“Luxury brands position for U.S. boom,” has decreed Reuters. “Americans Regain a Craving for Luxury” echoed the Wall Street Journal, as FY2012 results from LVMH, Richemont and Hermès once again confirmed the dominance of the North American luxury market.
“Luxury spending in the United States collapsed after the 2008 financial crisis but roared back to pre-crisis levels by 2012,” according to Reuters. “Last year, the world’s No.1 and No.3 luxury groups LVMH and PPR saw higher growth rates in the United States than in China for the first time in years.”
Within the €212 billion market as a whole, Bain & Co estimate that €59 billion was spent on luxury goods in the U.S. in 2012. Europe remained the industry’s leading economy – valued at €74.2 billion – whilst Mainland China and Hong Kong combined account for €22 billion.
“ Within the €212 billion market as a whole, €59 billion was spent on luxury goods in the U.S. in 2012 ”
Looking at sales growth, Bain & Co expect the Americas to increase by 5-7% in 2013, compared to 6-8% in Mainland China and 0-2% in Europe. No matter how sensational the discussion becomes about luxury in China and for the Chinese, the North American market is quite rightly beginning to attract attention as a sustainable driver of luxury growth in the coming years.
In the case of Hermès, fourth-quarter sales in 2012 rose 21% in the Americas to €184.6 million. LVMH full-year revenues in the United States (including Hawaii) increased by 12% from 2011 to 2012, accounting for 23% of the group’s €28.1 billion turnover.
At Richemont, the Americas (as a whole) are the Swiss conglomerate’s third-largest market. In FY 2013 (based on actual exchange rates), it was the fastest growing region whereby sales increased by 18% to €1.473 billion. The Americas business now accounts for 14% of total Richemont sales, posting its third successive year of double digit growth.
“ Fourth-quarter Hermès sales in 2012 rose 21% in the Americas to €184.6 million ”
At Kering, the U.S. accounted for 19% of luxury division revenue in 2012, representing approximately €1.18 billion in sales. Though when it comes to retail presence, the region has one of the lowest rates of directly owned stores – with the exception of Gucci – representing an opportunity for further U.S. driven growth in the coming years.
The U.S. remains the world’s largest market for luxury cars. McKinsey & Co. has predicted that China could overtake the U.S. as early as 2016, though China’s luxury-auto market is beginning to signs of slowing. A BMW executive last week declared that “breakneck growth in China is over.”
According to the General Aviation Manufacturers Association, the U.S is also the largest world market for private jets, whereby North America accounted for 49.7 percent of all business jet deliveries in 2012.
The second largest market is Europe 20.8%; followed by Asia Pacific 11.8%; Latin and South America 11.6%; Africa and the Middle East: 6.1%. Overall, were registered 11,261 private jets for use in the United States, as compared to 7,997 in the rest of the world.
“ North America accounted for 49.7% of all business jet deliveries in 2012 ”
The continued dominance of the U.S. market is unsurprising when you consider that North America is home to the largest amount of high net worth individuals in the world. According to the 2013 World Wealth Report from Capgemini and RBC Wealth Management, North America reclaimed its position as the largest HNWI market in 2012, as its market share of 3.73 million HNWIs overtook Asia-Pacific’s 3.68 million.
“As in the previous five years, North America continued to hold the greatest share of HNWI investable wealth,” explained the report, “with $12.7 trillion in 2012, compared to US$12.0 trillion for Asia-Pacific, US$10.9 trillion for Europe, and US$7.5 trillion for Latin America.”
North America and Asia-Pacific, the two largest HNWI regions, drove global growth in 2012, expanding 11.5% and 9.4% respectively in HNWI population, and 11.7% and 12.2% in wealth. When looking at the number of billionaires by country in 2012, the United States commanded the highest concentration, housing 543 billionaires of 2,198 globally (24.7%).
“ North America is home to the largest amount of high net worth individuals in the world ”
Within the Top 30 Cities by HNWI Population, New York tops the list with 7,580 individuals with net assets of over US$30m. San Francisco (#4), Los Angeles (#5), Chicago (#15), Houston (#17), Washington DC (#18) and Dallas (#19) were the other six U.S. cities to appear in the Top 30.
Mykolas Rambus of Wealth-X believes that the US will remain dominant in terms of numbers of HNWIs and billionaires over the next 10 years, despite growth in the East. Explaining to Knight Frank that “the industrial revolutions in the US and the UK acted as a base for the large concentration of wealth still evident in these areas."
North America is still expected to have 30% of the world’s HNWIs in 2022, according to Knight Frank, although this is down from the current 34%. Within the US, the biggest rise in the concentration of HNWIs is expected to be outside New York, despite its status as the world’s pre-eminent global city. New York, however, will still boast the largest number of HNWIs of any city in the world in 2022.
“ New York will still boast the largest number of HNWIs of any city in the world in 2022 ”
Whichever way you look at it, the United States is still a formidable force in the luxury industry. Retail expansion across the globe may eventually threaten its position as the world’s biggest market for luxury goods, as BRICs consumers are offered the opportunity to consume locally.
Though when you consider the barriers to entry for luxury brands wishing to set-up-shop in markets like India and Brazil, coupled with hefty local duties and taxes, it is unlikely to expect this shift to occur rapidly.
Indeed, the cache of purchasing a luxury item in New York, London or Paris, is thought to be just as much of a purchase driver for BRICs consumers as are increased range selection and price advantages.
And when you consider that U.S. Visa restrictions are also in the process of being relaxed by president Obama, to encourage further tourism and spending, this position seems even less likely to be lost.
Based on the success of our debut event in London, we are pleased to announce the second edition of Luxury Society Keynote, produced in partnership with Bloomberg in New York City.
On Tuesday October 15th we will again investigate the UHNW consumer of luxury, with a distinct focus on the North American market and the city of New York.