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Study Sees Luxury Sector Growing 10%

A new Bain study says the Asia-Pacific region will lead gains in 2012.

MILAN — Lifted by growing demand for accessories and China’s ongoing appetite for luxury goods, the global luxury market in 2012 is expected to reach sales of 212 billion euros, or $274.5 billion at current exchange rates, up 10 percent compared with last year, according to a study by Bain & Co. in cooperation with Italy’s luxury goods association Fondazione Altagamma.

This story first appeared in the October 16, 2012 issue of WWD.  Subscribe Today.

Sales in the last quarter of 2012 are forecast to grow 7 percent as no slowdown is expected for the upcoming holiday season.

According to Bain’s study, the Asia-Pacific region, and China in particular, will help lead growth in 2012, with an expected 18 percent increase, followed by the Americas, with sales seen up 13 percent by the end of the year, compared with 2011. Greater China has overtaken Japan as the sector’s second market, behind the U.S. Chinese consumers now make half of the luxury purchases in all of Asia, and nearly one third of those in Europe. Globally, one in four purchases of personal luxury goods comes from Chinese consumers.

Europe and Japan are expected to grow 5 and 8 percent, respectively, this year while the rest of the world is forecast to show a 5 percent increase.

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Bain also expects that the luxury goods market will grow, at constant exchange rates, by 4 to 6 percent a year between 2013 and 2015, projecting revenues of over 250 billion euros, or $323.7 billion, by 2015.

“Concerns about market weakness are somewhat overblown,” Bain partner Claudia D’Arpizio said. “But we are seeing sharp disparities between brands that are not keeping up with the quickening pace of change in the market and those that are adjusting to shifts in tastes and demographics.”

D’Arpizio conceded that Mainland China is becoming more challenging as consumers become more sophisticated and said there are the first signs of deceleration in China. This is balanced by increasing overseas luxury shopping by the Chinese, helped by easier visa policies and lower prices. 

The study underscored the fact that accessories have become the core category in personal luxury goods, accounting for 27 percent of total sales, also lifted by increasing levels of male spending and increasing interest in higher quality and more expensive items.

Leather goods are projected to grow 16 percent in 2012, reaching sales of 33 billion euros, or $42.7 billion, while shoes are seen growing 13 percent to 12 billion euros, or $15.5 billion.

Ready-to-wear is expected to rise 10 percent, lifted by strong growth in men’s wear and high-end women’s clothing in emerging countries. Jewels are projected to grow 13 percent and watches by 14 percent.

Online sales are expected to climb 25 percent in 2012, turning into a business of 7 billion euros, or $9.06 billion. The study reports an increasing share of men shopping online, partly because of dedicated sites.

The study also addresses additional areas such as luxury cars, wine and spirits, hotels, in-home and out-of-home food, home furnishings and yachts, all showing growth and contributing to an overall market of 750 billion euros, or $971.2 billion, up 9 percent over 2011. Bain suggests this figure will approach 1 trillion euros, or $1.3 trillion, within the next five years.

Tourists now account for 40 percent of global luxury spending. According to tax-refund giant Global Blue, tax-free shopping in Europe has a value of about 30 billion euros, or $38.9 billion. A 28 percent growth is expected by the end of 2012 and an additional 18 percent rise is forecast in 2013.

Armando Branchini, general secretary of Fondazione Altagamma, presented the association’s Altagamma Consensus 2013 study, which estimates earnings before interest, taxes, depreciation and amortization, or EBITDA, in the high-end sector will rise 7 percent next year. All categories are growing, said Branchini, with leather goods, shoes and accessories expected to gain 10 percent, and jewelry and watches seen to grow 8 percent in 2013. Sales of apparel and fragrances and cosmetics are forecast to rise 6 percent and 4 percent, respectively.