NEW YORK (MainStreet) — The number of luxury consumers worldwide has more than tripled in the past 20 years, and will continue its relentless growth for years to come thanks to an increasing number of wealthy shoppers in emerging markets.
About 10 million luxury consumers enter the market each year, according to a Lens on the Worldwide Luxury Consumer report compiled by Bain with broker Redburn Partners and research agency Millward Brown.
In 1995, there were about 90 million luxury consumers around the globe. By last year that jumped to 330 million, the report says, and by 2020 it will be closer to 400 million.
The majority of those consumers last year were in North America (90 million) and Western Europe (80 million). But emerging markets already make up a substantial portion of the luxury consumer base — 130 million such shoppers last year, with the Chinese being the leading emerging-market spenders.
"When you look cumulatively at the last 20 years, we have had some major changes in the world economy," says Dan Geller, a behavioral economist and author of Money Anxiety. "China came on board with tremendous economic growth that created affluence. It definitely created luxury consumers. The same thing with India, it has an improving economy also."
There were about 50 million luxury consumers in China last year. Another 25 million came from what the report describes as "other Asian countries" and another 20 million from Latin America.
The report describes China in particular as a "universe of its own" when it comes to luxury shoppers and their diverse profiles. Overall, luxury is viewed as a social enabler in China, with strong demand for well-known luxury brands.
But it's not just China that has a growing appreciation for luxury goods.
Catherine Heald, CEO of Remote Lands, a boutique travel and tour operator with a focus on pricey trips to Asia, has seen firsthand a growing demand for luxury throughout the region.
"If you go to the capital of Mongolia, they have a Louis Vuitton shop, which is absolutely crazy," Heald says. "The first time I went there in 2005, there was absolutely nothing."
Mongolia is just one example of the increasing luxury consumption seen by Heald, who lived in Hong Kong for seven years and travels to Asia about four times each year. Heald has been to Bhutan three times since 1999, and has seen a growth in the demand for luxury of all types there as well.
"It has changed hugely. The first time I went there, there were no luxury hotels, nothing," Heald says. "Now they have resorts that are $2,000 a night, and there are a lot of Asians in those hotels."
True luxury consumers consistently dedicate a part of their discretionary spending to personal luxury products of various types, the Bain report says. "Occasional consumers" want to buy luxury products but can afford only a few entry items — such as designer second lines, beauty products and small accessories.
Of the 330 million luxury shoppers last year, about 150 million were true luxury consumers. The top 10% of true luxury consumers make up half of global spending on luxury items.
During the past five years in particular, people have been feeling better about spending, especially luxury spending, Geller says.
"At the beginning of the recession, which was pretty much worldwide, consumers held back on luxury items because of the financial anxiety and uncertainty about the future," says Geller, developer of a "money anxiety" index. "But we are seeing evidence that there was an improvement in consumer financial anxiety in 2013 and therefore we are seeing an increase in purchases of luxury items."
To prove that theory, Geller did his own study focused on high-end diamond sales through DiamondsonWeb, an Internet retailer.
The study tracked and compared sales figures 2012 and last year, focusing on diamonds of $15,000 or more because such pricey diamonds are not a necessity purchase and tend not to include the engagement ring category of buyer, Geller says.
"Lo and behold, there was an increase of 10% in the sale of diamonds of $15,000 or more," Geller says. "This is significant because those are purely luxury items."
"Since January 2013 the 'money anxiety' index that I measure is improving," Geller says. "We are creatures of habit. And basically as soon as the level of money anxiety decreases, we repeat our behavior — so that includes spending more and for those who can afford it, it means spending more on luxury items."
According to the Bain report, by 2030 there will be an estimated 500 million luxury consumers around the world.