By: Vanja Djuric
Pressure continues to increase on luxury budgets around the globe. Yet despite this fact, the luxury goods market has grown both on a global and domestic level, though it has actually grown more quickly within the US. As reported by Mintel, from 2009 to 2013 the US market grew from $22.4b to $35.9b, which is an increase of 60%, compared to the global growth rate of 57%. Obviously the luxury goods market in the US has grown, and as indicators suggest we can predict that it will do so in the future as well. Throwing in the mix the largest nation’s generation, the Millennials, the purchasing power behind the luxury goods is guaranteed to grow. Despite the positive market indicators, the luxury brands are facing some major challenges, and will need to look for innovative ways to stay competitive. With that in mind, here are top three trends in luxury fashion market to keep on your radar in the future:
Luxury buyers purchase discounted luxury
Due to so many options and an increase in discounted items, wealthy shoppers are looking for ways to keep their spending in control by refusing to purchase multiple items at full price. As reported by Business Insider, a high-end retailer, Nordstrom inventory increased by 12% in the most recent quarter – which points out that the company is having a hard time clearing its shelves and the need to rely on promotions and their Nordstrom Rack operations to sell the merchandise is increasing. This trend has also led to an unfortunate position for Nordstrom, where they are forced to cut around 400 jobs at its corporate headquarters. The issue that brands are faced with is that a discounting strategy can be a risky strategy, particularly for these high-end retailers, as it can cheapen the brand. This desire for discounted items within the luxury market is presenting a challenge for companies because although they are looking for ways to increase sales and profit margins, they would like to do so without having to cheapen their brand.
Consumers are avoiding obvious luxury trademarks
Mintel research also shows that majority of the consumers avoid obvious trademarks, likely because they tend to perceive them to be too flashy. This is also predicted to grow with the millennial population. What’s really interesting is that luxury buyers are more likely than average to enjoy owning these visible markings; however, the majority seem to feel indifferent toward them, as fewer than one in five luxury buyers avoid them. This trend seems to be leading more towards choosing unmarked clothing in order to put your own individual styles together. This area also needs further research, as results show very different behaviors amongst the male and female consumers – in general men seem to be more likely to buy an item with a larger logo than women.
As noted, the overall high-end fashion industry is predicted to benefit from the rise in the number of high-income households in the upcoming couple of years. Although the industry might seem clearly tough for the new entrants, the success will always lead back to those that are able to differentiate themselves by fulfilling the niche that might be underrepresented currently. Some of the examples of high growth areas within retailers are plus sized stores, eco clothing stores, women’s athletic apparel stores and premium denim stores. These specialty retailers tend to be small in size and usually are able to serve a fairly homogeneous target market well, creating a competitive advantage for small organizations and a problem for large organization.
As the luxury market continues to embrace the power and promise of the digital world and the best that technology has to offer, there are obvious challenges that they will face during that path. Organizations that are looking for ways to increase their sales and market share should look for ways to keep up with the fast-paced luxury market. The trend is leading back to the increase in online visibility and discounting. As part of this process, these companies need to look for ways to satisfy a wider range of audience, which includes the discount buyers, while still taking in consideration that it must do so in a way not to diminish the perceived value. The trend around e-commerce allows companies to explore international expansion and new product lines.