Tuesday, November 29, 2011

New Money in the Luxury Goods Market

Today it's not only the high net worth (HNW) individuals or the even the ultra high net-worth (UNHW) investors who have a corner on the luxury market. The newest category of nouveau riche are the innovative and cutting edge entrepreneurs who have worked long into the wee hours, given up quality family time and invested their whole selves into an idea or product that they helped develop. They are the partners and employees in Silicon Valley start-ups who will be lawfully allowed to sell their company stocks for cash in the near future. When a firm goes public, shares held previously by employees or investors are "locked" for a period of time. That time period is about to expire for many profitable start-ups including Pandora Inc, Linkedin Corp and Zynga Inc. With a sudden influx of ready cash, wealth managers and investment professionals expect the luxury market to be flooded with new demands for high-quality products.

UK Luxury Market
That's in the Silicon Valley, but the luxury market in the UK isn't far behind. The results of the luxury market research carried out by Walpole predicts that by the year 2015 the luxury sector in the UK will grow by 57%, or £9.4 billion in real terms. But we don't have to wait as that sector is expected to increase by 10% this year.

What's the connection between the newly rich in America and the rise in demand for luxury items in the UK? In a single word, it's tourism, since more than £1 in £4 spent on UK  luxury brands come from visitors. According to James Lawson, of Ledbury Research, the peaks in luxury demand in 2007 was related to conspicuous consumption, whereas the new luxury consumers of today are more refined.

Is the UK luxury market ready for an influx of wealthy tourists? This sounds like a win-win situation for everyone.