It is worth noting that when New York-based fashion designer Josie Natori celebrated her company’s 40th anniversary, she included a stop in the Philippines to launch her Spring-Summer 2017 collection. No doubt her Filipino heritage played a part in that decision, but her vote of confidence in the local luxury retail market may have something more behind it.
The country’s healthy economy, growing middle class, and upbeat consumer spending combined to boost the local luxury goods industry, which posted a 6 percent current value growth rate in 2016, according to Euromonitor International. Elsewhere, consumers in emerging economies are also driving growth in the global luxury market.
Earlier this year, as part of its annual Global Powers of Luxury Goods report, Deloitte surveyed more than 1,300 luxury consumers across 11 countries to learn about their attitudes and purchase behavior with regard to luxury brands. The survey showed that consumer spending on luxury goods has remained relatively robust over the last five years, with only a small proportion (4 percent) of respondents claiming to have cut back on their spending.
In China, Russia, and the United Arab Emirates (UAE), which Deloitte categorized as emerging luxury markets, the percentage of consumers who claim to have increased their spending stood at 70 percent. In the more mature markets of the European Union (EU), the US and Japan, that figure stood at 53 percent. This is no surprise, considering the most self-assured consumers can be found in emerging economies: Of the 10 countries that topped Nielsen’s Global Consumer Confidence Index, six are emerging economies; the Philippines came in second only to India.
Another trend that Deloitte noted among luxury consumers is their penchant for shopping while on the go. Almost half of luxury purchases are made by consumers who are traveling, either in a foreign market (31 percent) or at the airport (16 percent). But when you zero in on consumers from emerging markets, this proportion rises to 60 percent. Typically, these shoppers do not have access to the same range of products and brands that can be found in more mature markets, so they take advantage of their overseas trips to make their big-ticket purchases.
This presents an opportunity for luxury brands that have yet to establish their presence here in the Philippines, or offer limited collections or product portfolios locally. Deloitte’s study further revealed that consumers from emerging markets favor watches and jewelry when doing their luxury shopping, which probably explains why in one year alone, six high-end Swiss watch brands opened their first stand-alone stores in the country.
But one product sector that is not likely to look to the Philippines for its emerging market boost is the luxury vehicle sector. The government’s tax reform package could see the excise tax on vehicles increase by about 169 percent, so that a car with a current net value of P2.5 million could sell for almost twice that price – P4.82 million – once the new excise tax rate passes. This plan has already claimed one victim: Last month, Jaguar Land Rover PH, the local dealership for the UK-based car manufacturer, announced it would be closing its doors as its prospects dimmed with the looming tax reform.
Nonetheless, luxury brands in the bags and accessories, shoes and clothes, and cosmetics and fragrances categories will find an interested market here, especially among young professionals who are increasingly able to afford a luxury lifestyle.
Asked about their attitudes and preferences when it comes to luxury goods, 88 percent of the respondents in Deloitte’s survey said they buy luxury items because of the premium quality. There is also a clear preference for craftsmanship: 75 percent of the respondents said they like to buy luxury products that are hand-made. A little over half of the respondents – 56 percent – admitted they buy luxury products to show them off.
Deloitte’s Global Powers of Luxury Goods report also features a list of the top 100 luxury goods companies, based on sales. Those of you who have your own favorite brands might be interested to know that LVMH Moët Hennessy-Louis Vuitton SE remains at the top of the ranking, with total revenue of $39.6 billion. It’s followed by Compagnie Financière Richemont SA, which owns the brands Van Cleef & Arpels and Vacheron Constantin among others; The Estée Lauder Companies Inc.; Luxottica Group SpA, which owns Ray-Ban and Oakley; and Kering SA, the company behind Gucci and Balenciaga.
The highest ranking Asian brand on the list is Chow Tai Fook Jewellery Group Limited from Hong Kong, which landed on the 9th spot. Brands from China, India, South Korea and Japan also made it to the list.
On the sidelines of the launch of her latest collection, Natori was asked for her thoughts on local designers and their path to success. She acknowledged how many of them are eager to expand beyond the Philippines, but pointed out that right here and right now, there already is a great market for well-crafted products. It certainly looks like it. And who knows? In a few years’ time, maybe we’ll see a Filipino name make it to Deloitte’s power list of luxury brands.
The author is an audit partner at Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.