German luxury spending

Does the term luxury mean something different in Germany than it does elsewhere?

Yes and no, according to German business magazine "Wirtschaftswoche," which recently partnered with a consulting company to define just what "German luxury" means.

Much of the global luxury industry operates on terminology defined by global banking giant HSBC, which releases an annual luxury report that splits the luxury sector into two categories: hard (such as watches) and soft (apparel).

In contrast, the list by Wirtschaftswoche and its partner, Biesalski & Company, broadens the meaning of luxury and embeds it in a German context. The list of German luxury goods includes glassware and porcelain, cars, cutlery, ornate lamps, bespoke kitchens and kitchen appliances, bathroom interiors, cameras and camera lenses, and furniture.

Some of the top brands on the list include Länge & Söhne watches, Porsche automobiles, Gaggenau ovens, Meissen china and Decon garden furniture.

"Successful brands on the list share a niche," Alexander Biesalski, one of the study's authors, explained in a press release. "They offer high quality, precision, and innovation. German luxury manufactures have as their strengths soundness, reliability, and perfection."

Germans' spending on all luxury goods is up

People are talking about Germany's luxury segment right now because it appears to be growing, despite concerns about the EU economy. According to consultancy Roland Berger, the German luxury market is growing about 5 percent a year faster than the overall global luxury market, with the strongest year-on-year growth (20 percent) coming in the designer clothing and accessories, watch, and jewellery segments.

Global luxury brands have recognized this too. According to CBRE, luxury retailers are pouring into Germany's main shopping cites: Munich, Frankfurt, Düsseldorf, Berlin, and Hamburg. From 2011-13, of the 31 high-end luxury brands that entered Germany, 8 were French, 10 were Italian, 2 were Swiss, 6 were from the U.S., and 5 were from the UK.

The new store-openings aim to capitalize on Germans' relatively low spending on luxury goods. According to Wirtschaftswoche, luxury goods account for just 0.3 percent of Germany's gross domestic product. This compares with 1.1 percent of GDP in Italy and 0.7 percent in France. Overall, the global luxury goods sector accounts for 217 billion euros in annual turnover, and of that amount, between 9 and 11 billion euros can be attributed to Germany.

Unclear who is buying

While there is no doubt that more luxury goods are being sold in Germany, it's not clear exactly who is accounting for the bulk of Germans' luxury spending. Is it the richest 1 percent of the nation? Or does the situation resemble that of Japan, where until 2009, single 20 to 35-year-old, gainfully employed women who lived with their parents were among the important demographic groups who spent their discretionary income on luxury goods?

Much of the country's luxury spending can be attributed to the 650,000 German individuals who earn a per-capita income of at least 112,000 euros annually. The country's super-rich also seem poised to continue spending: Three-quarters of the country's private wealth is owned by one-tenth of the population.

Germany's 100 richest individuals saw a 5.2 percent increase in their wealth in 2013 to 337 billion euros in assets - whereas growth was only 0.1 percent for the German economy as a whole.

So the takeaway is that Germans are increasing their consumption of luxury goods - both domestic and those from abroad. Whether that trend will carry into 2015 - a year that promises slack growth in Europe and continued geopolitical jitters with Russia - remains unclear.