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Is luxury retail’s sweet spot?

Written by Tom Ryan

Photo: Getty Images/tupungato

The latest “Saks Luxury Pulse” survey finds higher-income consumers continuing to spend on luxury despite record inflation and a plunging stock market. According to the survey of over 2,100 U.S. consumers fielded between May 24 to 27:
  • Seventy-six percent with an income of $200,000 or more plan to purchase the same or even more luxury items in the next three months than they did in the past three months.
  • When asked where they would spend an extra $500, respondents with an income of $200,000 or more would spend first on vacation and leisure travel (38 percent), followed by shoes, accessories and handbags (29 percent).
Marc Metrick, Saks’ CEO, said in a statement, “The luxury customer remains highly engaged with fashion.” The ongoing momentum in luxury spending this year was also called out by recent reports from Bain and Bank of America (BOA). In 2021, U.S. luxury spending surged 47 percent higher than pre-COVID 2019 levels, according to BOA. Luxury’s gains have been attributed to “revenge spending” or pent-up demand following lockdowns. Luxury was also a key category for splurging while eating out, entertainment and travel faced restrictions. Wealthier Americans also enjoyed soaring stock and home prices. For 2022, luxury spending is up 14 percent through May, with growth accelerating to 26 percent for higher-income spenders and slowing to five percent for lower-income earners, according to BOA. BOA attributed the strong higher-income consumer demand “to reopening and more purchase occasions (return of weddings, galas, holidays, etc.).” Bain in June raised its 2022 global outlook for luxury due to healthy double-digit growth in the first quarter, despite weakness in China tied to lockdowns. Bain said Europe's luxury sales are recovering faster than expected due to a "fierce 'back to normal' attitude and a rebound in intraregional tourism," while U.S. luxury is "experiencing unprecedented growth as luxury brands are unleashing the real power of diversity and inclusion, discovering the true potential of the entire American customer base." However, Bain found the overall “resiliency” of luxury spending in the face of macro-economic challenges, including hyperinflation, slowing GDP growth and the Russia-Ukraine conflict, far stronger than expected. Bain partner Claudia D’Arpizio told Reuters, “We were for sure astonished.”

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