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What Luxury Experts Predict For 2016 January 06, 2016 (0 comments)

Merrick, NY—For luxury jewelers, the 2015 holiday selling season wasn’t as strong as 2014, but the year overall was good. For the luxury goods market overall, 2015 was predicted to be a solid year and in fact it was. But with some uncertainty creeping in, what will 2016 hold for luxury jewelry?

The economy itself is strong—but different. In its Annual Economic Outlook, Wells Fargo’s top economists say this recovery has been unlike any previous models, and it can’t be compared to past recoveries on the basis of those models. They call it “the great divide,” wherein the U.S. economy is outperforming while emerging markets struggle, and within the domestic economy certain sectors are outperforming while others lag.

Consumer spending remains the largest contributor to economic growth and it has picked up in the last two years, but this recovery differs from past cycles because while unemployment has dropped faster than prior recoveries and is currently approaching what is considered full employment, income and wages have not risen commensurately, as happened in prior recoveries. This is a very sound explanation for why consumers may not feel like the economy is doing as well as the numbers show. Low inflation is another distinct difference from past recoveries, as are continued low short-term interest rates, something Wells Fargo anticipates will continue into 2016 despite the Federal Reserve raising fed funds rates.

Experts on the luxury market agree that things have picked up considerably for these consumers, but are divided in their views of where the market strength will be. For example, Ron Kurtz of the American Affluence Research Center, feels the safest bet is to focus on the 1% who are insulated from pretty much any economic hiccups. In an article in Luxury Daily, he said, “Since there is no consensus on an objective definition of ‘luxury,’ (such as specific price points for different categories of products, or the specific level of wealth of the ‘luxury’ consumer) the many estimates of the size and composition of the ‘luxury market’ are very subjective. [But] most in the industry probably recognize or believe that true luxury is composed of products or services that are available in limited quantities with limited distribution and priced well beyond the means of all but the wealthiest 1% percent.

But Bob Shullman of Shullman Research Center says the biggest boost to the luxury market last year came from the return of mass affluent consumers, and that will continue this year. “2015 was positive as more mass-market and mass-affluent adults came back into the marketplace and bought one or more luxuries in 2015 as we forecasted would happen,” he told Luxury Daily. Assuming there are no devastating events beyond anyone’s control (such as massive terrorist attacks or a major country defaulting on debt), he anticipates consumers will continue spending on their families and themselves.

While he agrees that the ultra-wealthy will continue to buy whatever luxuries they want, based on his recent survey and ongoing discussions with consumers, growth potential is biggest among mass-market adults (about 140 million out of 242 million total adults in the country) who started re-entering the luxury and premium markets they left in the recession, and the 90 million consumers in the $75,000-$250,000 income segment who also stepped up their luxury purchases,” he said.

Paula Rosenblum, partner at RSR Reasearch in Miami, FL, concurs, especially when it comes to Millennials. These consumers, she says, are most drawn to aspirational or off-price luxury such as Nordstrom Rack or Saks Off Fifth, with older consumers forming the bulk of main store clientele.

Pam Danziger of Unity Marketing said that while her research shows affluent consumer confidence is positive, their purchases remain carefully considered, especially in light of uncertainty about the global situation and the U.S. election cycle. Responsible consumerism reigns and their purchases are more likely to be for things that greatly improve their day-to-day life, such as home improvements, than things that give a momentary thrill before becoming just another item in the closet.

But one thing the experts agree on is the importance of omnichannel retailing to engage luxury consumers and tailor a unique experience for each one.

Separately, Luxury Daily named Neiman Marcus as its luxury retailer of the year, for the store’s embrace of digital and cross-channel marketing, particularly its introduction of innovative digital technologies at the in-store level.

First runner up was Barneys New York and second runner up was Net-A-Porter. Luxury Daily’s editorial team and reader nominations determined the winners.