As Inflation and Slower Growth Harm Other Sectors, The Luxury Market Is Booming
Lap of Luxury
Rising prices over the last 12 months have put pressure on retailers’ bottom lines. Simply put, as basic necessities like food and electricity cost more, discretionary spending goes down. There are signs those pricing pressures are having less of an impact on wealthier consumers, however.
Luxury-good sellers are enjoying a booming market for things like exotic travel packages, sports cars, and other premium products. This is arguably a direct result of pandemic-era wealth growth. There are also more millennial millionaires shopping for luxury goods, and a concept known as “revenge spending” — which also connects to the pandemic. The thinking around “revenge spending” is that people are spending more than they normally would as a form of rebellion against the lockdowns and general isolation experienced over the past few years.
Brand consultants report that demand remains robust for luxury goods, and sales figures back that up. Market-research firm Statista Ltd. reports global luxury goods revenue will go above $349 billion for 2022 as a whole, which is up from $309.6 billion last year. The company estimates sales will hit $419 billion in 2027.
Luxury brands are also aggressively marketing their products according to ad agencies. This year’s budget outpaced 2021, and that doesn’t appear to be changing as planning gets underway for next year. Some ad execs say this is aimed at building long-term equity since luxury goods technically aren’t produced fast enough to keep up with established demand.
Wine, Travel, and Sports Cars
Some luxury products are doing especially well in the current environment. That includes wine, which can also be considered a non-luxury item. St. Michelle Wine Estates Ltd. has boosted its marketing budget 15% on an annual basis. The company says while lower-value wine is in decline, bottles in the $15-plus category are on the upswing.
Luxury travel packages are also in demand. Marriott (MAR) increased its 2022 marketing budget for its luxury brands, while Four Seasons Hotels (FS) said its paid media budget will increase 300% this year, in comparison to 2021.
For some established brands, even the word luxury is an insufficient label. Aston Martin (ARGGY) has begun describing itself as “ultra-luxury.” Many retailers are currently focused on finding ways to save customers money. On the high end, it’s the spending that counts.
Things are changing daily within the financial world. Sign up for the SoFi Daily Newsletter to get the latest news updates in your inbox every weekday.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
Comments are closed.