A short analysis of the luxury brand market in Asia, and impact of societies
This topic looks into some of the worldwide trends in luxury brands and its impact on the Asian affluent. In a Price Waterhouse (PwC) survey done in 2012, entitled, “Market Vision Luxury – Challenges and opportunities in the new luxury world: winners and strategic drivers”, the report explored some of the trends taking place worldwide and in Asia. In the report, the authors cited that worldwide spending in luxury products rose by 13.0 percent in 2010 and 10.0 percent in 2011, led by Emerging Markets. This comparison represents a significant recovery in luxury spending, following the Global Financial Crisis (GFC) of 2008 – 2009.
The report indicated some of the main strategic drivers for the rise in worldwide luxury spending, including the fact that emerging markets growth potential has increased by approximately 25.0 percent in 2011, versus 2010, with half of the worldwide luxury goods sales are made to customers in China. There has been a retail network consolidation and upgrading which drove most of the luxury sales growth in emerging markets. Perimeter expansion, including store expansions in China have driven much of the growth in luxury spending worldwide.
The luxury brands market has been touted has one of the most resilient group among the consumer discretionary segments since the onset of the GFC. Post GFC era, in an austerity, tight budgetary environment, it is quite amazing that luxury brand consumers continue to increase their spending. This goes to show that most of these consumers did not feel much of the impact from the GFC, and the ongoing Euro zone crisis. Asia has been driving much of the growth in luxury spending as seen from the PwC study. If one were to take a stroll along the Marina Bay Convention Centre in Singapore, you could see various luxury brand stores, including a new store opening in April 2013 by Ms. Christine Herrera, a renowned socialite, and owner of many luxury retail outlets around the world. One of the local luxury brand retailers, Ms. Christina Ong, wife of billionaire, Ong Beng Seng, owns a worldwide chain of luxury retail outlets, including Club 21. Such upbeat trends in luxury spending in Asia could be extrapolated by a casual visit to the Orchard Road area, one of the premier shopping belts in Singapore, where there are clear signs of luxury spending trends. These spending trends are quite a stark contrast to the slowing economic conditions experienced in many parts of the world.
Another growing luxury spending trend could also be seen in the increase in e-commerce sales. According to the PwC report, the value of e-commerce luxury market from FY 2007 to FY 2010 grew at a compounded annual growth rate (CAGR) of approximately 18.3 percent from 2.5 billion Euros to 4.2 billion Euros. Chinese luxury spending, in particular was forecasted to grow from 6.36 billion Yuan in 2010 to 37.2 billion Yuan in 2015, a CAGR growth rate of approximately 55.6 percent. These e-commerce luxury sales trends highlighted the fact that on a worldwide basis, consumers continue to place online shopping at the forefront of their shopping lifestyles, along with retail. It is expected that with current technology innovations, more shopping luxury websites are emerging, allowing luxury fashion brands to expand their reach to more customers through online platforms. The online luxury spending trends have taken into another level of growth and competition. Emerging technologies such as the use of mobile commerce platforms, mobile transaction systems, QR code systems, and the impact of social media could be brought into the mix of emerging technologies that might help improve brand recognition, increased patronage, and these could translate into greater profits among industry players, who seek to innovative and be able to adopt more creative marketing strategies.
The case of rampant growth in luxury spending has caught the attention of many government policy makers, who are concerned about the wide disparity among the high income and low/middle-income households. This is quite true if one were to extract various economic statistics that despite the heavy investments placed by the multinational luxury brand firms, including Prada, Yves Saint Laurent (YSL), etc., much of the shopper traffic has not resulted in an improved economic environment, and instead, it was viewed by certain policy makers as unnecessary spending on luxury items. There are thoughts that if such spending trends were to be prolonged, it could result in backlash among the poor, who have the tendencies to lay blame on the government for the state of their current well-being.
Although laying much of the blame to governments is often the result of growing public discontent among inaction among the policy makers, individuals should also practice financial responsibilities, and examine the household budget constraints before making the purchase decision. Blaming the government for inadequate attention towards their plights might not bring about solutions to the current situations, and instead exacerbate their heavy reliance on government payouts. This brings to a new perspective of social equality, which will not be discussed in this article, but it continues to represent the increasing resentment towards the government inactions to deal with the wide income inequality, prompting some tax advocates to step up campaigns such as the resumption of wealth taxes on the rich.
In conclusion, the state of luxury spending has taken new heights, especially among folks in Asia, who are increasingly following the latest trends, pursuing the elite lifestyles, etc. However, in the midst of such hype-up luxury spending trends, government policy specialists, politicians should also be mindful of their responsibilities bestowed by the voting public not to allow such rampant luxury spending impact negatively on the rest of the society, thus increasing their resentment against the highly educated, and reasonably well-off households. Every resident should take responsible of their actions, and try to change their existing lifestyles towards a better, healthy living. This is described as meritocracy, and a major driver of sustainable economic growth going forward.