Luxury Brands Will Strengthen Yet Again in 2015
Luxury brands have weathered the latest period of economic turmoil relatively well and in more recent years have achieved solid sales and profits. The wealthy customers in the luxury market have, of course, been crucial to that performance. However, support is also coming from a growing group of consumers known as ‘aspirational buyers’.
Wealthy consumers, the mainstay of the luxury sector, have continued to pay for the best products and the superior service that typically accompany their favoured high-end brands throughout the economic downturn and slow recovery. However, what aspirational consumers lack in net worth, they are beginning to make up for in sheer numbers, and they are increasingly providing support to luxury retailers and manufacturers. Indeed, 2015 is looking very much as though it will another year of growth because of those purchasers willing to stretch the purse strings for the best brands.
What is driving that expected further increase in the number of aspirational consumers? As the global economic recovery continues, albeit at a slower pace than in 2014, an increase in jobs growth is putting more people in work, which means more consumers around the world are earning a wage. At the same time, the recent sharp drop in the price of oil (it fell by over 40% in the last three months of last year alone and has dropped further in the first weeks of 2015) is giving that increased workforce a larger disposable income as fuel and energy costs decline.
Another factor is the continued rise of the middle classes in China. While there are fears that the pace of economic growth in China will slow down this year, a rise in GDP of around 7% in the third quarter of 2014 confirms that economic expansion is still much greater than in the more mature economies of the US and the UK. For any retailer, popularity in an economically expanding country with a population of over 1.3 billion can make a huge difference to sales and profits. And many of the upwardly mobile Chinese population associate success with the cars, clothing and accessories made and sold by high-end luxury Western brands.
One Size Fits All
It is therefore essential for the growth of those luxury brands to ensure they continue to produce the best products and provide the best service. In that way, they will retain their wealthy clients while providing the growing number of aspirational consumers with the best their money can buy. In theory, that suggests brand messaging and advertising can be streamlined, as they are effectively sending the same message to their entire potential customer base.
In reality, consumers, particularly those from the aspirational group, are becoming increasingly more knowledgeable about the items they purchase. Information on anything and everything is available to us whenever we want it. Consumers constantly take advantage of that and rarely will a major purchase be made without the confidence that the product is the best available.
Provided that luxury brands continue to manufacture the best products and sell them with the best service, then the wealthy and aspirational groups should continue to flock to their stores and boost their profits, which will help those luxury brands fulfil the expectations of further expansion this year.