Spending on private jets and luxury yachts is drying up as the wealthy move to buying experiences rather than toys.
Sales of private jets have slumped by 5% in a year, while orders for new yachts are stuck in the doldrums, says the latest Bains Luxury Study, a survey monitoring how the rich spend their cash.
Although luxury brands can expect a 4% growth to $1.18 trillion by the end of the year, wealthy consumers have changed the way they spend their money.
More is going towards cruises, hotels and travel rather than personal goods, according to the report.
Not only are sales of big ticket items like jets and boats in decline, but consumers are losing interest in smaller luxury goods as well, such as branded clothing, bags, shows, jewellery and watches.
Prestige cars on sales drive
The only expensive brands doing well are luxury cars – with sales growing 8% this year.
However, this is only half as good as 2015, when the growth rate was 15%.
Bains explained this is mainly due to falling sales in the USA and China.
“The luxury market has reached a maturation point. Brands can no longer rely on low-hanging fruit. Instead, they need to implement differentiating strategies to succeed going forward,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study.
“We are already starting to see clear polarization when it comes to performance with winners and losers emerging across product categories and segments.”
Other factors affecting the market included Brexit and terrorism concerns in Europe.
Emerging brands snatch market share
Brexit has pushed prices down in London for tourist shoppers, making the city a magnet for the wealthy looking for designer brand bargains.
Paris, Brussels and other European cities have lost trade due to security concerns, said D’Arpizio.
The report also highlights emerging designer brands are starting to steal market share from their more established rivals.
“Luxury brands need to adjust their expectations and their strategies as we enter an era in which growth is no longer a given,” said D’Arpizio
“We’re now on a level playing field. Brands that adapt their business and take an omni-channel, customer-centric approach will rise to the top. Those that lag behind are sure to lose market share.”
