Luxury Industry Bullish On Outlook For 2015, Wealth-X Survey Shows
The luxury industry is cautiously optimistic for the coming quarter, according to the latest Wealth-X Luxury Sentiment Survey Report released by Wealth-X. The quarterly Wealth-X Luxury Sentiment Survey polls senior-level executives from various sectors in the luxury industry.
The Luxury Industry Sentiment Index (LISI) declined from its peak in 2014 of 108, seen in Q4 due to high expectations for the holiday shopping season. The luxury industry’s outlook for the whole year was more optimistic, with 92% of respondents stating they expect to see an increase in revenue over the course of 2015, while less than 75% expect to see revenue growth in the first quarter.
Some highlights from the latest edition of the Wealth-X Luxury Sentiment Survey Report:
• The Luxury Industry Sentiment Index (LISI) stands at 100.6, almost the same level as it was at the start of 2014.
• Competition was the biggest obstacle in Q4 2014, followed by personnel issues, particularly in the traditional luxury subsector. Despite these constraints, respondents were still optimistic regarding their long-term performance and prospects.
• Outlook for 2015 as a whole was more optimistic than for the first quarter of the year, with 92% of respondents expecting to see growth in total revenue in 2015, up from below 75% for the first quarter.
• Fast revenue growth is expected in the luxury industry this year, with 40% and 50% of respondents expecting to see revenue increase by more than 10% in the first quarter of 2015 and the whole of 2015 respectively.
• Only 10% of respondents have no expansion plans in either Q1 2015 or throughout 2015. For the other 90% of respondents, new product launches were particularly significant, with around 40% of respondents expecting to launch new products either during Q1 2015 or at some point during the year.
• Respondents from the hospitality and services industry were the most likely to have expansion plans in Q1 2015, with more respondents planning on opening new stores, launching new products and increasing their digital presence in the first quarter of the year, rather than later in the year.
• Despite a growing number of respondents targeting specific geographical regions, 36% of respondents reported that the majority of their clients were from North America — and not all of these respondents were solely responsible for that region.
• 72% of respondents used affinity partnerships as one of their marketing strategies for targeting UHNW clients. Although this was a common practice across the industry, providers of big luxury items such as yachts, planes and motor cars had the highest proportion of respondents (37%) stating that affinity partnerships were not part of their marketing strategies.
• Only 47% of respondents agree or strongly agree that “marketing strategies with affinity partnerships have higher ROI than those without affinity partners”.
• 82% of respondents who have affinity partnerships use them for targeted and bespoke events.
• 78% of respondents felt that affinity partners were particularly helpful in expanding customer base, and 68% think that these partners help to increase the prestige/awareness of their companies.
• 61% respondents only had one or two partners at any one time, and 53% of respondents focused on longterm partnerships of one year or longer. This enabled them to remove the perceived risk of incompatibility with their partners, which ranked as the main disadvantage when using affinity partners.
• 78% of respondents plan on increasing their use of affinity partners in the future.
- TRADITIONAL LUXURY
In the traditional luxury subsector, the most significant obstacle that respondents faced in Q4 2014 was personnel issues, with 43% of respondents stating that this was the single greatest problem of the last quarter. Competition ranked as the second biggest obstacle, with 29%. Despite these issues, 60% of respondents stated they received an increase in enquiries during Q4 2014.
64% expect to gain new UHNW clients in the next quarter and an even higher proportion, 69%, expect to gain new UHNW clients over the year 2015 — showing greater optimism for prospects in the later parts of the year.
Despite such an optimistic view, the UHNW segment of the traditional luxury sector is expected to perform less well than the entire industry: 92% of these same respondents expect to see an increase in their total clients (including UHNW clients) over the coming year — much higher than the 58% that expect to see increase in Q1 2015 for total clients. 50% of respondents expect to see total revenue increase by over 10% in the coming quarter and for the whole of 2015.
- HOSPITALITY & SERVICES
Only 8% of respondents in this industry felt that competition was their most significant obstacle at the end of Q4 2014. Instead, personnel issues and regulations were considered to be the most important barriers to performance, according toover 50% of respondents.
- BIG LUXURY ITEMS
In the big luxury items subsector, 50% of respondents indicated that both personnel and competition were significant hurdles during the last quarter of 2014. Despite these issues, 56% of respondents saw increased enquiries for their products in Q4 2014.
59% of respondents to this quarter’s Luxury Sentiment Survey expect to increase the number of their UHNW clients in Q1 2015 — and an even larger proportion expect to do so over the year: 83%.
A further indication of optimism in this industry is shown by the fact that 48% of respondents expect growth in excess of 10% in total revenue for both Q1 2015 and for the entire year of 2015.
As a way to ensure that such expectations are met, 62% of respondents indicated that new products launches would be the main expansion plan for their businesses over the coming quarter and year, while only 8% have no expansion plan for either periods.
- ALTERNATIVE LUXURY
43% of respondents in this subsector felt competition was their single biggest obstacle in the last quarter of 2014. This subsector of the luxury industry was also the most likely to be pessimistic when it came for its future performance, with 13% of the subsector’s respondents experiencing a decrease in the number of enquiries they received during Q4 2014 and 19% of respondents having no expansion plans. Despite this, 67% of respondents expect to see an increase in number of clients and none expect a decrease in this coming quarter. These respondents were even more optimistic for the whole of 2015, with 87% expecting an increase in UHNW clients.
