Luxury cosmetic buyers turn to 'experiences'
spending more on luxury items. But a new market report suggests
that the future looks daunting for makers of luxury cosmetics and
fragrances as expenditure on spa and beauty treatments looks set to
boom.
The findings draw a clear division between these two important aspects of the luxuries industry, suggesting that the growing spa and beauty services sector should not be overlooked.
Spending on what the report describes as 'luxury experiences', which as well as spa and beauty services, also includes travel and dining out, almost doubled from an average of $11,632 in 2004 to reach $22,746 in 2005.
Although these figures are not representative of every household, showing only the category average, they do suggest that individuals are increasingly likely to spend money on experiences associated with luxury or pampering themselves, rather than physical products.
According to the report authors, Unity Marketing, it is the growing spending power of the early baby boomers, now entering the 60-plus age group that is helping to fuel this boom in luxury spending.
The baby boom generation, which makes up 57 per cent of all households in the US with incomes over $100,000, has largely acquired the material trappings of the luxury lifestyle though. This trend means that, instead of still wanting to buy luxury goods, the emphasis is increasingly shifting to the area of luxury experiences.
This trend is throwing up a challenge to manufacturers of luxury goods, who have experienced years of increasing sales thanks to significant increases in the number of wealthy households in the US. But now the tide appears to be changing.
Reflecting this trend on a global basis, cosmetics and personal care giant L'Oreal has just released strong full-year 2005 figures. The resulst showed that the only underperforming division proved to be its luxury cosmetics business, which reported a growth of only 2.7 per cent in its €3.6 billion ($4.3bn) like-for-like sales.
In contrast to that, like-for-like sales at L'Oreal's professional products division, which serves the spa and beauty care business, grew by 6.1 per cent to nudge past the €2 billion for the first time.
Pam Danziger, expert in the luxury market and head of Unity Marketing said: "This is a key trend in the luxury market today - The consumer is the final arbiter of what is luxury, not the manufacturer, the designer, or the retailer."
Danziger also points out that near-affluent households are buying luxuries at the same rates as affluent households, they are just spending less on the actual purchases. This trend is emphasized by simply comparing the price of a trip to a spa or beauty salon to a diamond ring of designer watch.
Although the spending power of wealthy households is continuing to grow, the shift towards more sensory experiences indicates that makers of luxury cosmetics and fragrances will have to find ways to adapt to this trend by adapting to it.
