How are luxurious brands beating the price of living disaster? | Enterprise Past

Cost of living crisis? What cost of living crisis? ROB: Wars and a pandemic may haveplunged many people into poverty… But the world’s luxury brandshave never had it so good. Sales have soared for everythingfrom fancy footwear to Ferraris. We saw the largest demand ever actually incars now in the first quarter of this year. You look at LVMH, they just became a500 billion euro company. The first time in Europe a company ever became that big. With the help of industry expertsand insiders – let’s investigate.

What’s driving the luxury boom:the people and the places. In 2021, the affluent Chinese families were about 100 million, and in 2025there will be 200 million. Why do so many people in the worldseem to be treating themselves? Luxury puts a smile on your face.Luxury changes your perspective. And just how long can it all last? Find out in this edition of Business Beyond. If you’re in the luxury business,you’ve had a good couple of years pretty much no matter what you sell. Butthe reasons why are not always the same.

During the course of this video,let’s look at four key luxury sectors, each of which has a different story to tell. Let’s start with what are calledpersonal luxury goods. That term covers everything from premium clothing,though cosmetics, handbags and jewellery. The things we might buy ourselvesto make us feel and look good. And right now, they’reflying off the shelves. The sector has actually seen decadesof sustained growth – interrupted only by the global financial crisis of 2008and 2009, and the coronavirus pandemic. But since the depths of the pandemic,.

Spending on personal luxury goodshasn’t just recovered… it’s surged. I think it's a period of timeprobably when consumers need a bit of escapism. [When you'vebeen stuck at home for so long, I think you aspire to travel, you aspireto forgetting what we've just all been through. Luxury enables you to move to a morepositive psychological place, I guess. That’s Erwan Rambourg, who is HSBC’s expert onpersonal luxury, having worked deep within the industry himself. We spoke to him just as thebiggest name in the sector made history. LVMH became the first European company to surpass500 billion dollars in market value today. The shares up 34% this year, up70% just in the last 7 months.

LVMH, the owner of brands includingLouis Vuitton, Dior, Tiffany, Hennessey and a whole load of others,is riding a wave of enormous demand for a taste of European luxury. A wave thathas taken the sector by surprise. I think fundamentally, we had underestimatedthe impacts of the reopening in Europe, even more so in the US. And now youhave Chinese consumers coming back, and they're moving the needlequite significantly. ROB: Since the depths of the pandemic, luxuryretailers have seen sales rise basically everywhere. Including in markets that theynever fully exploited before the pandemic. I think you have a lot of local clientels who wereignored literally for decades. If you think about.

The local French, Italian, Spanish consumers,if you think about in Asia, the local Thai or Singaporean consumers, they were left out becauseyou didn't really need them. You needed in Italy to speak Japanese, Korean, Mandarin, Russianand English to go about. And then suddenly the world shut and you started to pay attention tothe local consumers in those local markets. The biggest market for luxury goodsremains the United States. But with things looking a bit wobbly with theUS economy – more on that later – the sector’s future may not depend on America,but on Asia. And above all: China. The GDP growth fueled by an increasingmiddle class, and that middle class getting increasingly affluent has been the drivingmotor behind luxury business. And if you.

Just think numbers, in 2021, the affluentChinese families were about 100 million, and in 2025 there will be 200million. Just think about the doubling of a relevant population that'sinterested in buying luxury goods. And those are just the wealthiestChinese. But as much as a quarter of the country’s population is now thoughtto be middle class – around 350 million people. That’s more than the entirepopulation of the United States. That’s an enormous, aspirational target marketfor luxury retailers the world over. Particularly with Chinese consumers still appearing to preferto buy their premium products from overseas. If you look at other categories in China, you seecompared to ten years ago, local brands gaining.

Increasing popularity, but in the luxury brands,that's still not fully the case. In the luxury segment, you see some early startups and some ofthe big Europeans have invested in the view. But if you look at the scale of that, compared to thebig Europeans, it's still relatively small. And Asia has two other major marketsfor luxury goods. Japan has long been the region’s high street, with wealthy shoppersheading there to shop in up-market stores. And South Korea… South Koreans areactually the world’s biggest buyers of premium brands. A fact that hasn’tescaped the likes of Louis Vuitton, who just held their firstever major event there. According to Morgan Stanley,the average South Korean spent.

