Luxury in high demand in post pandemic world
Yev Shelkovskiy (pictured), PM at Emles reports that retail sales have shown a significant shift towards luxury goods, post pandemic. Emles is the issuer behind LUXE, the Emles Luxury Goods ETF and Shelkovskiy says that first quarter GDP total sales were 6.3 per cent higher than a year ago – before the pandemic really hit – and that he believes that the latest USD1,400 stimulus payment and relaxation of Covid containment measures will increase the opportunities to spend.
Luxury consumption has grown on ~5.9 per cent through many economic cycles every year from 1996 to 2019, according to Bloomberg Visual Capitalist figures, and in the next decade, growth is expected to be 28 per cent, led by Chinese consumption, according to McKinsey.
Shelkovskiy was the co-creator of LUXE, having arrived at Emles at its inception in November 2019. The ETF was launched in November 2020, when, perhaps, luxury was the last thing on many people’s minds, but is now hoping to build on its USD3 million asset base.
“We looked at the equity space and found it saturated in thematic ETFs, but luxury was a big glaring gap but it is a USD300 billion industry every year globally,” he says.
He observes that there has never really been a benchmark for luxury, and the sector has mostly been growing in Asia and Europe, rather than the US.
“A lot of people find it weird or interesting that luxury has been relatively strong during the pandemic and people like to put it in their discretionary bucket but fear that a downturn in spending will see luxury plummet, which is not necessarily the case as the consumer base is different from other discretionary goods, with customer loyalty and stickiness to brands.”
Shelkovskiy notes that luxury goods let you access the growing middle class in the emerging markets, without directly accessing emerging market stock markets. Around 40 per cent of luxury consumption is in China, which is driving growth in the space and has done for the better part of the last 10 years.
“It used to be Japan, then the Middle East and Russia and now it’s China and prosperity in China will continue to drive this sector with 60 per cent of luxury consumption growth in the next decade expected to come from China.”