Canada Outpaces US in Luxury Spending

By US Daily Review Staff.

The luxury sector in Canada has proven to be resilient in economic uncertainty as compared to this sector in Europe and the U.S., according to data released today from American Express Business Insights. Optimism amongst Canadians appears to be on the rise as luxury spending increased, but what has proven most surprising is that in a soft job market, younger Canadians are dominating Canadian luxury spend growth in the core areas of fashion, travel and fine dining.

These findings, which are proprietary research, are based on actual, aggregated spending data from 2009 through 2011, suggest that not only was the Canadian luxury sector less impacted by the downturn (down 9% in 2009) than its counterparts in the U.S. and Europe (down 14% and 10% respectively), but that Canadian spending levels have recovered more quickly. Europe and the U.S. have yet to reach pre-recessionary spending levels in the luxury segment, whereas Canadian luxury spending has increased overall since 2009.

“As a trusted partner to many Canadian businesses, having the ability to gain insight into consumer spending patterns enables us to effectively help our merchants enhance their business planning and marketing programs,” says Colin Temple, Vice President and General Manager of Merchant Services, American Express Canada. “What we’ve seen in Canada is that, even during economic uncertainty, consumers are not shying away from luxury spending.”

Gen Y Dominates Canadian Luxury Spend Growth 
While their parents may be pausing prior to making a transaction, Canadian Gen Y’s are willing to spend when it comes to a night out.  Over the past few years, Gen Y has been the driving force for growth in the luxury market, with an increase in spend on luxury fashion of 33 per cent from 2009-2011, 74 per cent increase in spend on travel for the same period, and a staggering 102 per cent increase in spend on fine dining. Conversely, the data suggests older generations, who once dominated the luxury market, have shown a slowdown in spend growth over the same period:

  • Gen X increased spend on luxury fashion by 33 per cent, travel by 15 per cent, and fine dining by 31 per cent
  • Boomers increased spend on luxury fashion by 24 per cent, travel by 6 per cent, and fine dining by 15 per cent
  • Seniors increased spend on luxury fashion by 2 per cent, decreased in travel by 3 per cent and decreased in fine dining by 1 per cent

“The luxury market is turning its eye to the younger generation,” says Temple. “This demographic set has become integral to business growth as older generations start to exit the market.”

The New Luxury Consumer 
In Canada, newcomers, or consumers who have not spent on luxury before, made up 42 per cent of total Canadian luxury shoppers in 2011. Yet, despite being the largest percentage of luxury shoppers, the newcomers have the lowest average transaction size.

“The data shows that newcomers are vital to the luxury market,” says Temple. “While these consumers are just dipping their toes into the luxury pool now, we see great potential for this demographic to truly embrace the luxury shopping lifestyle and become loyal to the category over time.”

Although newcomers are integral to the Canadian luxury landscape, this particular group made up just 22 per cent of total luxury shoppers in the U.S. In the U.K., newcomers made up just 17 per cent of total luxury shoppers for 2011.

Interesting Online Insights
One consistent element amongst all Canadians Cardmembers is that they like to shop online for luxury products:

  • Gen Y increased online luxury fashion spend from 15% year-over-year growth in 2009 to 53% year-over-year growth in 2011
  • Gen X increased from 1% YOY in 2009 to 32% YOY in 2011
  • Boomers increased from 3% YOY in 2009 to 45% YOY in 2011
  • Seniors increased from 4% YOY in 2009 to 30% YOY in 2011

Concurrently, the research pointed to a new appreciation for men shopping for high fashion online. Over the past three years Canadian men’s share of online luxury fashion shopping has increased significantly led by Gen X men. In fact, in 2011, 60% of all Gen X shoppers in the luxury space were men.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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