Friday 22 June 2018

Global luxury goods market 'to expand 4pc'

Dubai, April 21, 2010

Building on strong momentum from a healthy 2009 holiday shopping season, global luxury goods industry revenues will increase 4 per cent this yea, a report said.

The market will grow from 153 million euros in 2009 to a projected 158 million euros in 2010, said the Bain & Company report.

The global business consulting company released the Spring 2010 biannual update of its Luxury Goods Worldwide Market Study at a Fondazione Altagamma (Italian luxury goods industry trade association) conference.

The positive outlook for 2010 is a sharp reversal from the year-over-year 8 per cent decline in revenues that the global luxury goods industry experienced in 2009.

Bain estimates that the projected full-year increase of 4 per cent will result from a particularly strong growth spurt of 5-10 per cent in the first half of the year, followed by a second half increase of zero to five per cent. Strong like-for-like revenue growth in luxury retail stores ranging from 15-20 per cent, strengthening fundamentals in GDP globally, a return to international travel and a resurgence in consumer confidence have all converged to create a positive climate for growth, say the study’s authors.

Perhaps the most important lesson from the economic crisis is that bigger brands were better equipped to weather and respond.  Only 2 per cent of the 220 brands studied saw growth over 5 per cent in 2009, accounting for 10 per cent of the overall market. Brands that declined by more than 15 per cent accounted for half of the brands studied, yet realised only 20 per cent of overall sales.

“This polarisation creates fertile conditions for market concentration,” said Claudia D’Arpizio, a Bain partner in Milan and lead Bain author of the study. “As megabrands capture more market share, 2010 is likely to be a year when the search for capital triggers more luxury M&A and IPOs.”

This year's luxury rebound is lifting all of the sector’s core product categories.  Apparel and watches/jewelry are forecast to grow 4 per cent for the year, with accessories, shoes and leather to increase 5 per cent. Perfume and cosmetics are forecast to grow at 2 per cent for 2010.

“We see the temporary phenomena of ‘luxury shame’ fading in mature markets, with luxury appeal returning amongst loyal customers,” added D’Arpizio.

Looking across geographies, China and Asia (excluding Japan) continue to drive growth for the global industry, with 15 per cent and 10 per cent forecasted growth respectively. For the Americas, 4 per cent growth is forecast, and 3 per cent for Europe, a critical turnaround in luxury’s core market regions. Only Japan will see further decline, by 3 per cent versus 2009.

'The new forecast is quite encouraging,” said Santo Versace, chairman of Fondazione Altagamma, “In the midst of the worst crisis to hit the sector, luxury manufacturers have shown an excellent reactive capacity, recovering faster and better than many other industries.  The business challenges brought on by the ‘Great Recession’ actually propelled high-end luxury companies to focus deeply on their customers, concentrate on their core business, and elevate their product design and innovation to a new level.'

“After three punishing quarters, shoppers started coming back into the stores, and better yet, they are once again buying,” said Bain’s D’Arpizio. 

“A resumption of luxury goods purchasing has allowed retailers to work through their inventories. Destocking is over. The luxury goods market is once again poised for growth.”-TradeArabia News Service

Tags: retail | Shopping | global luxury goods industry | Bain & Co |

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