Olin Business School retail expert attributes soaring sales of luxury goods to expanding personal wealth in China

Sales of luxury goods, which analysts say could spike as much as eight percent this year, are soaring thanks to expanding personal wealth in China, says a luxury retail expert at Washington University in St. Louis.

“One of the key factors driving global sales of luxury goods is the burgeoning Chinese economy and the concomitant expansion of its affluent classes,” says Martin K. Sneider, adjunct professor of marketing at Olin Business School.

“These people are anxious to demonstrate their successes and newly found wealth,” he says. “What better way than purchasing and displaying or wearing the signature luxury items that Louis Vuitton and other similar brands market?”

While the United States hopes to avoid a “double-dip” recession, global demand for luxury goods is skyrocketing.

Luxury retail giant Moët-Hennessy Louis Vuitton (LVMH), the world’s largest maker of luxury goods, announced recently that profits beat analysts estimates in the first six months of 2011 as demand for its products soared in America, Europe and emerging markets.

LVMH plans to open two new stores in Asia and expand four others this year.

Hermes International SCA, the French maker of luxury handbags and silk scarves, raised its target for annual revenue growth, saying first half operating profit, when numbers are released, should grow 12 to 14 percent.

Domestically, despite what many see as a still fragile economic outlook, the luxury market has taken off as well.

“The stock market has recovered, commercial real estate has rebounded and corporate earnings and salaries are robust,” Sneider says. “The self-imposed austerity of 2008 and 2009 is but a distant painful memory for wealthy Americans. Comparative store sales are up every month for Saks and Neiman-Marcus, which provides further proof that for their customers the recession is history.”

Sneider teaches the “Luxury Apparel Marketing” course at Olin Business School. During a two-week class tour of luxury goods’ headquarters in Europe this year, Sneider and his students learned first hand about the upturn in this niche market.

“It was an eye opening experience for the students,” Sneider says. “We had presentations from senior executives, buyers and strategists from Louis Vuitton, Chanel, Hermes, Burberry, Brunello Cucinelli, Gucci, Armani and more. I think the students were able to see the pride these retailers take in their products and some of the reasons they are expanding so quickly.”

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Neil Schoenherr

Olin Director of News & Information

Olin Business School at Washington University in St. Louis

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