Luxury: wealthy customers ready to spend more in 2023
Good news for the luxury industry, VIP customers are back with a growing appetite for high-end products and more so exclusive services. This segment, representing 5% of the population in terms of annual household income, is ready to spend more in 2023, guided by six major motivations, according to a study by marketing data analysis specialist Kantar Insights and research firm Altiant.
The survey was conducted online from October 21 to November 1 in the United States, China and Europe in Germany, France, Italy and the United Kingdom among women and men aged 18 to 60 in the top 5% of annual incomes, who have purchased at least one luxury item in the past year. These individuals spent an average of $43,000 in 2022 on six out of nine of the top luxury products or services ranging from hospitality, food, wellness, wine and spirits to all fashion and accessories categories.
For 2023, 65% of respondents stated "their intention to increase spending on at least one of these sectors and, on average, 32% indicated they would do so on all nine. Luxury hotels and restaurants lead the way with 38% each, followed by spas and beauty salons with 36%. Thirty five percent of participants plan to increase their spending on ready-to-wear and haute couture, while 34% are likely to splurge on leather goods. A little more unexpectedly, jewelry, accessories and watches inspire only 30%, 25% and 24% of this population respectively.
It's the experiences, more than the products, that attract luxury consumers, as Françoise Hernaez, head of luxury for Kantar Insights, points out. "The luxury industry is dynamic. This is true regardless of the category studied. But some sectors are true objects of desire and will benefit even more from this growth. We find in first place, the luxury hotel industry, followed by gourmet restaurants, spas and luxury beauty salons. Desires that naturally echo this post-confinement period."
Geographically, upward buying intentions are particularly strong in China, with 39% on average, while in the UK, double the average amount say they want to spend less, note the surveyors.
But where are consumers going to spend this extra money? As other studies also illustrate, it appears that "online points of contact are more relevant for consumers still in the research phase, while physical locations are preferred to complete the purchase". Traditional stores are essential with an evolution forecast of +26%, even if online spending continues to grow strongly with an increase of 32%. For a successful shopping experience "luxury consumers value rare moments in store, holistic experiences and artistic, festive or educational events organized by brands for VIP customers," notes Adrien Germain-Thomas, head of the retail and e-commerce sectors at Kantar Insights.
"A new cartography of desires"
Furthermore, the study highlights the emergence of "a new cartography of desires that transcends borders and categories" around six main motivations. Twenty nine percent of respondants are motivated by the notion of discovery, while 18% are attracted to the attention. Fifteen percent see luxury as a symbol of success, 14% are attracted to the exclusivity, 12% the heritage, and 12% the authenticity in terms of commitment and values embodied by the brand.
It is interesting to note the increasingly significant role played by influence, the internet and new technologies in this mapping of desires. This notion of "influence" is also used in the metaverse, which, as the study notes, "is more widespread among those seeking to attract attention and influence (20%), who are the most communicative, and therefore more seduced by this new communication medium."
On the other hand, NFTs appeal more to "people who are looking to enhance their status (23%), which is possible by purchasing works or virtual objects in limited or unique numbers." They therefore join consumers, who see the purchase of luxury as a status. Finally, cryptocurrency is mostly adopted by "people who are sensitive to discovery (41%), more adventurous and probably more risk-orientated."
This last trend confirms the wealthy clientele's desire to be stimulated by luxury houses, expecting them to cultivate their curiosity and desire to learn, as Nelly Papapanayotou, head of brand strategy for Kantar Insights, notes: "Only one group stands out as carrying more weight than the others, the desire for discovery, which is tending to be driven by the United States. This demonstrates the importance of innovation and surprise to maintain desire."
These motivational groups "go beyond traditional segments (country, age or gender) to focus on customer needs. Each of these desire territories is significant and transversally present on the three continents. Brands will be able to play on one or more of these deep motivations, depending on their ambition, their positioning and their target," she concludes.
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