MILAN — The luxury sector will mainly grow organically in the next decade, boosted by 440 million consumers that will spend a total of 880 billion euros, or $1.2 trillion, in 2020, according to the first True Luxury Global Consumer Insight study presented here Tuesday by Fondazione Altagamma and Boston Consulting Group. Today, 380 million consumers of luxury goods spend around 730 billion euros, or $998.5 billion, on personal luxury goods.
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Antonio Achille, partner and managing director of Boston Consulting Group, touted the research as “the most complete ever on the luxury consumer,” with more than 40,000 shoppers analyzed in 20 countries. “Retailing is a science, you can’t improvise it,” said Achille.
The study focuses on a target of around 380 million consumers and an elite of 32 million core luxury consumers, with average yearly spending of 300,000 euros, or $410,352.
According to the research, to be successful in an increasingly transforming market, companies will need to leverage the evolution of the monobrand store toward one that is customized per country and generation and it will be necessary to focus on quality and exclusivity to defend and develop the brand globally. Word of mouth and advocacy will be pillars of an effective omni-media communication strategy and the digital and brick-and-mortar channels will need to be integrated for a true omnichannel approach, said Achille. Made in Italy is seen as a fundamental asset to develop a brand in the medium and long-term. “A deep knowledge of the customer, or ‘Amazonization,’ is key to grow,” he added.
Armando Branchini, vice president of Fondazione Altagamma, said the goal is to keep a customer’s business. “There are more consumers we need to retain in order for them to be loyal than markets to conquer. This is the challenge today for high-end, international brands,” he noted.
The association also presented the Altagamma Retail Evolution study, prepared with Exane BNP Paribas, which studied 12,500 stores. Luca Solca, managing director global luxury goods of Exane BNP Paribas, said high-end brands “have progressively transformed into retailers,” a fact that boosted their revenues in the 2005-2013 period. The trend has been to increase the number of countries to plant a flag in, rather the number of stores per country. Solca urged companies to increase productivity per store, which varies depending on the product category, the strength of the brand and the dimension of the store, and to integrate online and brick-and-mortar channels. Creating a relation between the penetration of luxury boutiques and per-capita income in each country, Solca noted that China shows “a saturation” in this sense. He predicted a reduction of franchised operations and a transition from wholesale to concessions in department stores. “The key for a successful retail integration is the productivity of spaces,” he said.
Solca forecasts that, in 2020, direct distribution will grow from 31 to 40 percent of the total, while franchising will decrease from 10 to 6 percent; department stores will decrease from 23 to 19 percent, and wholesale will remain at 36 percent.
High-end consumer spending is expected to increase from 217 billion euros, or $296.8 billion, today to 310 billion euros, or $424 billion, in 2020, of which 44 billion euros, or $60.2 billion, will be online. The number of monobrand boutiques totaled 12,500 in 2013 and is expected to reach 16,000 in 2020.