Americans are still king when it comes to luxury spending. In 2014, they spent more on luxury goods than consumers in Japan, Italy, France and China combined, according to The Luxury Retail Landscape Report from Nielsen. Quoting figures from consulting company Bain and Company, the report says that spending on personal luxury goods in the US rose by five per cent last year to $73 billion, dwarfing the next biggest spender, Japan, with sales of $20.4 billion, followed by Italy ($18.2bn), France ($17.3bn), and China in fifth place at $16.9bn. However, it notes that in the US, many upscale brands are no longer exclusive to the extremely wealthy. 'Because of the aspirational nature of luxury, the consumers actually buying luxury items can be surprising. High income is not always the most reflective driver of the best or only opportunity with luxury brands,' it says.
African luxury
Meanwhile Africa represents some of the best opportunities for luxury retail sales, trailing only the Middle East in terms of the fastest growth globally. A report from Bloomberg Intelligence (Untapped Africa Growth Potential Attracts Luxury Goods, May 2015) which says that Africa’s luxury retail sales have risen 5.6 per cent year-on-year, and may reach $5.2 billion by 2019. This compares with a growth of just 1.2 per cent in Western Europe.
As wealth continues to rise on the continent, luxury goods makers will look beyond Morocco and South Africa, which currently account for 86 per cent of Africa’s directly-operated luxury stores, Bloomberg says. The report highlights Nigeria as one to watch. 'Demand for luxury goods in Nigeria may increase given a rise in the number of the country’s richest citizens,' it says. Knight Frank Research estimates that Nigeria will have 400 ultra-high-net-worth individuals by 2024, a 90 per cent growth.
Across Africa, ultra-high-net-worth individuals are expected to grow by 59 per cent to 1,900 by 2024, on Knight Frank estimates. Meanwhile there has been a proliferation of millionaires, with New World Health putting the number of African millionaires at 165,000.
Ivory Coast tops the regional list, with 119 per cent growth in the richest population predicted by 2024, according to Bloomberg. Its biggest city, Abidjan, where almost all political offices and foreign embassies are located, is home to 1,100 millionaires, according to The Business of Fashion. Other millionaire-heavy cities outside of South Africa identified by The Business of Fashion include Nairobi in Kenya, its booming technology industry the driving force behind a cluster of 6,200 millionaires; Luanda in Angola, where oil has fuelled the rise of 5,200 millionaires; Accra in Ghana with 2,100; and Dar es Salaam in Tanzania, with 1,200. Kinshasa in Congo is not just home of the style gods Les Sapeurs, but also 500 millionaires.
Supplying merchandise to an African customer can cost two to three times more owing to poor infrastructure, but major investment by the Chinese is delivering road improvements and many new shopping centres. Prada now has two stores in Morocco, Michael Kors has one in Egypt, and a number of luxury brands have franchises in Nigeria.
UK luxury consumers evolving
According to The Luxury Opportunity, a June 2015 report from Deloitte, consumers in the established market of the UK are evolving in terms of their purchasing behaviours, the drivers of their decisions, and the way in which they want to be engaged with – most notably in digital channels.
It finds that 58 per cent of millennial (aged 18-34) luxury consumers in the UK most often buy luxury products through online channels. Magazines remain the dominant channel for consumers to become aware of new brands (with 57 per cent citing these as a source against 45 per cent for online) – but for the millennials, online is edging ahead, with 58 per cent discovering brands online and 55 per cent in magazines.
A key challenge for luxury retailers in the UK is to remain unobtrusive, discrete and scarce, according to Deloitte. An example would be the increasing preference (and expectation) within the luxury consumer’s brand engagement for sustainable business practices (eg Kering, L’Oreal, Stella McCartney), it says.
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