Luxury goods sales growth seen at 12pc
Dubai, June 1, 2011
The luxury goods sector in the GCC will see a growth of 8 to 12 per cent, fuelled by tourism in Dubai and internal markets demand, said a report.
Worldwide luxury sales are projected to grow to 185 billion euros ($266 billion) in 2011, up 8 per cent from 172 billion euros in 2010, added the report “Spring 2011 Update: Luxury Goods Worldwide Market Study” from Bain & Company, the leading advisor to the global luxury goods industry.
After declining by 17 billion euros over the course of 2008 and 2009, a strong 2010 closed with higher-than-expected holiday sales (up 14 per cent versus 2009), bringing the luxury goods market to 172 billion euros, surpassing its prior peak of 170 billion euros in 2007.
While Brazil will see heavy investment by international brands (10 to 15 per cent), lifestyle changes have driven a return of luxury goods sales in Russia (5 to 10 per cent annual growth). China’s fast-growing wealth will fuel both same store sales growth and new store openings, the report said.
“The Middle East remains a hugely lucrative market for luxury goods as we expect growth in the region to remain robust in the coming years due to tourists’ influx, domestic salary increases and store openings, notably in Abu Dhabi, Saudi Arabia and Kuwait,” said Cyrille Fabre, partner and head of Luxury & Retail practice for Bain in the Middle East.
“The emerging market consumer continues to create the most exciting challenges for our industry,” said Santo Versace, chairman of Fondazione Altagamma. “Even as we adjust to the maturing of the North American and European markets, consumers in countries like China are becoming more demanding and more sophisticated in their luxury tastes.”
Bain finds that department stores and direct-owned luxury stores saw continued double-digit sales increases in February and March versus 2010, selling out on much of their Spring/Summer 2011 inventory.
Additionally, stores have placed robust orders for the Fall/Winter 2012 seasons and have restocked sold-out inventory levels, especially in accessories, leather goods and hard luxury categories such as jewellery and watches.
Retailers interviewed for the Bain study expressed a high level of confidence that consumers will keep coming into stores and continue making purchases with the same vigor that preceded the global financial crisis.
“Luxury has made a brilliant return to the retail stage, but the script has been re-written,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study.
“More demanding customers, generational shifts, new loyalty rules, an increasingly integrated offline and digital customer experience and the continued growth of China and other fast-growing markets are transforming the luxury industry.”
Bain forecasts that sales in the Americas for 2011 will grow by 8 per cent, to nearly 52 billion euros.
The US will remain the world’s largest luxury goods market. China will see 25 per cent year-over-year growth this year, putting Greater China (including Hong Kong, Macao and Taiwan) in a strong position to exceed sales in Japan for the first time.
Growth in Europe will reach 7 per cent in 2011 and Japan will see declines of 5 per cent, due in part to structural decline and also the impact of the recent earthquake.
However, the Bain study estimates that Japan’s luxury sales will stabilize starting in the third quarter of 2011, as consumption recovers and as reconstruction drives GDP growth. In fact, even as Tokyo stores reopened in the two weeks after the earthquake, brands reported a quick resumption of sales to expected levels, with little impact in southern cities such as Osaka.
The Bain study concludes with a look ahead to 2014 and beyond, estimating a 214 billion euros to 221 billion euros market within three years.
The report recommended three keys to “owning the luxury goods future”:
• Deep focus on emerging markets—penetration; route-to-market; a tailored value proposition
• Adaptation to the continuing generational shift—baby-boomers retiring; Generation Z (always connected)
• Continuous enhancement of the customer experience—increase loyalty and satisfaction; integrated online and offline experiences; unrelenting service
“Emerging markets are doing more than generating revenues,” concluded D’Arpizio.
“New consumers are also forcing luxury brands to become much more nimble in the merchandise selection and customer experience they offer to increasingly diverse consumers.” – TradeArabia News Service