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In Stagnant Luxury Market, Luggage Brands Roll On

While the market for personal luxury goods grew only 1 percent last year, momentum in high-end tourism is fuelling a gold rush in sturdy luggage on wheels.
Chanel Spring/Summer 2016 | Source: InDigital
By
  • Limei Hoang

LONDON, United Kingdom — In the first four months after it launched, luggage brand Raden made around $2 million worth of sales from its website and Manhattan showroom.

The company, which sells just two sizes of luggage in a range of different colours, is on track to meet its target of $12 million in sales for its first full year, according to founder and chief executive Josh Udashkin — a former lawyer and director of international development for shoe retailer Aldo.

“We are growing [at such a fast pace] that we can’t keep our products in stock, which is a good problem to have as a young company,” he tells BoF. “I think people are really attracted to the simplicity of the purchase experience.”

Its two products, simply named “Carry” and “Check,” retail for $295 and $395 respectively, both feature glossy exterior shells, as well as built-in chargers, an integrated weighing scale and sensors that allow users to check their bag’s location via an app.

Raden is just one of many luggage brands tapping into the opportunity in the high-end travel goods market, where sleek, lightweight designs and “smart” technology features are targeting a growing base of well–travelled and digitally savvy customers.

While growth in personal luxury goods is slowing — the global personal luxury goods market grew by just 1 percent in 2015 on the previous year in real growth terms, according to a report by Bain & Company — travel and tourism is on the rise, particularly amongst the growing middle class in China.

Chinese citizens made over 100 million trips overseas in 2014. In the first half of 2015, this number grew by 10 percent and could reach 200 million trips by 2020. Chinese consumers have been driving almost a third of global luxury sales volume in 2016, with 80 percent of their spending taking place abroad.

The luxury luggage sector stands to benefit from this, particularly as consumers focus their spending on experiences like travel, and is helped by encouraging signs that demand for high-end luggage remains high at a time of sluggish growth for the overall luxury sector. Data from Euromonitor estimates the value of the global luxury travel goods market to reach $4.3 billion in 2016 and predicts it to grow by 16 percent over the next four years to around $5 billion.

“The luggage industry has enjoyed a steady continued annual growth rate of 3.7 percent compared to other categories, such as bags and watches, which only see a continued annual growth rate of 2 percent and 1.2 percent respectively,” says Jasmine Seng, personal accessories associate at Euromonitor.

The opportunity for growth in the sector was made even more apparent after LVMH’s announcement last week that it has purchased an 80 percent stake in suitcase maker Rimowa for $640 million. It was the second significant investment in the luxury travel goods sector this year (following Samsonite’s $1.8 billion acquisition of Tumi in August), highlighting the growing interest in a market where there are a few players but many opportunities for growth.

LVMH has acquired one of the few iconic brands with high-end positioning in the growing segment of premium luggage.

Earlier this summer, Samsonite bought luxury luggage company Tumi for $1.8 billion as part of a strategy to strengthen its position as the world’s largest branded-luggage maker by entering into the high-end travel baggage and accessories market.

"LVMH has acquired one of the few iconic brands with high-end positioning in the growing segment of premium luggage, which is boosted by the development of luxury tourism in both developed and emerging markets," says Mario Ortelli, head of the luxury sector at Sanford C. Bernstein.

Indeed, many luxury brands are keen to take advantage of the promising outlook in the luggage market, using it to diversify their portfolios against the wider downturn. Chanel's airport-themed Spring/Summer 2016 show tapped into the zeitgeist for luxury travel, and in July, Louis Vuitton launched a new contemporary collection of roller luggage — in mini, cabin and maxi sizes — a first for the French heritage brand, which traditionally makes monogrammed trunks.

It makes sense then, that LVMH invested in Rimowa, particularly given that the German brand recently launched its own “smart” suitcase with an electronic tag embedded inside that can communicate with the user’s smartphone via Bluetooth, an area with potential synergies for the Louis Vuitton luggage range.

"Even though brands are struggling to understand this complex picture with currency fluctuations and everything else changing the luxury shopping map, the big picture overall is that the market is still increasing," said Claudia D'Arpizio, senior partner at Bain & Company in a previous interview with BoF.

The sector is also seeing a host of new players emerging. In addition to Raden, luggage brands Arlo Skye and Away have also launched in the past two years.

“People are travelling more than ever,” says Steph Korey, co-founder of Away. “Certainly in the last five years, there has been a major shift into people focusing on experiences and investing their money into experience more than goods, products or apparel.”

Companies have come to realise that the consumer is looking for a better product, experience and price point, adds Korey, who previously worked at direct-to-consumer eyewear brand Warby Parker as head of supply chain.

It’s a view shared by Mayur Bhatnagar, the co-founder and chief executive of luxury luggage brand Arlo Skye. “Traditional luxury is stagnating,” Bhatnagar tells BoF. “It’s very wholesale driven and … there’s an very uninspiring shopping experience when you purchase luggage in [most] stores.”

Bhatnagar, who previously worked for LVMH before setting up Arlo Skye with Tumi’s former head of design Denielle Wolfe, says the brand’s customer feedback, particularly on social media platforms like Instagram, was integral to helping the company understand the needs of its consumer.

“You end up getting a better view on who your customer is, even though you have never met them, because it’s an online purchase, but because of social you are learning faster on who your customer is and how to engage with them directly.”

Editor's Note: A previous version of this article stated Raden was on track to meet its target of $12 million for the first nine months. This has been amended to its first financial year.

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