$325 dollars on personal luxury goods last year: 50 dollars more than the average American,and SIX TIMES the average spend in China. Only 20% of Koreans has a quote-unquote“shame factor” or feeling of “you should not display your wealth andyour status”, which is very, very different from other countries. Andso the willingness to demonstrate wealth and to demonstrate luxury in an extremeway is much, much higher, even for younger generations and especially for young and affluentgenerations who are buying more and more. The post-pandemic return of thesemarkets has lifted luxury retailers to new heights. But the questionis: how long can it go on?.

It's a much more balancedindustry than it used to be, and it's partly derisked from that pointof view because you're relying on, again, global wealth and not one single nationalitymoving the needle for your business. Probably China will remain the biggest motorjust by sheer volumes. Korea will still grow, driven by the affluence of the youngerpopulation. Japan will actually still grow again by the Chinese tourists spending there.And then Southeast Asia is on the rise as well. So the luxury goods boom stillhas some time to run yet… Let’s have a look at anotherpremium sector now: Luxury cars. While sales of ordinary carshave barely moved recently,.

And show little sign ofgetting out of first gear… High-end vehicle sales are cruising – with the sector expected to continuegrowing into the next decade. Sales of cars costing over half a million dollars are expected to increase 14%each year, through to 2031 What’s going on? Many people of course, lookat these cars as an asset. Eric Finnås Dalhström is CEO ofglobal luxury marketplace James Edition. Demand for luxury cars on thesite hit a record high this year.

Our average price there in the cars category thenis a little bit more than $400,000. So it's really in the higher luxury segments and a combinationof both, either brand new luxury unique cars or secondhand cars in the luxury segment. Twothings we see there is that if we compare to two years ago, we see that demand is very strongand we see that the prices are increasing. So what happened two years ago? Well we’re backthere again: the pandemic. But unlike luxury goods – which soared in the wake of the pandemic- luxury car sales surged in the midst of it. One reason was that as people avoidedpublic transport, they upgraded their own set of wheels. But a further driver wasthe behaviour of the car manufacturers. A global shortage of microchips causedby pandemic supply chain problems meant.

Carmakers could produce fewercars. So to make up for it, they went for quality over quantity – shiftingtheir efforts onto their premium products. Couple that with the growing numbers of wealthyindividuals around the world – like we’ve talked about in Asia in particular – and you havethe engine for a luxury car sales boom. And what’s more, carmakers havebeen able to keep prices rising by limiting the availability of theirproducts in places like Asia. It's more constrained by the amount of carsthey're willing to put in the market than the demand. So the Ferraris of this worldcould sell more cars if they wanted to, but they're also very deliberate in how muchthey allow to go to the market in terms of.

Fulfilling growth and making sure that theykeep the experience really exclusive. This strategy means that, unlike mass market cars, luxury vehicles don’t begin losing their valuethe moment you drive them off the forecourt. You might double the value when you takeit out of the factory instead of losing. Let’s keep things moving and look atanother luxury sector with a tale to tell. While the pandemic saw some ofthe world’s rich take to the roads in fancy cars, it saw others take to the skies. When COVID first happened, the airlines, the commercial airlines probablycut somewhere between 60 and 70%.

Of their schedules. So if you wanted to go frompoint A to B, you just couldn't get there. The solution for those who could afford it? A private jet. Although it tookthem a bit of time to realise it. The industry did take a big dip. Big dip, rightwhen the first lockdown occurred, in beginning of 2020, I'd say the market probably dropped 20or 30% as far as prices. And most of the activity stopped dead because everybody thought it wasthe end of the world and nobody was going to fly anymore anywhere in the world, and everybody wasgoing to die. So it didn't take long. After that, people realized, okay, the world's not coming toan end, and they start seeing there is potential for light at the end of the tunnel. Andthings started coming back alive, and.

