Luxury goods boom in Britain as super-rich youngsters buck the recession
They’re young, rich and mortgage-free, and the scions of the 1% are having a roaring twenties.
Despite the economic gloom currently shrouding the UK and many other western countries, sales of luxury brands have been booming and growing numbers of buyers are young adults.
Swiss watches, Louis Vuitton trainers, rare Birkin bags and 81-year-old whiskies are among the products that are fuelling impressive growth in the bottom lines of luxury brands such as LVMH, Burberry and Kering.
Imports of Swiss watches to the UK were up by 31% in the first half of 2022, according to the Federation of the Swiss Watch Industry – the average spend at the Watches of Switzerland group being about £6,000. Meanwhile, sales of watches below £2,500, sometimes referred to as “mid-range”, are falling.
Burberry’s sales were up 11% over the last six months, it was reported last week. LVMH, which owns brands including Dior, Tiffany, Moët Hennessy and Louis Vuitton, was up by 28%, while Kering, the firm behind Gucci and Balenciaga and others, saw a 14% rise.
“I don’t want to describe luxury as recession proof – it feels like tempting fate – but it is an extremely resilient sector, both at the top end of the market and at the affordable luxury segment,” said Helen Brocklebank, chief executive of Walpole, which represents the British luxury market.
Tourists from the US and the Middle East are making use of the strong dollar to come to the UK and European countries, according to James Ison, the self-styled Deal Maker For The 0.1%, who founded his business as a wrangler for the rich after his Rich Kids of Instagram account became popular.
“People are having a Yolo [you only live once] moment,” Ison said. “They’re going to Bicester Village and spending five figures in an afternoon. They include a lot of people who did well in the pandemic, online entrepreneurs.
“These are people who aren’t necessarily paying a mortgage or high fuel costs,” Ison said. “Kids of very successful business people, or international students. They’re the younger generation who are more likely to bid on Louis Vuitton and Nike Air Force 1 trainers at £7,000 a pair.”
This is the other side of the boom – the rise of the luxury reseller. Buying a watch, a handbag or a pair of trainers has become a new type of investment, although nobody refers to these resold investments as “second hand”.
“During the pandemic, people were selling their Rolexes for 150%, 180% more than the retail cost,” Ison said. “They just don’t have the supply – the big luxury brands are facing the same kind of issues as every other business with supply chains, so you’re getting people who are able to find something at retail, and then sell it online 24 hours later for double.”
Sotheby’s and other traditional auction houses have set the tone with sales of items such as a Hermès Himalaya Birkin 30 handbag for $226,180 (£190,250) in 2021.
More modest offerings are available online at sites such as Vestiaire Collective, Trendy Tickers and the RealReal, which said that millennials and GenZ shoppers made up 41% of their customers.
“People are more incentivised to buy a watch than save up and buy a house,” Ison said. “It gives them opportunities – they’re buying status, that way to level up into whatever crowd they’re chasing. And a watch is easier to sell than a house.”
Whiskies are the British equivalent of Swiss watches, according to Brocklebank. Last month an anonymous collector at Sotheby’s in London paid £300,000 for a bottle of Macallan’s The Reach, an 81-year-old single malt, the oldest whisky to be sold at auction.
However, luxury goods makers in Britain are concerned that dollar-rich tourists are not returning to London, but are preferring European destinations such as Paris and Milan because the UK has stopped allowing tourists to reclaim VAT when they leave the country.
“I go day-to-day to boutiques and department stores, and it’s quiet,” said Melody Mashilompane, the founder of Style Concierge by Melody, who is a personal shopper for many high-net worth individuals.
“People definitely aren’t spending as much as they were six months ago,” she said.