Luxury Goods Worldwide Market Study 2012

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Global luxury goods sales are defying initial concerns over Eurozone turmoil and fears of a cool-down in emerging markets, and will exceed €200 billion in 2012; this according to Bain & Company, the leading advisor to the global luxury goods industry, in the spring 2012 update to its industry bellwether "Luxury Goods Worldwide Market Study," which was unveiled at a conference hosted by Fondazione Altagamma (the Italian luxury goods industry trade association). Bain further expects an average of 7% to 9% annual increases in global sales to fuel luxury brands’ growth aspirations until the middle of the decade.

The study points to a continuation of the core market trends that created a sharp recovery from luxury’s 2008-09 recession: growth of online sales, rapid expansion in China and a shift from wholesale to direct-owned retail remain factors to watch. As the industry matures around its global retail and e-commerce capabilities, however, the Bain study identifies new factors to watch in the mix of consumers and products that define the industry. Most important, Bain finds that luxury has become a more truly global market. Growth for 2012 of 2% to 4% in Europe, 5% to 7% in the Americas, and as much as 2% in Japan will generate the highest sales in terms of absolute numbers. At the same time, China’s growth of 18% to 20% now stands alongside resumed growth in India and Russia, where recovery was delayed, and in a host of new markets where the luxury market is solidifying, including Azerbaijan, Brazil, Indonesia, Kazakhstan, Malaysia, Mexico, South Africa, Turkey and Vietnam.

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“Brands must develop strategies with much wider reach than ever before,” said Claudia D'Arpizio, a Bain partner in Milan and lead author of the study. “The lessons they learned in earlier emerging markets will help, but they now must manage even broader diversity of consumer preferences, and more variations in their model of how to take products to market.”

As consumers and product trends evolve, the study also finds that hard and soft accessories will consistently outperform even the rapid-growing luxury sector, as much as double the growth rate of other luxury categories. Market growth is tilting to the absolute end of the luxury spectrum, with the true highest-end brands and products outperforming more accessible offerings by 2% to 4% a year. Within these trends, Bain has identified the top nine market-defining factors for luxury in the next three to five years:

  • Chinese consumers, including their spending as tourists, now account for over 20% of global luxury sales. Asian consumers (i.e., adding Japan, Korea, and Southeast Asia) account for more than 50%.
  • Thirty percent of global luxury sales now occur within emerging markets.
  • The average age of Asian luxury consumers is decreasing steadily, while that in Japan, Europe and the United States increases, creating a new generation of luxury consumers, but with very different tastes and preferences.
  • Women are encroaching on traditional male purchases (business attire, luxury watches), as women’s spending becomes increasingly independent.
  • Men are increasingly likely to seek traditionally female brand dimensions around "fashion" and "beauty" as well as product functionality.
  • Luxury product usage has crept in to more casual occasions, which in turn affects the kinds of products that brands develop (e.g. casual-chic apparel lines).
  • Luxury is fueled by newer and bigger money. In turn, consumers’ insatiable chase for higher quality and greater craftsmanship/materials favors absolute luxury offerings.
  • Premium and fast-fashion brands are forcing luxury brands to rethink their value proposition by competing directly with lower segment luxury.
  • The convergence of stores, e-commerce, social media and mobile commerce is creating an "omnichannel" experience for consumers.
  • “Fast growth is bringing even faster change to the luxury sector,” concluded Bain’s D’Arpizio. "With more markets to manage and accelerating trends to anticipate, brands that struggle to respond quickly may find the markets’ rapid growth a double-edged sword."

For a copy of Bain’s “Luxury Goods Worldwide Market Study, Spring 2012 Update” or to schedule an interview with Claudia D’Arpizio, please contact Dan Pinkney dan.pinkney@bain.com or +1 646 562 8102.