It slowly, slowly started picking up speed, almostlike a locomotive coming out of a station. So private jets enabled businessesto send their people to parts of the world that commercial airlines weren’twilling to take them. They also had the added bonus of sidesteppingcertain health concerns. People didn't want to travel with alot of other people in a big airplane and a lot of the commercial aircraft alsorecirculate the air inside the cabin where on a corporate aircraft you're actuallytaking fresh air in from outside. As a result of all this, demandsurged. And so did prices. A lot of the charter operators.

Saw a huge increase in demand. I mean really likea 50 60% increase in people who wanted to charter a corporate jet and 50% of those peoplenever flew on a corporate jet before. And for some, the habit stuck. 2022 was a massiveyear for the private jet industry. The market grew to over 34 billion dollars – with a record 5.3million private flights worldwide last year. You can’t talk about private jets withoutmentioning the environmental question. Private flights are thought to emit tentimes more pollutants per passenger than commercial flights. But it’s a questionSteve Varsano is used to answering. Nowadays, this is the second commentyou get after hello, how are you? Yes, for sure, flying on a corporate jet is not asenvironmentally friendly as flying on a commercial.

Airplane. There's no question about that. Flyingon Ryanair is not as environmentally friendly as taking a horse. Whether people want to believe itor not, corporations who have bases all around the world, they need this kind of flexibility to beable to travel around the place. This is 2023. Environmentalists would prefer tosee a reversal of the trend towards private flight. So is that going to happen? It started slowing down a little bit when interestrates started going up around the world and the threat of a European and a US recessioncoming. […] A lot of the world is just taking a breather and it's nothing differentthat's happened in the past. Everybody thinks, oh the end is here, but it's just a cycle.[…] What I hear from people that are pretty.

Smart in the world economics is the beginningof 24, interest rates start dropping down and the world starts recovering and all ofa sudden you go right back up again. Let’s look at our final luxurysector: real estate. Again, this story starts with the coronaviruspandemic. Lockdowns and the rise in working from home meant people were spending a lot moretime between their own four walls – and realising that they needed something more. Something thatalso played out on the James Edition website. People have maybe to some extentreevaluated where they live and how they live. Which means that people arelooking for more space and maybe moving us to places which offers a slightlydifferent lifestyle on a day-to-day.

Basis that still enables them to workon a distance to their regular jobs. The impulse among the world’s wealthiestto seek out more space peaked in 2021, when the number of luxury home sales was a whole 35% above the pre-pandemic levelsof 2017, according to Forbes. And at the very top end, 2022 sawprice records smashed in many of the world’s most expensive housingmarkets – particularly in the US. Properties in Hong Kong and in Europewere also among the most lucrative. We see also a lot of demand from the UScoming to Europe. Now we have a strong dollar. Even though the stock market hasgone down a bit lately, we still have a.

Lot of people that still benefited a lot fromthe stock market gains in the previous years. And if we look, even though interest rates aregoing up, a lot of these buyers in what we call them hotspots in Europe are cash buyers to alarge extent. So they are not as affected. ROB: And that is a key difference betweenluxury real estate and the average sale. While many would-be homeowners needa mortgage to push the sale through, the world’s wealthy do not. And that meansthey’re more or less immune to the high interest rates that are blightingbuyers in Europe and the US. So that means luxury real estate sales havebeen resilient where more modest home sales haven’t. However, the questionis, once again, can it last?.

I think that the trends that we have seen interms of real estate people relocating, I guess that will taper off a bit as we go forward.People have now done those relocations. And that’s what’s playing out. Luxuryreal estate levels in 2022 were only a few percent (5%) above pre-pandemiclevels. Well below the 2021 boom times. So, four luxury sectors -four different stories. But in the long term, what does the future hold for those who make their moneyoff people having lots of it? What's interesting about the luxurymarket is that you see more younger populations still quite happily spendinglots and lots. So it's not a oh, this is.

An old generation thing, which also makesthe sustainability of the growth better. With a huge wealth transfer going to happenin the next ten to 15 years of then large inheritances moving down to kidsand then later grandkids, then that will drive to some extentsome luxury consumption. I am bullish for the long term in termsof the compounding nature of growth, because you still have so many people youcan recruit within the pyramid of luxury. Thanks for watching this edition ofBusiness Beyond. If you liked it, we reckon you’ll like this onetoo. We’ll see you over there.

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