Is It Worth Investing in Luxury Goods?

The luxury goods market is booming, expected to hit 1.26 trillion euros by 2019¹. This makes investing in high-end fashion, jewelry, and collectibles more appealing. But, is it a smart move to put part of your money into luxury items? Let’s look into the good and bad sides of investing in these sought-after goods.

Luxury goods cover a wide range, from designer clothes and handbags to rare watches and fine jewelry¹. These items are seen as non-essential but are prized for their status, exclusivity, and quality¹. True-Luxury consumers, 30% of the market, will drive most of the growth from 2018 to 2025¹. The luxury casualwear segment, like sneakers and jeans, is also growing fast, thanks to True-Luxury consumers¹.

Key Takeaways

The global luxury market is projected to reach 1.26 trillion euros by 2019, growing twice as fast as global GDP¹.
True-Luxury consumers currently account for 30% of the luxury market, equivalent to 278 billion euros, with an expected increase to 395 billion euros by 2025¹.
The sneaker resale market is valued globally between five and seven billion US dollars, a small fraction of the overall primary sneaker retail market valued at about 100 billion US dollars².
Luxury watch brands like Rolex, Patek Philippe, and Audemars Piguet are considered the best investments, with about 20% of all luxury watches becoming profitable investments³.
The luxury goods market is influenced by demographic shifts, with Millennials expected to grow to 50% of the personal luxury market by 2025, and Gen Z consumers shaping the future of the industry¹.

What are Luxury Goods?

Luxury goods are items that go beyond what we need every day. They are made for people who have a lot of money and want special things. These items, like luxury fashion and accessories, are chosen for their uniqueness and the status they give¹. They range from high-end designer brands to luxury travel and experiences, offering many ways to indulge beyond everyday needs.

Examples of Luxury Goods

Some top examples of luxury goods include:

Exquisite high-end designer clothing and accessories, such as handbags, jewelry, and watches
Prestigious luxury vehicles, from sleek sports cars to the latest SUV models
Lavish luxury travel and experiences, including over-the-top vacations and specialized services
Rare and coveted collectibles, like vintage luxury watches and fine wines

These items stand out because of their top-notch quality, detailed craftsmanship, and the special status they offer⁴⁵.

“Luxury is not a necessity, but a privilege. It is the opportunity to be unique, to be special, to be different.”

– Anonymous

Luxury goods capture our attention, touch our feelings, and show off our refined taste and status. Whether it’s a fancy dress, a fast sports car, or a top-notch luxury travel spot, these items meet the wants of those who aim to improve their lives and stand out with their choices⁴⁵¹.

Why Do People Buy Luxury Goods?

Buying luxury goods is a complex topic. Many people choose luxury items for reasons beyond just need. They believe higher prices mean better quality, even if cheaper items do the same job⁶.

People also buy luxury to feel better about themselves. Showing off their wealth through luxury goods is a big reason⁶. They want to own real luxury brands to look and feel better about their social status⁶.

Brand loyalty is another factor. Some people feel a strong connection to certain luxury brands. This makes them choose those brands over cheaper or more practical ones⁶. This emotional tie can make them buy luxury items even when it’s hard on their wallets.

Reason for Luxury Goods Purchase	Explanation
Irrationality	Consumers often believe that higher prices equate to higher quality, leading them to pay exorbitant amounts for luxury goods that serve the same basic function as more affordable alternatives⁶.
Desire for Self-Esteem and Accomplishment	Owning luxury items can boost one’s self-perception and social standing, leading to a sense of accomplishment and increased self-esteem⁶.
Brand Loyalty	Consumers may develop a deep emotional attachment to certain luxury brands, prioritizing those brands over more practical or cost-effective options⁶.

Buying luxury goods is complex, mixing rational and irrational reasons. Knowing why people buy luxury can help both consumers and businesses in the market.

“Luxury is not a necessity, but a privilege. It’s not a need – it’s a want.” – Unknown

⁶

The Appeal of Authenticity in Luxury Goods

In the luxury world, being real is key. People often choose to buy the real deal over a fake, even if they look the same⁷. They want the real thing because it holds special meaning and makes them feel like they truly own it, not just a copy⁷.

Being real is more than just about the item itself. It’s about supporting a brand known for quality and a long history of excellence⁷. This feeling of being part of an exclusive group is what makes luxury items special. It’s what makes them different from fakes.

Now, wanting real luxury goods is also about being sustainable and ethical⁷. Young people are looking for brands that share their values and care more about doing good than making money⁷. So, luxury brands are starting to offer pre-owned items that are checked for quality and realness.

