The global luxury market is expected to grow by a solid 2-4 per cent this year in a clear sign that the turnaround in performance for the sector that began last year is on a steady and sustainable footing.
Consultant Bain's spring luxury update predicts that the global personal luxury goods market will grow to between €254 billion and €259 billion this year, as consumer confidence returns in Europe and Chinese customers spend more at home and overseas.
Large luxury houses, such as LVMH, Kering and Hermes, began indicating this trend in their results from the middle of last year. The industry had previously suffered a difficult period as a result of an economic slowdown, a corruption crackdown in China and the impact of terrorism on spending.
“The market is growing again,” said Claudia D’Arpizio, a Bain partner and lead author of the study. “It’s less dependent on gift giving in China and less dependent on tourist flows that were driven by price differentiation and bargain hunting. It’s more solid and it’s healthier.”
Bain estimates that the overall market will expand to €290 billion in sales by 2020.
Performance is polarised across geographical regions. In the US the luxury market continues to underperform, hurt by a strong dollar, political uncertainty and problems faced by department stores – a pillar of distribution for luxury brands in North America. Bain expects the region's luxury sector to shrink by as much as 2 per cent in 2017.
Terrorist attacks
Meanwhile, fortunes in Europe, where luxury spending has been worst hit by terrorist attacks, are improving. Bain forecasts growth of 7-9 per cent in luxury sales in Europe, and highlights the bright spots of the UK, where sterling has dropped in the past year following its vote to leave the EU, and Spain, which is perceived as a safe destination.
The increasing tendency for Chinese consumers to buy luxury goods at home is expected to drive growth of 6-8 per cent this year for the mainland China market. Chinese consumers account for one in three luxury purchases globally and will nonetheless remain an important source of overseas tourist flows. Outside mainland China, however, Bain predicts the Asian luxury market will shrink by 2-4 per cent because of decreased tourism in Taiwan and southeast Asia.
– (Copyright The Financial Times Limited 2017)
