Is the USA Becoming Luxury’s New El Dorado?

For years, China has been the go-to growth market for luxury brands. However, recent data suggests that the United States could be the next hotspot for high-end fashion and accessories. Despite the ongoing challenges posed by the Covid-19 pandemic, the US market has shown remarkable resilience and promise, leading major luxury groups and labels to invest heavily in the region.

In the first quarter of 2021, luxury conglomerate Kering reported a staggering 46% increase in comparable sales in the USA, with online sales experiencing an unprecedented growth rate of 134%. Kering’s flagship brand, Gucci, saw a 51% rise in retail sales, while Saint Laurent recorded a 46% increase. Similarly, LVMH observed a 23% sales growth over Q1 2020 and a 15% increase over Q1 2019. Hermès also experienced a 23% sales rise in the same period, highlighting the positive performance of the US market despite ongoing local restrictions.

The surge in luxury shopping in tourist destinations like Miami, Las Vegas, and Los Angeles has contributed to this growth. Salvatore Ferragamo reported an 18.2% increase in sales at constant exchange rates in North America, attributing it to a phenomenon known as “revenge shopping.” This term refers to consumers’ pent-up demand for luxury goods after months of frustration.

In addition to increased sales, several luxury brands have chosen the US as a prime location for events and store openings. Gucci showcased its centennial celebrations with a show in Los Angeles, while Golden Goose opened a store on Rodeo Drive in Beverly Hills. Moschino and Montblanc have also recently announced plans to expand their presence in New York. These high-profile moves exemplify the growing significance of the US luxury market.

According to Claudia D’Arpizio, a partner at Bain & Company, the US is once again becoming the most important market for the luxury industry. After an initial surge in demand from Asia, the US has become the new El Dorado, attracting a renewed customer base and a younger demographic. The dynamic nature of the US market makes it an attractive prospect for luxury brands.

The US economy is displaying signs of a strong recovery, with experts predicting that it will reach pre-pandemic levels by 2021. The younger generation, which has been less psychologically impacted by Covid-19, has shown a significant appetite for luxury goods. Additionally, the remarkable performance of the stock market and the success of the vaccination campaign have contributed to increased consumer confidence.

The Biden administration’s substantial investment plan, including significant spending on household consumption and infrastructure, has further fueled the US economy. In Q1, the GDP experienced a 6.4% rise, signaling robust growth. Luxury sales have mirrored this trend, with retail sales jumping by 23% in April compared to the previous year. Online sales have also witnessed significant growth, rising by 19.9% and 95.6% respectively.

The retail distribution landscape in the US is rapidly evolving, with department stores struggling to attract younger consumers. On the other hand, specialized e-tailers and online platforms that cater to younger demographics are gaining traction. Luxury brands must adapt to these changing dynamics and engage in localized efforts to connect with diverse communities, such as African-Americans and Latin Americans.

Furthermore, luxury labels should consider the evolving needs of American consumers who prioritize proximity and convenience. Pop-up stores and personalized clienteling initiatives can cater to these changing demands. Influenced by the habits formed during lockdowns, the US is witnessing a shift towards a more ruralized luxury market.

To summarize, the resurgence of the US luxury market positions it as an appealing alternative to China. Major luxury brands and groups are experiencing significant growth and success in the region, driven by increased consumer confidence, economic recovery, and a younger, more diverse customer base. As the US economy continues to rebound, luxury brands should prioritize investing in localized strategies and strengthening relationships with their target market to capitalize on the country’s status as luxury’s new El Dorado.

Useful links:
1. https://www.businessoffashion.com/articles/professional/luxury-brands-wooing-us-customers-with-appropriate-strategies
2. https://www.cnbc.com/2021/05/20/rolex-sold-out7-years-for-new-basics-idn-el-dorado-us-luxury-boom-.html