What the New Year will Bring to Luxury Goods

Just as the US economy has been since 1945 the world economic locomotive, Chinese affluence has been the fuel energizing the Luxury Goods industry over the past decade. But by 2013 it was obvious that the Chinese leadership had decided to switch gears from export promotion to aggregate demand creation. The public policy twist would soon impact foreign exchange access to emerging entrepreneurs and public companies’ leadership. This were the insatiable customer s for luxury goods from the West.

As foreign exchange access began to be restricted demand lost fuel and began to taper off. To the economic policy impact one must add the decision by President Xi Li Ping to crackdown on lavish expending and corruption. This will definitively postpone the day when China would surpass Japan to become the world’s second largest luxury market.

The new curse taken by China in its development journey will certainly also impact the west. To be sure, a significant proportion of the global luxury sales impetus witnessed intaking place from 2014 to 2015 in the developed regions was fueled by wealthy visiting Chinese tourists. However, after the Chinese government devalued the renminbi in August 2015, China’s foreign spending power has taken a turn for the worse. And this analysis of the Chinese impact could not be complete without adding the fact that the Chinese economy is set to continue cooling.

In the West, the scenario does not seem to be much more promising. As baby boomers continue to retire and the US economy while growing is not roaring, demand for luxury goods seems to be flat. Add to the mix the ascent of Millennials as a large consumer cohort and demand luxury goods could experience in 2017 a scissors effect situation. The Millennial backlash will however impact luxury goods unevenly. It will be strongly negative on apparel but positive in electronics and travel. Riding the Millennial wealth crest will definitively be two luxury activities.

First wellbeing cruises. August 2016 saw US-based luxury cruise line Seabourn unveil a spa and wellness program developed in partnership with holistic health practitioner Dr. Andrew Weil. Set to roll out in January 2017, each program will integrate physical, social, environmental and spiritual wellbeing and will be led by Weil or a certified yoga and meditation practitioner. Guests can also participate in seminars focusing in happiness, healing, nutrition, and introspection. One-on-one sessions will also be available for a fee. Seabourn cruise tickets start at around USD 5,000 per person.

In the field of electronics, last May, SIRIN LABS introduced the Solarin: a USD 13,000 Android smartphone. The Israel-based technology company’s device has military grade privacy protection and features a chip-to-chip 256-bit encryption activated by a physical switch that places the cellphone in its secure mode. When the secure mode is enabled, the device only connects with other Solarin handsets for calls and messages. This takes care of the Ultra Rich obsession with being hacked or recorded while communicating.