Take walk down Fifth Avenue, Michigan Avenue or Rodeo Drive, and you might think Louis Vuitton had finally had a sale. Block by block, the signature brown bags fill the streets. Never mind that the bags in the Spring 2011 collection start at $2,930 for a small clutch, and go up to a whopping $35,500.
With sales up 23 percent from last year to $23.4 billion, Louis Vuitton is setting the tone of growth for the wider luxury industry. In 2011, spending on premium items and services is expected to rise 8 percent over last year to $359 billion, according to an annual survey by American Express Publishing and Harrison Group.
But the big players are not just the barons of Wall Street, sports, and entertainment.
“America’s top one percent – a little over one million households with a net worth of six million plus – are spending on luxuries,” says Ron Kurtz, president of the American Affluence Research Center. “But the bigger growth has come from the BRIC markets – Brazil, Russia, India and particularly China.”
China, the deus ex machina of the luxury market, is expected to account for 20 percent (roughly $27 billion) of global luxury sales by 2015, according to research by McKinsey, as the Chinese shift their consumption preferences from generic goods and materials to the status of internationally well-known brands. China’s unprecedented wealth has bolstered consumer confidence throughout the country; the fifth annual China Luxury Summit in December 2010 was aptly titled “China Luxury Market: An Oasis of Hope and Possibility.”
In the U.S., despite the belt-tightening across most of the country, wealthy Americans are starting to enjoy the good life once again, buying high-status items and services they had cut out of their 2009 and 2010 budgets. Indeed, rich Americans’ expenditures on luxury are set to rise $26.6 billion this year.
Whether such optimism will trickle down to the middle class is to be seen. Overall spending is still at a standstill, with consumer confidence declining sharply in August. Online shopping and social media may be the key to bringing up luxury sales in the United States as well as abroad. A recent study by Italian luxury foundation Altagamma found online sales (now only 2.6 percent of the market) growing at a rate of 20 percent a year as luxury brands multiply their friends on Facebook and activity on other social media sites.
Here are nine popular purchases helping wealthy consumers live high. Some people just can’t live without their Louboutins.
Think a stroller is just a way to transport your kids? Think again. The mommy wars are being played out on the playground, with parents sizing up each others’ wheels. High-end strollers like those by the Bugaboo brand are flying off the shelves, and run anywhere from $500 to $2,000. One Bugaboo model that converts from a single stroller into a side-by-side double has a $1,659 price tag, and a waiting list to buy one. Another stroller by Kid Kustoms has a vinyl leather seat and optional iPod speakers, for a mere $3,500. Celebrities like Naomi Watts and Gwen Stefani have been spotted pushing around expensive Bugaboo prams, and their popularity has spread to suburban streets across the country.
Biking became more popular in the last year, with bike sales rising 15 percent between 2009 and 2010, according to the Bicycle Manufacturing Association. But the bikes that are gaining the most popularity? Pricy, custom-built bikes. Specialty bike retailers command only 14 percent of the market, but 44 percent of the dollars, according to the National Bicycle Dealers Association. For example, custom bicycle company KGS Bikes does an elaborate three-hour fitting session, and has sold bikes for as much as $32,000. “I’ve seen growing demand,” says KGS Bikes’ owner Kevin Saunders. “My customers want a bike that is perfect for them.”
Last year, Carolina Herrera reported that, to her pleasant surprise, her $7,990 gray sequined ball gowns were “selling like hotcakes.” Other top designers have also reported stellar earnings, including Louis Vuitton (up 23 percent from 2010 to $24.3 billion), Hermes (up 41 percent to $11.9 billion), and Chanel (up 23 percent to $6.8 billion). The king of American style, Ralph Lauren, has seen his $13 billion-valued company’s stock grow 150 percent in the two years since June 2009. Sales for Ralph Lauren’s heritage Rugby brand jumped 34 percent last year after an online-only fashion show where online shoppers could purchase items in real time. High-end department stores and online designer sale sites have snagged some of the profits as well. Saks reported quarterly earnings up 50 percent and sales up nine percent ($726.7 million) in May this year, thanks in part to a boost in full-price sales.
Forget two-buck chuck. Nielson Co. reporting a 4.1 percent rise in total U.S. wine sales to $9.32 billion this year, but wine priced $20 plus saw an even larger increase in sales (11 percent), demonstrating that pricier wines are becoming more popular. In its 22nd Annual Restaurant poll, Wine & Spirits magazine found the average price for the most popular wines in restaurants was $62. One of the magazines’ most popular restaurant brands, Duckhorn Vineyards, boasts an array of reds, including a 2007 estate-grown Rector Creek Vineyard Cabernet Sauvignon, which goes for $95 per bottle.