Luxury Jobs Report Summary
- Millennials prioritize experiences over materialism
- The Yuppie generation coming to an end
- Chinese government policies discourage luxury spending
- Western market growth balancing out diminishing markets in the East
- Luxury brands changing advertisement strategies to appeal to younger generations
How was 2015 for Luxury Jobs?
The luxury market is not one that is known for dynamic change, but with the rise of meritocracy over old money, the preferences of high-income earners are vastly different than they have been in the past. With a new generation that values non-traditional aspects of the luxury sector such as environmentalism and rejects materialism, the U.S. luxury market is adjusting to cater to new preferences.
Overall, the luxury sector of the economy had an average 2015 performance. The sector has experienced a slowdown in growth of personal luxury goods while seeing an increased growth in luxury travel and fine arts. This is a reflection to the new wave of higher income earners that are more prone to spending on luxury travel for life experiences.
High tariffs and taxes on luxury items in China along with stock market volatility has contributed to a lackluster Chinese contribution to the luxury market as they had a 3% decline in sales in 2014 and only a 1% increase in 2015. The difficulty for Chinese consumers to purchase luxury goods at home has drove them to do munch of their luxury spending abroad, but devaluation of their currency has caused a decrease in Chinese foreign spending.
What is Happening in 2016
Market forces in 2016 will force luxury retailers to change their approach in marketing as well as the types of goods and services they offer to consumers. For example, luxury brands are now hosting events such as debates as part of their marketing to appeal to the new upper-class that cares more about intellectual thought and ideas than prestigious branding and luxury materials. Armani recently launched “Tweet Talks” as way to stimulate intellectual discussion and American Express has teamed up with music artist Jay-Z. We can expect to see luxury brands engage in more of these marketing strategies throughout the course of 2016.
It has become almost impossible to do an economic report without mentioning the rising ‘sharing economy’ and the luxury industry is no exception. Services like Uber and Airbnb are commonly viewed as cheaper services for people on a budget, but they have also penetrated their way into the luxury market. For example, NBA superstar Stephen Curry enjoys using the services of Uber and Airbnb offers plenty of luxury options — Beyoncé used their services to rent a place for $10,000 a night during her Super Bowl stay.
Where is the Luxury Sector Jobs growth?
Growth in the luxury sector has been spearheaded by luxury travel and fine arts. This should not come as a surprise as “new money” tends to value experiences more than previous generations over physical goods. To capture this new market, luxury brands must do something they are not traditionally known for doing; innovate.
The new generations of high-income earners have a much different value preference than the successful Yuppies and the previous WASP elite that dominated the upper class. Luxury market growth will occur for brands that embrace the new values of the meritocracy. The luxury hospitality sector has an advantage in this because they can offer luxurious world experiences that this new culture craves.
However, this does not mean traditional luxury retailers are doomed to fail. New market growth will occur for brands that embrace changing culture and appeal to newer generations. Growth can be expected for brands that take part in becoming a figurehead in this new culture, which means taking part in intellectualism and addressing concerns such as environmental sustainability.
Luxury Sector Job Market Challenges
This attitude of anti-materialism by the rising upper class as documented by David Brooks in his book Bobos in Paradise: The New Upper Class and How They Got There presents a new trend in the luxury market. The new class of ‘Bobos’ – members of the bourgeois with bohemian values – creates new opportunities for growth as well as new challenges for luxury retailers.
Rather than relying on traditional prestige behind brand names, luxury retails are now faced with the challenge of being innovators. The new upper class of bobos have drastically different values than the traditional members of the bourgeois that luxury brands have catered to in the past, so reaching them will be a challenge in 2016 and for years to come.
The luxury industry is facing a much different type of challenge outside of Western markets. Regulatory obstacles Chinese consumers face combined with a slowdown in economic growth means that they will not overtake Japan as the East’s largest consumer of luxury goods.
There is no reason to believe that the Chinese government will lift their high tariffs or lower their taxes on luxury goods, so we can expect Chinese consumption of luxury items to be limited to tourism and purchases abroad. The restriction of luxury goods to Eastern markets means the luxury market will struggle in the East despite the economic growth occurring in that region.