MILAN — “We will be able to give you only good news,” said Altagamma vice president Armando Branchini here on Thursday, introducing the updated data by the Altagamma Worldwide Market Monitor and by the Bain & Co. study.
First on the list was that the global personal luxury goods industry is expected to grow 6 to 8 percent at constant exchange rates to 276 billion euros to 281 billion euros this year. This figure was up compared to the data released in October, which forecast a 5 percent growth for this year. According to the studies, the market is seen reaching 390 billion euros by 2025, registering a 4 to 5 percent compound annual growth rate.
Overall, expectations for average growth in earnings before interest, taxes, depreciation and amortization in 2018 are up to 10 percent compared to the figure released in October, which was 7 percent.
Sales of accessories, jewelry and cosmetic goods will be driving this year’s positive performance, as said categories are expected to grow 7 percent, 7 percent and 6 percent, respectively. In particular, footwear will continue to play a major role, boosted by the popularity of sneakers and the street style-related trends. On the other hand, apparel will grow at a slower rate of 4 percent.
Regarding the markets, according to Altagamma’s study, Asia will be key, growing 12 percent compared to the 10 percent increase forecast in October.
The personal luxury goods market in North America, which in October was forecast to grow by 4 percent this year, is now seen expanding by 6 percent, while Europe, last fall seen up 4 percent in 2018, is now seen slowing down to 3 percent this year, in part due to less favorable currency conditions and stagnant circumstances in some countries, as Germany and the U.K.
Key, traveling Asian shoppers — who are on the hunt for bargains —are more inclined to travel to the U.S. rather than Europe, where the strengthening of the euro negatively impacts tourists’ flow and spending. Locally, American customers are seen showing more confidence in purchasing luxury goods compared to German and English ones who are restrained by political uncertainty in the respective countries.
October’s data for Japan, Latin America and Middle East were confirmed, as sales of personal luxury goods in these markets are seen growing 5 percent, 3 percent and 2 percent, respectively.
The personal luxury goods market’s positive forecasts will be boosted by two additional elements, according to Branchini.
“Starting from July, China will reduce a series of import duties for a range of product categories, including apparel, fashion accessories and some categories related to furniture,” he said. In particular, for these goods, duties will be halved, which will impact their pricing in China.
Another positive element is the alignment of shoppers’ way of dressing. “I think this could be really the turning year in the sociology of consumptions,” Branchini said, referencing to how in the past there were neat differences between generations and customers’ profiles, while the lines are now being blurred “between teenagers and seniors, and similarities are increasing.”
Picking up from Branchini, Claudia D’Arpizio, partner at Bain & Co., said that “casualization” of customers’ habits is one of the four macro-trends shaping the market growth in 2018 and inducing also classic, heritage companies to expand their product offering and develop dedicated strategies to engage new customers.
“Street style and casualwear represent a change of paradigm, as there are no special, fixed occasions any longer, no dressing diktats,” said D’Arpizio, underscoring also an unprecedented element of comfort and wellbeing in the “here to stay” trend.
Among the other macro-trends, D’Arpizio reiterated Chinese shoppers’ prominent role in driving the luxury market acceleration. “This is the kind of customer to win over,” she said, defining it as a young, fashion-educated and price-per-value-discerning shopper. Online and social media are Chinese customers’ primary instruments, especially to intercept trends, discover new brands and compare prices.
On a global scale, D’Arpizio defined customers’ new approach as “Millennial state of mind,” as older generations are also acquiring Millennials’ same set of values.
“The real transformation lies in the communication rather than the product. This [communication] is enabled by new digital tools but that’s not the key feature; it’s the message that is changing,” she noted.
“We are in a post-aspirational era of luxury: [customers] don’t buy a product because it’s a status symbol per se, but because it’s more a show off of other values, not of money but more of the taste, the ability of choosing wisely and living a good life….So opinions are more important than the status; exclusivity is no longer a concept that sells, while inclusivity and a continuous narration of contents is needed to keep the relationship with customers alive.”
The Bain & Co. partner underscored how best-performing luxury companies are being proactive in implementing strategies to expand “conversation fields” to different themes, mimicking consumer brands of the likes of Coca-Cola. Winning examples in fashion include Gucci, which “talks to customers all the time, it deals with a lot of topics — as sustainability, art, music — and it rides even the negative news about the company itself. They have opened a dialogue with a large number of customers and this is what people likes, beyond the product itself,” concluded D’Arpizio.