09 January 2023
Luxury goods are products with a demand directly related to consumer income exponentially. And the goods are categorized under non-essentials to life which are considered as a magnifying factor for the quality of life and comfort and as an indicator of status. Therefore, the industry is heavily reliant on consumer desires.
As per findings from management consulting firm Bain & Company, the global personal luxury goods market was valued at roughly EUR 220 billion (around USD 251 billion) in 2020. The strong emphasis on quality has enabled luxury brands to develop their brand image over several years, and luxury brands are now linked with a unique sense of heritage and timelessness. Resultantly, superior quality and a strong brand image have fostered deeply loyal customers who value a unique brand experience. (Source: SPEEDA Spotlight Report - Luxury Goods Industry Overview -World 2022)
SPEEDA spoke to Jheewa Subhrabinium, Chief Executive Officer of Protinus Group in Singapore to find out more about the Luxury Goods Market in Southeast Asia. Below are the key takeaways from this interview:
Demand for Luxury goods among affluent consumers and in developing markets is expected to pick up in the near future. On the latter (i.e. developing markets), Jheeva opined that “...China has always been high on the luxury market. The wealth level in China, (is such that the middle class is getting) wealthier.” Jheeva further expects that as China eases its COVID-19 lockdown measures, one can start seeing growth in this market again. Jheeva also predicts considerable growth of Luxury Goods demand in India and Southeast Asia, and for Southeast Asia, growth “tends to hold around 10 to 11% growth level - That is what we predicted in our forecast for this market.”, according to Jheeva.
Conversely, the outlook for demand from aspirational or middle-class consumers, in general, is not so rosy. "Luxury market currently faces some challenges, even high-end players, because middle-class consumers who prefer luxury products are facing a lot of pressure, making it difficult for them to spend on luxury products”.
Consumers are increasingly looking for brands that adhere to ethical principles and values rather than solely focusing on the brand name and product. “There is an emerging trend in consumer consciousness about how brands handle ESG factors, even in the luxury industry. Brands will probably have a problem in the future if they do not incorporate these new concepts into their policies, products, and marketing today,” said Jheeva.
It is also crucial for brands to take diversity into account when marketing their products and this resonates especially with younger consumers. Colorism practices have been gradually excluded from advertisements, especially in European countries, but Southeast Asia have been slow to adopt this trend. It is important for Southeast Asian brands to focus on different races and respect diversity because consumers nowadays have a higher regard for the moral principles that businesses uphold, with Jheeva adding that failure to embrace diversity will eventually lead to a brand’s fall.
Tourism plays the most critical role in the ASEAN luxury goods market. For example, Jheeva mentioned that Chinese customers are willing to spend more on luxury goods when they travel to countries such as Singapore, Malaysia, Thailand and less so in their home country. Singapore is likely the leader in the ASEAN luxury market due to factors like having a huge local customer base and as well as a frequent travel destination for visitors from Thailand, China and India - “Especially things like luxury watches; For example, Hour Glass in Singapore has picked up very well. Because the demand of tourists for this kind of product is going up” said Jheeva.
When considering the global context, North America and Europe would most probably still dominate the market for higher-end luxury goods. However, he believes that growth in China and India will gradually surpass North America and Europe. In addition, Jheeva believes that ASEAN consumers will tend to spend a lot more on luxury items compared to the US because the middle class is getting richer in Asia.
The COVID-19 pandemic has forced luxury brands to re-examine their digital strategies with an increased emphasis on online retail channels. Luxury brands are making significant efforts to realign their strategies with digital trends. (Source: SPEEDA Spotlight Report - Luxury Goods Industry Overview -World 2022). “The pandemic has shown businesses how to thrive with technology. For example, Nike has spent USD185 million on NFTs. Gucci has gone into the Metaverse, and some companies have gone into Roblox for some luxury items” said Jheeva. In addition, the luxury second-hand market or resale market had expanded as the pandemic lockdowns accelerated online trade, as some key players embraced this trend more than others.
Technology has transformed every perspective of how business functions and progresses. According to Jheeva, embracing AI-based software, virtual reality, or the Metaverse is not considered as adopting new digital technologies since these already exist in the market. However, he believes that the adoption of blockchain is a novel digital transformation in the industry as the luxury industry is facing issues like pirated market goods, and fake goods. Utilizing a blockchain system will help to track the products' journeys from the manufacturing to the selling stage and helps to resolve the issues.
Nowadays consumers are moving towards digital payments. One of the significant movers in payment technology is the “Buy-now, Pay later” option. The middle-class consumers in the luxury industry are affected by this, the aspirational consumers who may be able to pay later, which will motivate them to buy more. This could significantly boost the Luxury Goods Market.
In the short to medium term, the industry is expected to face obstacles related to (1) supply chain disruptions, (2) ASEAN consumers' mindsets. Consumers in ASEAN, particularly middle-class aspirational customers in the luxury market, might reconsider their purchases currently, Jeeva said. He believes that ASEAN consumers have this mindset because their economies are still developing.
Jheeva has shared more in his video about market trends and provides a quick fundamental understanding of the industry. Watch the full video for more insights sharing.
What are the key market brands in the ASEAN luxury goods industry today?
How does consumer behavior trend vary by region?
where does the ASEAN luxury goods market stand globally?
How is the growing focus on environmentalism affecting luxury retail brands?
How has the ASEAN luxury goods market been affected by Covid-19?
How is the digital transformation affecting the ASEAN luxury goods market?
What future challenges can we expect the market to face?
If you are interested in becoming our Expert and helping clients, please join our network from here:
https://www.enquire.ai/app/become-our-expert
SPEEDA is one of the largest company and industry Database in Asia.
