Global luxury goods market grew by 10 percent in 2012 (at current exchange rates) and now tops 200 billion euros, according to consulting firm Bain & Company [1]. The market will continue to grow as much as 50 percent faster than global GDP, with an expectation of four to five percent growth in 2013 and five to six percent annual average through 2015, on track to break the 250 billion sales threshold by mid-decade.
Sluggish growth in Europe
According to Bain’s spring update of the "Luxury Goods Worldwide Market Study" conducted with Italian luxury trade body Altagamma, growth should remain sluggish in Europe this year, rising by a maximum of 2 percent, compared with 3% in 2012, at constant currency.
Actually, Europeans, especially in southern Europe, are curtailing spending, while tourists from the USA, Asia and the Middle East are changing their habits, seeking out new destinations (e.g. Dubai, South East Asia, Australia) and showing more savvy in the items they purchase. Chinese tourists, in particular, are reducing their purchases in Europe due to narrowing price gaps with goods at home.
Slower growth in China
As far as Asia is concerned, Bain says that the growth of luxury sales in China is stabilizing to an expected seven percent, keeping pace with GDP. In parallel, Hong Kong and Macau benefit from the shift in mainland’s tourist flows previously targeting Europe.
Regarding, South East Asia, Bain expects a 20 percent growth driven by a wave of new store openings, and increasing strength and relevance of second-tier markets such as Indonesia and Malaysia.
Japan is returning to a strong growth story of five percent as the country’s monetary policy depreciates the yen and boosts the economy and local consumption while discouraging travels abroad.
Brazil and Mexico drives growth in the Americas
High consumer confidence among the affluent, increased store openings in American cities, and intensive investment in linking physical and digital shopping are all fueling United States sales growth. Combined with the strong growth of sales (+12%) across Central and South America (notably Brazil and Mexico), this positive environment will result in overall growth of five to seven percent in the Americas.
Argentina, however, continues to conduct economic policies that impediment the development of the luxury market, which should grow at a limited 0.3% rate.
Eventually, Middle East is growing at a steady pace, with Dubai continuing as the centre of gravity and the only city attracting foreign luxury consumers (e.g. Russians, Indians, Africans).
"We are seeing a more even distribution of global growth," said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. "In turn, brands are refocusing from short term, reactive hot spot thinking to long-term sustained growth strategies."
New luxury era
Over the long term, Bain estimates that the global luxury goods market in 2025 will likely be more than five times larger than it stood in 1995.
"We are entering a new phase in the evolution of the luxury market," concluded D’Arpizio. "More markets, more segments, and more diversity of tastes all combine to create more variables to solve for when pursuing the right strategy for growth."
