Luxury Shoppers Prefer Experiences to High-End Goods
What would you rather have–a Tiffany pearl necklace or a trip to a luxury resort in Mexico where you went scuba diving in search of pearls? Luxury shoppers are beginning to prefer experiencing a luxury to owning a luxury, according to “Luxe Redux: Raising the Bar for Selling of Luxuries,” a recent report on global luxury markets from The Boston Consulting Group (BCG).
Luxury as a lifestyle seems to be more important than luxury products on their own. Experiential luxury now makes up almost 55 percent of total luxury spending worldwide and, year on year, has grown 50 percent faster than sales of luxury goods, according to the report. Even in China, where sales of personal luxury goods are growing 22 percent each year, experiential luxury sales are outpacing goods with 28 percent growth each year.
“More and more luxury shoppers tell us they love experiences that make them feel pampered,” says Jean-Marc Bellaiche, senior partner at BCG. “But if luxury-goods players are to capitalize on the ‘experience’ trend, they have to move quickly and forcefully. To date, very few have been successful in adding experiential elements to their offerings, websites, or in-store execution. While the lack of such elements may not yet be hurting the providers’ financials, it is a missed opportunity to boost performance.”
After a survey of approximately 1,000 affluent people in eight developed markets (France, Germany, Italy, Japan, South Korea, Spain, the U.K. and the U.S.) and the BRIC countries (Brazil, Russia, India, and China), the report concluded that total annual spending on luxuries now tops $1.4 trillion. This includes more than $770 billion on luxury experiences, nearly $350 billion on luxury cars and the rest on personal luxury goods such as watches, handbags and shoes.
Luxury experiences is a wide category, including exclusive art, safaris, spas, deluxe accommodations at hospitals, private suites on airlines, and high-rise apartment buildings featuring movie-screening rooms and virtual-golf facilities.
Four trends are driving the preference of experiences over goods:
1. Luxury consumers are aging: In developed economies, consumers who drove the luxury boom in the 1990s are now beginning to retire. They no longer need nor want to own new “things,” but they are primary customers for experiences.
2. Changes in consumption patterns: When middle-class consumers become more affluent and being to buy into luxury, they are drawn to long-lasting goods made by reputable brands. Over time, they tend to move from accumulating material goods to buying experiences.
3. Generation Y does things differently: Members of Generation Y tend to define themselves more by what they have done and experienced than by what they own.
4. People want satisfaction: Consumers indicate that they get a greater sense of purpose and satisfaction from experiences than they do from the purchases of luxury things.
“All over the world, luxury shoppers tell us they’d rather spend more on experiences than on clothes and jewelry,” says Michelle Eirinberg Kluz, a BCG principal and co-author of the report. “They’ve gone from ‘all my friends and I wear Cartier’ to ‘I cherish spa days with my friends.’ Although experiences are more intangible than an item, consumers consider them more memorable.”
A full copy of the report can be downloaded at www.bcgperspectives.com.