For the world’s top luxury brands, business has been good in recent years. Increasingly, this growth is coming from a new crop of consumers.
Despite a slowdown in several major global markets, the outlook for luxury brands remains strong. The latest Global Powers of Luxury Goods, an annual report published by Deloitte, finds that the aggregated revenue of the top 100 luxury-goods companies topped $247 billion in FY 2017 (the latest data available). That reflects a nearly 11-percent growth in year-over-year sales.
Between 2015 and 2017, the growth rate in this market segment exceeded five percent—which likely would have been higher but was pulled down by a lackluster performance in 2016, which logged only a one-percent increase for the year.
According to the report, the minimum revenue threshold to enter the list of the world’s top 100 luxury-goods companies was $218 million, up $7 million from the previous year. The average company size on the list was $2.47 billion.
Once again, the ten largest companies accounted for the lion’s share of the total luxury-good sales (48.2 percent) and accounted for 14.2 percent of composite sales growth.
Breaking from historic trends, recent growth in the luxury markets is being driven more and more by younger, digitally-savvy consumers, the Deloitte report notes. Unlike older generations, these high-earners-not-rich-yet, or “HENRYs,” are seeking inclusive, personalized and self-expressive products and experiences. And it has brands scrambling to cater to a shifting consumer base.
“Companies are re-examining the value of brand heritage and brand history for their new customers and are adopting an omni-personal approach, focusing solely on the consumer, even prior to channel identification,” Deloitte’s analysis states.
“In this path between the old and the new, companies are faced with consumers’ increasing sensitivity towards privacy, but are trying to convert it into an opportunity to offer more personalized products and services to their customer base.”
This younger consumer demographic is moving luxury brands away from traditional marketing strategies, which emphasized legacy and company history, to instead prioritize lifestyle and personal touchpoints. Not surprisingly, the shift has directed companies to social media, greater online presences and peer-to-peer and experiential marketing.
“Long established luxury brands face a new reality,” Deloitte reports. “The reality is that ‘new’ luxury consumers only care about the brands that have created value for them in the last 24 hours.”
As more Gen-X and Millennial consumers move into the luxury space it’s likely these trends will accelerate further. That provides a real opportunity for shrewd brands to connect with new audiences—if they can navigate the change. It also provides a challenge for long-established brands to reinvent themselves to stay relevant.
Wherever brands find themselves in the equation, all signs point to a healthy luxury-goods markets rife for continued growth. But that may change over the long-term as younger consumers gravitate towards purchases that reflect their lifestyles and interests.