Shoes and leathergoods take lion’s share of luxury spend
31/10/2013
A steady pace of store openings in second-tier cities in the US interior has fuelled sales growth as well as luxury spending by the increasing number of Chinese now visiting in cities such as Las Vegas and Los Angeles; this according to the 2013 luxury goods worldwide market study by consultancy Bain & Co in collaboration with Altagamma, the Italian luxury goods manufacturers industry foundation.
Overall worldwide, luxury goods spending will grow by 2% to €217 billion at current exchange rates over 2013, as challenging economics in Europe continue and as China shifts from market expansion to network maintenance of major luxury brands which entered China over the past several years.
However, the growth figure masks a significant impact from exchange rates. At constant exchange rates, market growth would have reached 6% for the year, compared to 5% in 2012. The devaluation of the yen is responsible for over half of this year’s gap.
“The hypergrowth of recent years was destined to moderate,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “The silver lining for luxury brands is that they can now change their focus from keeping up with the present to planning for the future.”
Beyond the Americas, the study also shows significant regional differences in the luxury market:
• Europe will see 2% growth, with increasing spending by tourists counteracting slower spending by European nationals. Tourist spending now drives half of revenues in Italy, 55% of revenues in the UK, and 60% of revenues in France
• Japan will experience a 12% decline. Although in real terms, Japanese consumption increased by 9% after a long period of stagnation, the sharp depreciation of the yen imposed a steep penalty on the final revenues for luxury brands, even while consumers are responding well to brands’ offerings
• Greater China’s growth of 4% includes a split in performance between the mainland, which will grow at 2.5%, and Hong Kong and Macau, which increasingly capture Chinese spending as the nearest-to-home touristic markets. Overall, Chinese consumers have increased from 25% to nearly 30% of the luxury market, including local luxury consumption, and purchases made by tourists abroad
• Southeast Asia has become the rising star of the Asia Pacific region, with growth of 11%, not only in its historic core of Singapore but in Malaysia, Indonesia, Vietnam and Thailand
• The Middle East remains relatively strong, with 5% growth. Sales remain strong in Dubai, while Saudi Arabia is also gaining share to become the region’s second largest luxury market
• Africa is increasingly demonstrating its attractiveness as a high-potential region, with 11% growth and expansion into new markets such as Angola and Nigeria beyond its traditional strongholds of Morocco and South Africa.
Italian brands have gained the largest market share of luxury sales, moving from 21% in 1995 to 24% today, nearly equalling French brands’ share of 25%. But in a consolidating market, French conglomerates are a driving force, owning 29% of the market compared to 25% in 1995.
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