“Authenticity is the new luxury. Consumers are more discerning and demand transparency from the brands they support.” – Industry Expert

The love for real luxury is also seen in the growing second-hand market⁷. This market is getting bigger than the new one, drawing in young buyers who want luxury but don’t want to pay too much. They get to buy items they’ve always wanted but at a lower price, still enjoying the status and realness of the brand.

In the end, the draw of real luxury is complex. It comes from how people think, the desire for something special, and the push for ethical shopping⁷. As luxury changes, the value of being real will grow, making it even more key to what makes luxury items so desirable.

Size and Growth of the Luxury Goods Market

The luxury goods market has seen huge growth, reaching $253.7 billion in 2023⁸. It’s expected to hit $369.8 billion by 2030, showing a bright future for luxury⁸.

Luxury fashion and accessories are key to this growth, with the apparel market aiming for $115.4 billion⁸. This rise comes from more people wanting high-end items to show off their status⁹.

Even when money is tight, people still want luxury. Spending on luxury items may drop, but the demand stays strong¹⁰. People are willing to pay for quality and exclusivity⁹.

Brands face new challenges as the luxury market changes. They must keep up with what consumers want, the growth of online shopping, and the focus on being sustainable and ethical⁹. By adapting, luxury brands can grow with the market and stay ahead⁸.

Metric	Value
Global luxury goods market size (2023)	$253.7 billion
Projected global luxury goods market size (2030)	$369.8 billion
Luxury apparel market size (projected)	$115.4 billion
Luxury goods market growth rate (CAGR, 2023-2030)	10.1%

Brands in the luxury goods industry face a changing world. They must keep up with new trends, online shopping, and the focus on being sustainable and ethical⁹. By adapting, luxury brands can take advantage of the market’s growth and stay strong⁸.

“Luxury brands in the fashion industry are the most profitable and fastest-growing segment, although they are not thoroughly understood or investigated.”¹⁰

Is It Worth Investing in Luxury Goods? gv

Investing in luxury goods like designer clothing, handbags, jewelry, and watches can be tempting. But is it a good idea? The allure of owning rare items is strong, but the financial side is complex¹¹.

Some luxury goods have seen their value go up over time. For example, rare whiskey, cars, and wine have done well over the last ten years¹¹. But other items like art, handbags, coins, and jewelry haven’t done as well¹¹. This shows that luxury goods might not always be a smart investment choice.

Investing in luxury goods also has its challenges. Finding rare items, storing them safely, and selling them can be hard¹¹. They don’t make money on their own like other investments do, which makes them less appealing for long-term investing.

However, some luxury goods have seen big price increases. For instance, certain Rolex models have gone up by 20% to 27% in value¹¹. The Patek Philippe 5726A Nautilus also saw a 67% increase in price from 2008 to 2019¹¹. But these are not common cases, and the risks of investing in luxury goods should be considered carefully.

Whether investing in luxury goods is a good idea depends on your goals and how much risk you can take. For many, sticking with traditional investments is a safer bet¹¹.

The desire to own rare luxury items is strong. But, the financial side of investing in luxury goods is complex. It’s important to think about the risks and market trends before jumping into this investment area.

Pitfalls of Investing in Luxury Goods

Luxury goods can be tempting as investments, but there are risks to consider. It’s hard to predict which luxury items will increase in value, as their prices can change a lot each year¹². For example, watch prices dropped by about 40% from their peak in 2022, from $48,000 to $29,368¹². Finding rare luxury items can also be tough, needing a lot of research and connections.

After buying, there are ongoing costs like storage and insurance, which can be 1-2% of the item’s value¹². Selling these items can also be hard, and selling platforms take a big cut, reducing profits¹².

Risks of Luxury Item Collectibles

The luxury collectibles market has its risks⁵. Some items like vintage Rolex and Patek Philippe watches have seen big price increases, but the market is unstable⁵. Swiss watch exports fell by 16.1% in the first three months of the year, and wristwatch exports dropped by 25.4%¹².

Not all luxury brands are good investments. Rolex and Patek Philippe are top choices for collectibles⁵. But other brands, like those under 500 francs, saw a 18.8% drop in exports, and those between 500 and 3,000 francs fell by 38.2%¹².

Hidden Costs of Luxury Investments

Investing in luxury goods has hidden costs that can eat into profits¹³. These costs include storage, insurance, and fixing up the items¹³. For example, watch dealers now hold more old inventory, showing the need for good maintenance¹².

The secondary market for luxury goods is unpredictable, with some brands doing better than others⁵. The stock of Watches of Switzerland Group PLC is near a five-year low, down from a peak in December 2021¹². This shows how volatile this market can be.

