MILAN — The luxury goods market is expected to grow 4 to 5 percent globally in 2013 and 5 to 6 percent on a yearly average through 2015, according to consultancy Bain & Co. This represents a slowdown compared with the past three years, when luxury goods showed annual double-digit growth.
Claudia D’Arpizio, partner at Bain & Co., presented the spring update of the “Luxury Goods Worldwide Market Study” in cooperation with Italy’s luxury goods association Fondazione Altagamma on Thursday.
This year will be negatively impacted by the fluctuation of exchange rates, said D’Arpizio.
Bain confirmed that luxury revenues gained 10 percent in 2012, reaching 212 billion euros, or $271 billion at average exchange, boosted by “strong growth tailwinds” in the first half of the year. At current exchange, revenues would have grown 5 percent.
“The U.S. is rediscovering luxury, while Europe is struggling,” said D’Arpizio.
The sector is on track to break the threshold of 250 billion euros, or $322.4 billion at current exchange, by mid-decade, said Bain.
Southeast Asia and South America claim top spots as growth leaders while China’s rise of the luxury sector will keep pace with growth in its gross domestic product.
Bain identified tourists and “HENRYs” (High Earnings, Not Rich Yet) as key drivers for growth, as well as the rise of the middle class in emerging countries.
Despite some recovery of spending on apparel, the main drivers remain leather goods and other accessories, especially absolute luxury items, while watch consumption has decelerated sharply as retailers de-stock and Chinese luxury consumers slow their purchases.
In 2013, Bain said the impact of a 12 percent sales growth in Central and South America, in particular in Brazil and Mexico, will result in a 5 to 7 percent gain in the Americas. “High consumer confidence among the affluent, increased store openings in American cities, and intensive investments in linking physical and digital shopping are all fueling U.S. sales growth,” said D’Arpizio. Despite the “major obstacle” of high import tariffs and duties, Brazil is promising as it gets ready for the World Cup and Olympic Games.
China is expected to grow 7 percent, while Southeast Asia is forecast to show 20 percent growth, boosted by new stores and the increasing relevance of second-tier markets, such as Indonesia and Malaysia. Hong Kong and Macau are benefiting from a shift in tourism flows previously targeting Europe.
Japan is seen posting 5 percent growth in light of the country’s devaluation of the yen, which is boosting local consumption, “but luxury brands are still struggling to capture changing consumer behavior, especially that of younger generations, which are not very interested in luxury. Japan is very relevant as a test market,” said D’Arpizio.
Europe remains challenging and is “bracing for a summer spending dry spell,” as tourism is seen slowing, with a flat to 2 percent growth.
Dubai, an attraction for Russians, Indians and Africans, remains at the heart of business in the Middle East, which is growing steadily. “We are seeing a more even distribution of global growth,” said D’Arpizio, adding that the market in 2025 will likely be more than five times larger than in 1995.
Going forward, “superior customer experience, flawless retail management and people excellence will be key for success,” said the research.
“We are entering a new phase in the evolution of the luxury market. More markets, more segments and more diversity of tastes all combine to create more variables to solve for when pursuing the right strategy for growth.”
Altagamma also presented its study, called Consensus, and estimates for 2013, a year marked by a slowdown in growth, but with gains in all categories. Updating data provided in October, the study said Asia will grow less than expected, while the Americas and Japan will show a brisker pace.
In terms of categories, only perfumes and cosmetics will grow more than expected — 5 percent and not 4 percent. Leather goods, shoes and accessories, together with jewelry and watches, are the sectors with the highest growth rate — 7 percent (in October, the Consensus forecast growth of 10 and 8 percent, respectively). This was attributed to China, affected by the anticorruption policies of the new government. In the region, gift-giving accounted for 30 percent of business, but there is now “a healthier development and local consumption is spread over real consumers,” countered D’Arpizio.
Apparel was forecast to grow 6 percent but it is now expected to grow 5 percent.
Asia was expected to grow 17 percent, now adjusted to 10 percent. The U.S. was expected to grow 6 percent but is now expected to grow 7 percent. “The U.S. area is a positive and extraordinary surprise,” said Altagamma’s executive director, Armando Branchini.
“The U.S. is rediscovering luxury,” echoed D’Arpizio. “Consumer confidence is higher and pushing domestic consumption.”
The companies’ average earnings before interest, taxes, depreciation and amortization is expected to grow 9 percent compared with a 7 percent forecast in October. Branchini said the second half of the year will be stronger than the first.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews