Crypto Bros Saved Luxury From ‘Common Prosperity’

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Advisor Perspectives
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Crypto

Chinese consumers have passed the bling baton to American shoppers.

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Crypto

Flush from soaring stock markets and surging cryptocurrencies, the U.S. was the surprise leader of the luxury sector last year, as people splashed out on everything from Cartier jewelry to Christian Dior handbags. Although China is still linked to the fortunes of the industry, Covid outbreaks and Xi Jinping’s “common prosperity” agenda have curbed the country’s fierce appetite for high-end goods. Fortunately for Big Luxury, American spenders came to their rescue.

But the industry shouldn’t be celebrating just yet. With the selloff in tech and other highly valued stocks, and a near halving of the value of Bitcoin since November, the risk is that people rein in their newfound desire to go upmarket and the red-hot U.S. luxury market loses steam.

Consumers typically splurge when they feel wealthy. According to analysts at Jefferies, crypto gains likely accounted for up to a quarter of the growth in U.S. luxury sales in 2021. The most obvious example was in watches, as the U.S. overtook China last year to become the most valuable market for Swiss watch exports. But consumers spread the love everywhere, splashing on contemporary art and non-fungible tokens, as well as on top-end jewelry, boosting the likes of Cartier-owner Cie Financiere Richemont SA.

The new U.S. luxury buyer is younger and interested in what Jefferies dubs “Medal” — music, experience, digital, art and luxury.

The biggest corporate winner is LVMH Moet Hennessy Louis Vuitton SE, with brands including Louis Vuitton, whose menswear was led by the late designer Virgil Abloh, and Tiffany, whose recent advertising campaign was fronted by Jay-Z and Beyonce. These partnerships have helped LVMH connect European luxury to newer, more diverse customers. Founder and Chief Executive Officer Bernard Arnault even said last week that Louis Vuitton was “not just a fashion brand” but “a cultural brand.” He described both the performance in the U.S. in general, and Tiffany in particular, as “remarkable.”

Kering SA’s Gucci and Balenciaga, which have yet to report, should also have benefited from the rise of wealthy young buyers in the U.S. The same goes for Moncler SpA. Even Britain’s Burberry Group Plc has seen young men showing more interest in its check and branded sneakers.

But it’s not just American shoppers who are changing. In the past, U.S. luxury was highly concentrated in the retail bastions of New York, Los Angeles and Chicago, and the sector was very dependent on department stores. The environment looks different today. With the growth of Big Tech, and more affluent Americans relocating to other cities, many more regions are thriving.

Read the full article here by Andrea Felsted, Advisor Perspectives

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