Market Grows As Melania Trump Puts Focus on High End Luxury

U.S. First Lady Melania Trump opened a window onto the luxury world over the weekend when she wore a $51,000 designer jacket to a lunch on the sidelines of a global summit in Sicily.

While the revelation sent many into sticker shock, the reality is that those kinds of prices belong to the most exclusive high end of haute couture that operate at the highest level of hand craftsmanship, accessible only to the very few.

"For the brands, they need to do it, to have the attention and to keep the research and development high," said Claudia D'Arpizio, a senior partner at Bain & Company consulting. "There is not a real public for that. I would say very few women in the world are buying haute couture. While for the rest, I think people are spending money, but they are more cautious about value."

A floral applique jacket like the one Mrs. Trump purchased for the G-7 outing, for example, would require many seamstress hours of hand embroidery. Dolce&Gabbana did not release any details of the materials, but Stefano Gabbana celebrated its high-profile outing on Instagram.

Looking beyond the uppermost tiers of indulgence, a new Bain study shows that sales of global luxury goods leveled off last year from a period Chinese-fueled euphoria. They are expected, however, to grow again this year, despite uncertainty generated by the recent Manchester attack and changing U.S. travel policies.

Sales of luxury apparel, jewelry, accessories and beauty products last year totaled 249 billion euros ($280 billion), compared with 251 billion euros in 2015. They are expected to grow by 2 percent to 4 percent this year.

The forecasts reflect improved confidence in Europe, which suffered declines after terror attacks in Paris, and solid performance in China. They will offset a slowdown the United States due largely to the strong dollar and uncertainty over travel policy.

"Local customers are buying again, both in Europe and China," D'Arpizio said.

While sales in Paris are back to pre-attack levels, D'Arpizio said new uncertainties can affect the outlook. In Europe, that includes the impact from the more recent terror attack in Manchester. And in the United States, that includes the new administration's moves to impose a travel ban on some Muslim nations and even widen the ban on laptops in the carry-on luggage on inbound overseas flights, which she dubbed the "Trump Slump."

"These restrictions are not helping when planning holiday trips," she said.

While the impact on luxury sales of Trump's travel policies have yet to be calculated, D'Arpizio said the strong dollar is hurting sales to tourists to the United States, in particular from China, Argentina and Brazil.

For 2017, European sales are expected to increase 7 percent to 9 percent, while formerly double-digit China is expected to grow by a more moderate 6 percent to 8 percent. A slight contraction is forecast for the Americas and Japan.

The eye-popping price of Melania Trump's floral applique jacket goes against overall pricing trends in the luxury world.

D'Arpizio said high-end consumers are more price conscious than ever, and they won't accept an annual price increase for the same products. Innovation is key.

"They are happy to pay for newness or innovation or extreme quality that is durable but not for the same product that is inflated 6 percent every season," she said.