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THE LUXURY MARKETS

 

LUXURY GOODS MARKET TO APPROACH
$1.37 TRILLION IN 2018, SAYS BAIN REPORT

The luxury goods market continues to shine, according to the just released annual report by Bain & Co., with overall luxury, encompassing both luxury goods and experiences, growing by 5 percent to an estimated €1.237 trillion globally. Personal luxury goods, including jewelry,  will have outperformed the market, posting 6 percent growth at constant exchange rates in 2018 to approach the $300 million mark.

Looking ahead, Bain predicts that the positive growth trend for personal luxury goods will continue in the range of 3-5 percent per year through 2025, stand at $365 billion to $415 billion. However, sociopolitical issues, commercial policies, and potential short-term soft recessions could make this road to growth a bumpy one in the short term.

“Last year, we saw the global luxury market return to healthy growth, albeit at a more moderate pace than in the past,” said Claudia D’Arpizio, a Bain partner and lead author of the study. “That trend continues in 2018, reinforcing the ‘new normal’ we predicted, led by flourishing luxury demand from Chinese consumers, the continued rise of online channels, and increasing influence from younger generations of consumers.”

CHINA’S REMAINS THE PRIMARY ENGINE OF GROWTH

Chinese consumers are leading the positive growth trend around the world. Between 2015 and 2018, their purchases in Mainland China contributed twice as much growth as their spending abroad. Their share of global spending has continued to rise, and is now estimated at 33 percent of global luxury spend, up from 32 percent in 2017. In Mainland China, luxury sales grew 18 percent, driven by rising demand rather than by price increases.

Luxury purchases in softened slightly, Bain reported, pushing brands to find new solutions to bring consumers back to stores. However, retail sales still grew at 3 percent , with increased consumption from incoming tourism is prompting brands to rethink their distribution models.

Across the rest of Asia retail sales grew 7 percent at current exchange rates, due to dynamic growth in South Korea, driven by strong local consumption. Brisk growth in other Asian countries – Singapore, Thailand and Taiwan – also contributed. Hong Kong and Macau benefitted from Chinese purchases.

But Europe lagged in 2018 due to a strong euro that impacted tourists’ purchasing power. Local consumption was positive overall, despite mixed country performance, helping to boost retail sales by 1 percent.

The Americas grew 5 percent at current exchange rates. A positive U.S. economy boosted disposable income and overall luxury spending from locals, even as brands remained wary of continued economic prosperity. However, the strong dollar impacted tourists’ spending from Asia and Latin America. Canada and Mexico were strong players in the region, while political uncertainties derailed Brazil’s performance.

In other areas, growth was 0 percent, mainly due to stagnation in Middle East, which was brought on by a recent government spending restrictions.

DIGITAL METHODS OF BUYING TO BECOME MORE DOMINANT

Luxury shopping online continued to accelerate in 2018 compared with physical channels, growing 22 percent versus 2017. The U.S. market made up close to half of online sales – 44 percent– but Asia is emerging as the new growth engine for luxury online, slightly ahead of Europe.

Accessories remained the top category sold online, ahead of apparel, beauty and hard luxury, which includes jewelry and watches.

“New technologies are at once enriching the online and mobile shopping experiences, while potentially putting role of physical channels at risk,” said Federica Levato, a Bain partner and co-author of the study. “The luxury store-opening path is slowing down, leading to channel consolidation in the future. Brands must therefore re-think their physical channels and evolve their role from point-of-sale to point-of-touch, and use new technology to enhance customers’ in-store experiences.”

Bain & Company expects that by 2025 online will represent 25 percent of market value – up from 10 percent today – cannibalizing more “traditional” channels, and 100 percent of luxury purchases will be influenced by online. Further, 50 percent of luxury purchases in the future will be digitally enabled as a result of new technologies along the value chain, such as virtual reality and mobile payments.”

Summary
LUXURY GOODS MARKET TO APPROACH $1.37 TRILLION IN 2018, SAYS BAIN REPORT
Article Name
LUXURY GOODS MARKET TO APPROACH $1.37 TRILLION IN 2018, SAYS BAIN REPORT
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Personal luxury goods, including jewelry, outperformed the market, and will post 6 percent growth, approaching the $300 million mark. Looking ahead, Bain predicts that the positive growth trend for personal luxury goods will continue in the range of 3-5 percent per year through 2025,
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MID House of diamonds
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