than simple access to internet

Luxury Goods Emerging Markets

Asia Pacific p lays c atch-up with W estern Europe
Growth scales are tipping but how far will they go?
China to power ahead despite clampdown on extravagance
China’s discerning consumers keep brands hard at work
Tourist i nflows heavily s upport g lobal luxury s ales
Latin America heralds possible new era for global designer labels
Second tier cities in Brazil: an unexploited opportunity for luxury?
Brazil’s favourable demographics will help drive luxury goods growth
Sub-Saharan Africa the next luxury hotspot?
The global luxury goods unsung heroes

Conclusion

Understanding the rich world of emerging markets
Spending priorities across the rich world of emerging markets
Focusing more on affordable luxuries…
….and the over-65s
Emerging markets to represent over 41% of global growth by 2019
The developed markets should not be forgotten

Report Definitions

Luxury goods definitions
Report definition and abbreviations