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Whether they’re paying six figures for a three-minute ride in a private jet (do you think they served peanuts?) or $25,000 for a pair of sneakers that will be out of style in six months, rich people like to spend money.
And while you may think that their shopping sprees have been humbled by the recent “Titanic sinking to the bottom of the ocean” drops in the stock market you would be wrong…so very, very wrong.
While overall consumer spending has been up in 2022, the vertical that’s seen the most explosive growth in the last year is luxury retail.
According to research by Bank of America, luxury spending is up 14% in May for the year and has surged 47% higher than pre-covid 2019 levels.
In other words, even if her stock portfolio is down millions, Kylie Jenner still isn’t buying her shoes at Payless.
A survey by Morning Star Consulting showed that despite the onslaught of negative financial news, over three-quarters of consumers who made more than $200,000 annually were planning on purchasing the same amount or more of luxury goods in the next three months as they have in the previous three months.
And that’s consistent with data that shows that luxury brands across the board have enjoyed increased sales and profits in the last year.
Luxury clothing brand Burberry saw strong growth in 2021 due largely to the fact that full-price sales in the US have almost doubled in the last year.
And mega-conglomerate LVMH, which owns brands such as Louis Vuitton and Christian Dior, saw overall revenues grow by 29% in Q1 and enjoyed double-digit growth in almost every sector.
While speaking at the American Banker Payment’s Forum, Wayne Best, the chief economist for Visa stated that he expects wealthy households to unleash around $257 billion on consumer spending in the next year, as long as another Covid spike doesn’t lead to lockdowns.
“The affluent spending levels for this country in the last month’s worth of data are all growing,” added Best.
And that’s great if you’re rich (but maybe not so much for those of us debating whether to splurge on the 75 cents for the extra guac) but the term “rich” is pretty broad and if this is a market you’re selling to, then it’s worth diving into the data to see who’s actually spending this money and just as importantly, where they’re spending it.
The two categories within luxury spending that have seen the greatest growth have been travel and health & beauty.
Speaking with the E-Commerce Times, Michael Prendergast, managing director at professional services firm Alvarez & Marsal Consumer Retail Group, said that “We have seen the beauty and wellness space accelerate dramatically. Everyone was locked down for 12 to 18 months and now they are back out in the public and they want to look and feel good.”
Additionally, a survey by Flywire found that 72% of high-income luxury travelers planned on spending more on their vacations in 2022 than they did before the pandemic.
And while we usually think of luxury shoppers as gray-haired older men and ladies who lunch clutching tiny dogs, this new wave of spending is being driven by younger buyers. S. Krish Thyagarajan, president and COO of DataWeave, says that his research shows that by 2025 fully 50% of luxury purchases will be made by millennials, driven in particular by their demand for designer shoes.
And while sales are strong in North America, China is expected to be the real driver of growth in the marketplace with luxury retail sales exploding in that country from $384 billion in 2018 to $944 billion in 2021, with a 15-17% growth already projected for 2022.
Rising inflation or not, young, rich buyers are ready to spend and the market is growing and changing in significant ways. Buyers are younger and they’re prioritizing restorative vacations to far-flung beaches over the latest designer handbag (although they wouldn’t mind having both).
That’s not to say that this market segment is entirely recession proof but after two years of lockdowns, the jet set are clearly ready to glam up, hit the first class lounge and strut their stuff at tropical resorts and on their Instagram accounts.
After all, everyone wants to be Champagne Papi, even if most of us are just Martinelli Joe’s.