While luxury goods can be tempting, investors should think carefully about the risks and costs. Doing thorough research, diversifying, and looking at the long term are key to doing well in this market¹²⁵¹³.

Performance of Luxury Goods as Investments

Investing in luxury goods has had mixed results over the last decade¹⁴. Some items like rare whiskey, cars, and wine have done well, beating the S&P 500’s 152.9% return¹⁴. But most luxury collectibles haven’t matched that success.

Rare whiskey has seen a huge 373% return in 10 years¹⁴. Classic cars and fine wines have also been good investments, with returns of 185% and 162% respectively¹⁴. Yet, other luxury items like art, handbags, coins, and jewelry have done worse than the stock market¹⁴.

Even the best luxury collectibles can be unpredictable. Whiskey, for example, had a 3% return over the last year, showing how volatile these investments can be¹⁴. This highlights the need for careful research and a long-term view when adding luxury goods to your portfolio.

Luxury Collectibles as Alternative Asset Performance

Luxury collectibles can be attractive as alternative assets, but they often don’t match the stock market’s performance¹⁴. Investors should think carefully about the risks and rewards before putting a lot of money into these luxury items¹⁴.

Asset	10-Year Return
Rare Whiskey	373%
Classic Cars	185%
Fine Wine	162%
Art	91%
Handbags	74%
Coins	59%
Jewelry	44%
S&P 500	152.9%

Luxury collectibles like rare whiskey, cars, and wine have beaten the stock market in the past decade¹⁴. But the luxury goods market overall has been hit-or-miss for investors¹⁴. It’s crucial to weigh the risks and potential gains before investing in these alternative assets¹⁴.

Conclusion

Investing in luxury goods can be tempting but requires careful thought and realistic goals. The luxury market has grown steadily over the last ten years¹⁵. Yet, it’s hard to predict which luxury items will increase in value¹⁵.

Luxury brands are special because they have limited supply and focus on being unique. This makes them attractive as investments¹⁵. But, remember, there are extra costs like finding, storing, insuring, and selling them. These costs might reduce any potential profit¹⁶. Also, luxury goods make people feel many emotions, from joy to guilt¹⁷, which adds to the complexity of investing in them.

For most people, luxury goods are best enjoyed as a hobby or for personal pleasure. Only a few luxury items, like rare whiskey, cars, and wine, have done better than the S&P 500 in the past decade¹⁵. For most investors, sticking with traditional investments like index funds is safer and more reliable for long-term gains.

FAQ

What are luxury goods?

Luxury goods are items you don’t really need but want. They include designer clothes, handbags, jewelry, and fancy cars. Even things like expensive vacations and live-in nannies can be considered luxury goods. People buy them for their unique status and the prestige of the brand.

Why do people buy luxury goods?

There are many reasons people buy luxury goods, even if they can’t afford them. They might think that paying more means getting better quality. Or they might want to feel better about themselves or show off their wealth. Some people also like owning real luxury items, even if they cost a lot. They might choose to spend more on luxury goods that do the same job as cheaper ones.

What is the appeal of authenticity in luxury goods?

Being real is a big deal for luxury goods. People often prefer to buy the real thing, even if a fake looks the same. It’s about the memories and feelings that come with owning something genuine. They want to know they have the real deal, not just a copy. This desire for authenticity drives the market for luxury items.

How big is the luxury goods market?

The luxury goods market was worth 3.7 billion in 2023 and is expected to grow to 9.8 billion by 2030. Luxury clothes are a big part of this, expected to hit 5.4 billion by 2030. As people earn more, they often spend more on luxury, but now they’re cutting back in the U.S. and Europe.

Is it worth investing in luxury goods?

Investing in luxury goods can make money, but it’s not always the best choice. Only a few luxury items like rare whiskey, cars, and wine have done better than the S&P 500 over the last 10 years. Other luxury items like art and jewelry haven’t done as well. Investing in luxury goods also has extra costs like finding rare items, storing them, and insuring them. And selling them can be hard.

What are the pitfalls of investing in luxury goods?

Investing in luxury goods has its downsides. It’s hard to know which luxury items will increase in value. Finding rare items can be tough too. There are also costs like storage and insurance, which can be 1-2% of the item’s value. And selling your luxury goods can be challenging, with platforms taking a cut of the sale price.

How have luxury goods performed as investments?

Looking at luxury goods as investments over 10 years shows that only a few did better than the S&P 500. Rare whiskey, cars, and wine were the top performers. But art, handbags, coins, and jewelry didn’t do as well. Even the best luxury goods can have ups and downs, like rare whiskey’s poor performance over the last year.