Luxury brands look to long term

20 May 2013
MILAN: Global sales of luxury goods are expected to slow in 2013 as the Chinese market stabilises and the European market remains flat, forcing brands to re-appraise their strategies, a new report has argued.

The Luxury Goods Worldwide Market Study, from Italian luxury goods association Altagamma and consultants Bain, predicted that sales of luxury goods would slow to 4% or 5% in 2013, down from 10% in 2012.

"We are seeing a more even distribution of global growth," said Claudia D'Arpizio, a Bain partner in Milan and lead author of the study. "In turn, brands are refocusing from short-term, reactive hot spot thinking to long-term sustained growth strategies."

In particular, China's rate of growth will slow from 20% to around 7% following the government's clampdown on the giving of expensive gifts by functionaries, a step which has especially affected the luxury watch sector.

D'Arpizio also said that some luxury brands had acquired a "negative image" thanks to comments by microbloggers in China and that logos were no longer regarded as so desirable.

"There is a fatigue of the logo business," she told the Financial Times. "Aspirational consumers are shifting to more accessible luxury and premium brands which are also benefiting from the rise of a new middle class."

The fastest-growing region is likely to be South East Asia, where a 20% uplift will be driven by new store openings and the growing strength of second-tier markets.

Japan is anticipated to return to 5% growth and the Middle East to grow steadily as Dubai continues to attract wealthy visitors from Russia, Africa and India.

The Americas are forecast to grow between 5% and 7%, with the US benefiting from economic recovery and an increased focus by luxury marketers on digital channels.

Europe will suffer doubly, as local luxury consumers cut back due to the region's economic difficulties and as the number of Chinese tourists falls.

Bain advised a relentless focus on three luxury goods management principles if brands are to succeed in the next 10-15 years. These included superior customer service, flawless retail management and people excellence.

"We are entering a new phase in the evolution of the luxury market" concluded D'Arpizio. "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."

Data sourced from Altagamma, Bain, Financial Times; additional content by Warc staff
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