The importance of understanding luxury consumers
Who buys luxury and where they buy it are critical factors for the global market. Understanding these dynamics helps brands make strategic decisions.
The Chinese market: internal decline, external growth
The Chinese market may shrink by 15-20% in 2024, but consumer behavior tells a different story.
- In 2019, 70% of Chinese luxury buyers shopped abroad.
- In 2024, only 30% make purchases outside China.
Many consumers previously traveled to Japan due to currency imbalances but now prefer local shopping, thanks to government and brand incentives. Luxury brands have expanded their footprint in China, offering products identical to those in Europe to boost local purchases.
United States: an emerging market
The American cluster, the second-largest after China, shows remarkable stability. Historically less inclined to luxury purchases than Chinese consumers, Americans are increasing their spending, supported by a strong dollar. Luxury brands are expanding in the U.S., recognizing it as an emerging market for the sector.
Europe: a declining role
Europe, a historic destination for luxury shopping, is struggling with the absence of Chinese travelers.
- The European cluster is losing relevance as brands now focus on visitors from the Middle East, Asia, and North America.
- The Paris Olympics highlighted this shift, with more attention on global tourists than European consumers.
The rise of Asia’s middle class
The Asian middle class will drive 80% of new spending over the next decade. While currently a smaller market segment, this cohort is key to growth. A significant recovery is expected by 2025-2026.
Customer quality and strategic choices
The profitability of luxury brands depends on customer quality and sales momentum. Brands like Hermès, attracting wealthier and less volatile clients, are growing faster than Gucci, which faces weak sales.
Investment focus and the outlook for 2025
The year 2024 was challenging for luxury, but 2025 promises greater stability. Brands with positive momentum may achieve single-digit or low double-digit growth rates.
Conclusion
Understanding who buys luxury and where is vital for the industry’s future. Growth will require balancing high-end buyers and the expanding middle class. What’s your take on these trends? Share your thoughts in the form below!
