Luxury Brands Bite Back Against Brexit
Just yesterday, it was reported that total UK retail sales in May 2017 fell to levels on par with growth seen in 2013. The cited reason behind this? Brexit. Not necessarily surprising to ‘stay’ supporters who anticipated that Brexit would trigger a decline in consumer spending, however – it’s worth noting, that this decline in consumer spending far exceeds the 0.8% rate that analysts predicted. Of the statistics published, those suffering the most are furniture retailers and luxury food brands (while own-label food produce purchasing has experienced an upsurge). On top of this, the ‘middle’ high-street market are seen to suffer as retailers increase prices (on average) by 2.8% as a way to claw back some of the increased import charges. This is not say that it’s all doom and gloom, if you are a luxury brand, there is hope of weathering the Brexit storm.
Attracting foreign shoppers
While many are mourning the Sterling depreciation, the pound drop did make the UK a spending heaven for foreign shoppers. In fact, tourism was boosted by 8% in the second half of the 2016 (compared to the first half) as the cost of shopping in the UK becomes more accessible. Not only this, with its tight boarder control, the UK is not an easy entry location for shopping – meaning that the luxury shoppers it attracts are serious shoppers.
Home grown shopping
As the cost of travelling abroad has increased for the UK, more Brits are opting to shop for their luxury goods on home turf – rather than absorbing the costs of buying in other currencies. The sticking point here is the potential for retailers to continue to attract millennials. According to YouGov, 66% of 18-24-year-olds voted to remain in the EU, as did 52% of 25-49-year-old. This means that it’s the younger generations predominately set to live with the consequences of the older generations decision. If Millennials continue to feel financially squeezed, this could be reflected in anti-corporate sentiment. Luxury retailers will have to continually reinvent their proposition to attract this key demographic.
As prices increase, consumers have started seeking out little bits of luxury with prestige beauty products doubling in growth post-Brexit. This drift towards small luxuries shows that consumers still crave indulgencies and has become totally marketable with many luxury brands now offering entry price points, ‘token’ items. This strategy locks the consumer into the brand and helps establish a loyalty for when times are less turbulent.
While the luxury climate in the UK is a highly unpredictable, according to a new February 2017 report by CBRE and Walpole, London still remains the global city with the most potential for luxury retail growth. This is because it’s infrastructure widely supports the luxury market with 94 five-star hotels, 65 Michelin-starred restaurants, and 45 private members’ clubs.
As the UK begins to detach from Europe, it’s important that retailers continue to hold their luxury stronghold. After all, the UK has a strong luxury brand heritage, unrivalled expertise, and a strong supply chain in place that can ensure continued growth.
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