By Jennifer Heebner, Editor in Chief
Findings from two new luxury market endeavors reveal important insights for the fine-jewelry industry. Both efforts are produced by Italian luxury goods manufacturers’ association Altagamma, with different partners.
Research from Altagamma and Bain & Company’s recently released Luxury Goods Worldwide Market Study reveal that despite global political and economic unrest in 2023, the worldwide luxury market exceeded €1.5 trillion. And in Altagamma and Boston Consulting Group’s (BCG) True-Luxury Global Consumer Insight survey, released this month, results show that 1% of top customers account for 21% of spending, a relevance that has doubled in 10 years
Luxury Goods Worldwide Market Study
Jewelry was a top seller here. According to the study, consumers made “investment-led purchase decisions, surpassing watches in growth and showcasing strength in both uber- and entry-luxury segments.” Aspirational shoppers spent on makeup, fragrances, and eyewear and less on shoes, while apparel outgrew “accessories on an elevation strategy aimed at capturing the attention of top-tier customers.”
“A dual strategy, framed around the allure of top-tier clientele and the appeal of smaller luxury indulgences, is driving growth at both ends of the price spectrum,” explained Federica Levato, partner at Bain & Company and leader of the firm’s EMEA Luxury Goods and Fashion practice and co-author of the report. “As brands continue to face turbulence in the market, the winners will be those that rethink the way they craft and deliver their value propositions across multiple price points and touchpoints, growing their reach while building advocacy and loyalty among their customers.”
Other trends include the popularity of experiential offerings, including intimate cruises, hospitality experiences, and private jets and yachts. For sure, tourism is back, and luxury brands, amidst a world of uncertainty and crisis, should be on alert for quick market changes and strategic pivots.
For example, China’s weakened domestic demand is “undermining middle-class consumer confidence, leading to ‘luxury shame’ behavior similar to what occurred in the Americas during the 2008–09 financial crisis,” says the report.
In the first quarter of 2024, report producers reveal a small decline in personal luxury goods sales. To keep growing, brands should address rising prices while maintaining a strong price-value equation.
“As a narrative of resurgence and resilience emerges, luxury brands must rethink the way they build their value proposition to prioritize trust and connection with consumers,” says Claudia D’Arpizio, a Bain & Company partner and leader of Bain’s global Luxury Goods and Fashion practice and the lead author of the study.
True-Luxury Global Consumer Insight
This survey, now in its 10th edition, was unveiled at the “Altagamma Consumer and Retail Insight” event in Milan on July 2, 2024. Contents reveal that top-end customers are referred to as Very Important Clients (VICs) in the survey and account for 30% of brand revenue earnings, making them essential brand ambassadors. Each one spends €50,000 annually on personal goods like jewelry and represents less than 1% of the total number of luxury clients. Their spending is more than 200 times that of the average consumer, and survey findings state that they are the most resilient and rapidly growing luxury buyer segment—dubbed the “Beyond Money” group.
According to BCG, these clients number 500,000 and “represent 20–25% of the total luxury market and are growing by 10% each year (CAGR). They are immune to economic cycles and geopolitical crises, consider luxury an essential, and offer spending about 5 times less volatile than the aspirational buyer segment. Compared to the latter, they have also more than doubled their spending in the past decade. This group includes VICs, who buy products from 10 brands on average but are identified and treated as such by only 2 or 3 of them. Important opportunities are therefore missed in 70% of cases; these could be recouped with more sophisticated target segmentation.”
More insights reveal that brands are not fully harnessing the potential of these ultra-high-net-worth individuals. Interviews with them reveal that they are tough to impress and competition for their attention is fierce. To win them over, consider these four expectations:
Hyper-local personalization and global recognition. Recognize the VICs’ status globally at every stage of the customer experience.
Unique products without artificially engineered wait times. Wait times for bespoke products are generally accepted so long as they are justified and engaging as part of the experience.
More loyalty to client advisors than to brands. Some 70% of VICs say they have a trusted client advisor within the brand and would be willing to switch brands if that associate moved to a competitor.
Being more than a customer. VICs want a sense of community and networking. More than 80% of respondents believe that an emotional connection with a luxury brand is critical to their purchasing decisions to be part of a like-minded community.
Click here to see complete details on the “True-Luxury Global Consumer Insight” survey.
Meanwhile, in a companion “Luxury Retail Evolution” study, retail strategies were reviewed and showed that major luxury groups have invested heavily in premier locations (think Fifth Avenue, Bond Street, etc.). Smaller luxury companies should be open to finding new areas with potential.
