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Luxury: The Long View

Luxury brands might be feeling the impact of a slowdown in consumption worldwide, but the bigger picture is rosy.

Appeared In
Special Issue
WWD Collections issue 11/19/2012

Luxury brands might be feeling the impact of a slowdown in consumption worldwide, but the bigger picture is rosy. Growth is expected to be fueled by emerging markets and their lust for the finer things.

This story first appeared in the November 19, 2012 issue of WWD.  Subscribe Today.

 

RELATED STORY: Top 10 Emerging Markets >>

 

✦ Watches and jewelry will be the top-performing luxury category this year, growing at a rate of at least 20 percent, according to new research from Mintel on the international luxury market. “There is little sign of this category slowing, as shown most evidently in key, high-end watch-buying and collecting markets such as Hong Kong,” Mintel said in its Luxury Goods Retailing, International, 2012 Report.

✦ Mintel forecasts growth of 11 percent for the global luxury consumer-goods market in 2012, although it expects that rate to slow over the next two years to nearer 6 percent. In 2011, the global luxury goods consumer market—excluding consumables and automobiles—grew by 14 percent, coming “within a whisker” of 200 billion euros, or $258 billion, in retail sales.

✦ The European luxury sector will continue to grow at a rate of 7 to 9 percent a year, according to a study commissioned by the European Cultural and Creative Industries Alliance, or ECCIA, which groups Europe’s main luxury lobby groups. Medium-term forecasts suggest that by 2020 the sector will contribute 790 billion to 930 billion euros, $983 billion to $1.1 trillion, to the European economy.

✦ According to a study by Frontier Economics, the European luxury industry currently accounts for 3 percent of Europe’s GDP and employs one million people. That figure is set to rise to two million by 2020.

✦ In the upcoming U.S. holiday season, gift-giving will be down 3.4 percent, and the top 10 percent of consumers will account for nearly 29 percent of the total 2012 holiday spend. That minority will increase its gift-giving spend 21.9 percent year-on-year, according to a survey by American Express Publishing and Harrison Group. Some 58 percent of those surveyed said they intend to give gifts in fashion or beauty, while 26 percent plan to purchase jewelry or watches.

✦ In the next six months, the most affluent consumers in the U.S. are most likely to spend their money on vacations, electronics, apparel and accessories, according to findings from Ipsos MediaCT’s August Affluent Barometer.
 
✦ Real-world shopping is far from dead, according to the London-based Future Laboratory. Almost three-quarters (73 percent) of Americans say they still prefer the exciting experience of a visit to a store over the cheapness and convenience of online retail.
 
✦ New York’s Fifth Avenue continues to be the world’s most expensive retail destination, where annual rental prices can exceed $2,500 per square foot, according to Ledbury Research. This is more than 75 percent higher than those in Hong Kong, the second-priciest destination in the world. Demand is being driven by luxury brands, which continue to perform well in this market.

✦ Coach is the most searched-for luxury handbag brand in the world, according to Ledbury Research. However, it is less popular in Europe, ranking 29th in Italy, 19th in France and 7th in the U.K.

✦ Almost two-thirds (64 percent) of Americans believe that a new—and better—U.S. economy will emerge from the current global turmoil, according to London-based Future Laboratory.

✦ The British luxury industry is expected to grow 8.5 percent this year, and overall, it is on target to achieve forecasts of 9.1 billion pounds, or $14.6 billion, by 2015, according to the third annual Walpole & Ledbury U.K. Luxury Benchmark Study. The report named London, Manchester and Edinburgh as the top three cities in the U.K. for luxury-goods consumption.

✦ Bain & Co. expects the luxury-goods market to grow, at constant exchange rates, by 4 to 6 percent a year between 2013 and 2015, projecting revenues of more than 250 billion euros, or $323.7 billion, by 2015. In 2012, Bain is projecting online sales to climb 25 percent, 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 Boston Consulting Group estimates that during the next two years, the consumption of brand-related “luxury experiences”—such as hotel stays, beauty treatments and services, or outings such as helicopter snowboarding, will grow 12 percent per year.

✦ Generation Research, which tracks the travel retail market, revealed that global luxury sales in airport duty-free outlets will grow 25 percent in the next two years to $44.5 billion.

✦ Chinese arrivals to western Europe are expected to increase 55.1 percent through 2016 to 3.5 million, according to the European Travel Commission. By 2016, western Europe’s share of the Chinese tourist market is forecast to rise to 20.4 percent. Arrivals from India are set to increase 39.7 percent to 2 million, while those from Brazil are forecast to increase 5.9 percent to 1.3 million.

✦ By 2020, Chinese and Indian customers will spend $10 trillion per year on consumer goods and services, and are consistently trading up to better branded products, according to the book, The $10 Trillion Prize: Captivating the Newly Affluent in China and India, by Michael J. Silverstein, Abheek Singhi, Carlo Liao and David Michael of The Boston Consulting Group. According to the book: “The newly affluent are driving the upsurge. In both China and India, runaway growth in the middle and upper classes will fuel the consumer boom.”

✦ There were 180 superluxury cars sold in India last year, from brands including Ferrari, Aston Martin, Lamborghini, Bentley and Rolls Royce, according to a luxury study published by Ledbury Research. The figures will rise to 800 by 2020. India has a long history with Rolls Royce, and between 1907 and 1947, the marque sold 1,000 of its cars there, according to the automaker. In India, the number of millionaires will surpass 400,000 by 2015. In 2010, there were 173,000.

✦ The emirate of Qatar has the highest density of millionaires globally, behind Singapore and Switzerland, according to Doha Bank and Ledbury Research. Close to one in 10 households, 8.9 percent, have investable assets of $1 million or more. Thanks to relatively high savings rates, individual investors in Gulf Cooperation Council countries currently have approximately $2 trillion in liquid investable assets and this is predicted to grow by 40 percent to $2.8 trillion by 2015. Saudi Arabia and the UAE account for the majority—80 percent—of these assets.

✦ In its latest Luxury Market Insights report, Ledbury Research singled out Thailand as the number-one “hot spot,” or emerging market for luxury goods. The country has a GDP of nearly $346 billion—the largest in Southeast Asia after Indonesia—an unemployment rate of less than 1 percent and a thriving middle class. The other countries among Ledbury’s top five hot spots are India, Peru, Saudi Arabia and the Philippines.