The Long View on Luxury Spending

Luxury spending might be subject to the occasional quarterly blip, but it’s here to stay.

“I am optimistic, if there are no asteroid impacts or nuclear wars, the luxury goods market will continue to grow over the next 30 to 50 years.”

So says Armando Branchini, deputy chairman of Milan consultancy InterCorporate, and vice chairman of luxury goods association Fondazione Altagamma.

Branchini estimates the compound average growth ratio in personal luxury goods could range between 6 and 9 percent in the next three to five decades based on expected economic and social growth in industrialized countries, as well as in emerging markets.

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Asked what areas show the most growth potential after China, he pointed to—surprise—North America, which registered around 6 percent growth in 2012 and is expected to show the same this year. This area accounts for around 26 to 28 percent of the total luxury goods business, and represents more than the 12 percent growth from China, which still accounts for around 8 percent of the total. He also pointed to South Africa as having strong prospects.

Countries with no visa requirement or customs duties, like Singapore, Malaysia, Indonesia, the Philippines and Thailand, plus Cambodia and Vietnam further down the line, are markets with potential. While India now accounts for less than 1 percent of total spending because of high customs taxes, sooner or later it will have to open to free and fair trading, he added.

Branchini also pointed to inner China, as now business is more developed on the coasts, and to the Mercosur area: Brazil, Argentina, Uruguay, Paraguay and Venezuela.

“The growth in the luxury goods sector is unstoppable. There may be a global economic crisis and macro structural factors, but there is no crisis at the consumer spending model,” he concluded. “If you try superior quality, you never go back.”