The luxurious hunch has change into one of many largest phenomena of a good 2023. The wealthy are splurging much less and luxurious retailers from LVMH to Gucci and Balenciaga are all getting caught within the riptide.
However at the very least one firm believes it could actually get ultra-rich consumers to maintain shopping for its merchandise and defy the proclaimed finish to the “roaring 20s.”
The pinnacle of Bang & Olufsen—a Danish firm well-known for its high-end dwelling leisure gear—is assured the group will beat a latest financial downturn as a result of the wealthy will preserve including to their wealth.
Chatting with the Financial Times, Bang & Olufsen CEO Kristian Teär stated his firm was on monitor to maintain promoting to his clients for one easy motive.
“The rich will only become richer,” Teär informed the FT.
“We know they want to also express themselves, and they don’t want to have what everybody else has.”
Bang & Olufsen sells dear audio system, televisions, headphones, and soundbars. Its most costly merchandise is a set of £110,000 ($139,000) Beolab 90 audio system. Prospects may purchase Ferrari-branded headphones for £1,150 ($1,455), or splurge on a folding, oak-accented tv value £21,150 ($26,775).
Revenues for the group fell almost 7% final 12 months to round $400 million as demand in its essential China market slowed amid sustained COVID-19 lockdowns.
Nevertheless, the group beat expectations with its newest earnings as revenues and earnings as soon as once more elevated, buoyed by value rises and the sale of upper margin merchandise, demonstrating demand from higher-end consumers.
Finish of the ‘roaring 20s’
The final 12 months has seen a steep slowdown in luxurious purchases in what’s being dubbed the top of the most recent “roaring 20s.”
Gucci proprietor Kering posted a fall in revenues in its final quarterly earnings, becoming a member of corporations like LVMH, Burberry, and Balenciaga in struggling to maintain gross sales secure amid a tricky macroeconomic setting.
The watch sector hasn’t been spared both, with the value of Rolex and Patek Philippe timepieces falling to two-year lows in November. The slowdown within the sector prompted the CEO of Swiss watchmaker Audemars Piguet to recommend the widespread splurge skilled in 2020 and 2021 was an anomaly that wouldn’t be seen again.
In the meantime, corporations like LVMH have been pressured right into a minor technique shift amid the slowdown. The group, run by Bernard Arnault, diversified into entry-level sunglasses
Nevertheless, whereas these teams have been competing with one another for a shrinking pool of luxurious consumers, Teär informed the FT his group has the benefit of being the one considered one of its variety to promote its merchandise.
“In audio luxury, there is nobody else,” Teär stated.
Teär can also be desirous to attempt to promote to millennials and Gen Z consumers who’ve disposable earnings and need to furnish their properties with well-designed tech.
Certainly, a latest surge in consumers choosing Bang & Olufsen merchandise can also be an indication of the rising pattern of “stealth wealth,” the place ultra-rich consumers go for innocuous purchases of the whole lot from baseball caps to gentle switches which are effectively out of attain for the everyday client.
The pattern signifies a motion away from demand for the extra overtly luxurious objects marketed by the likes of Gucci and LVMH.
Nevertheless, whereas coming throughout as rightfully bullish after its newest earnings, Bang & Olufsen’s wager that rich shoppers will proceed to go for eyewatering value tags is a technique that has harm the corporate previously.
Shares within the group plunged in 2019 and have struggled to get better since as clients didn’t buy the group’s $15,000 televisions, after tech reviewers identified they may get similar-quality TVs at a a lot cheaper price level.
