The global economy is experiencing an unprecedented shift towards emerging markets, and the luxury industry is no exception.
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With significant rise of the middle class, urbanisation, women in work and the love of luxury, emerging-market cities have become a key target for luxury brands. Emerging countries alone now account for just over one-third of the global economy, and are forecast to represent 55% of the world’s GDP by 2025, driving more than 75% of global wealth creation, according to McKinsey’s 2014 research. China is expected to be the second-largest market for luxury goods, following the US.
Driven by a strong desire to show off financial stability and success, luxury brands and wealth in the emerging markets have become inseparable.
When expanding in emerging cities, luxury brands must take into consideration diversity in wealth, culture, types of potential, existing customers and local regulations in emerging markets. It is therefore important to design the right to-go market model for each location to protect brand value and experience.
WealthInsight’s study on ‘The Rise of Luxury Goods in Emerging Cities 2019’ looks at the market growth potential of 10 emerging-market cities for luxury brand expansion, as driven by the strong growth of HNWIs and UHNWIs living in cities, urbanisation, the emerging middle class, and promising economic outlook. The 10 cities include Shanghai, Mumbai, Mexico City, Istanbul, Bangkok, Tel Aviv, Jakarta, Kuala Lumpur, Ho Chi Minh City and Lagos.
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By GlobalData
Istanbul, Mumbai and Mexico City are top three emerging-market cities for luxury brands
Demand for luxury goods in Istanbul is strongly driven by a number of factors. The city has the highest number of UHNWIs in the 10 selected cities, with 1,110 individuals in 2014, slightly higher than Shanghai with 1,095 in the same year. HNWI population growth in Istanbul is also high, at a forecast-period CAGR of 6.1%, rising from 57,989 individuals in 2015 to 64,804 in 2019.
The city’s urbanisation is one of the highest in Turkey, with 73% of its population living in urban centers, and it being a sought-after location. The city has also experienced strong growth in its female working population, and tourists from the Middle East who are luxury spenders.
Mumbai, as India’s financial capital, is an attractive location for multinational enterprise (MNEs) worldwide, and increasingly attracts wealthy expatriates. The city is also home to Bollywood, and has the country’s highest HNWI population, with 97,912 individuals in 2014, which is forecast to reach 138,529 in 2019. The city also has a strong growing middle-class population, offering a significant opportunity for luxury brands.
Demand for luxury goods in Mexico City is strongly driven from domestic sources such as the emerging middle class and HNWIs living in the city. It had 63,572 HNWIs in 2014, with a strong positive growth prospect at a CAGR of 7.7%, rising from 65,592 individuals in 2015 to 73,301 in 2019.
It is clearly evident that luxury goods are on the rise in the emerging cities, sending strong message to luxury brands companies to carefully formulate their expansion strategy, client strategy, and marketing strategy, if to remain competitive.
Dr. Roselyn Lekdee, economist, WealthInsight
