Global luxury sales to increase in 2010

19 April 2010

MILAN: Luxury brands are set to enjoy an increase in sales this year, but revenues are unlikely to reach the level recorded prior to the economic downturn.

According to a forecast from Bain & Co, the consultancy, global demand for premium goods will improve by 4% in 2010 on an annual basis to €158bn ($214bn; £139bn).

This will include an uptick of between 5% and 10% in the first half, with rising consumer confidence, particularly in the US, among the main contributors to this trend.

More broadly, the return of widespread international travel and the fact many manufacturers in the sector are heightening their e-commerce capabilities will have a positive impact.

"All categories are recovering after a terrible 2009," Claudia D'Arpizio, chief luxury analyst at Bain & Co, argued.

The "end of luxury shame for local consumers in mature markets" which accompanied the recession also means "luxury brands are gaining appeal again," she added.

Bain predicted that sales of watches and jewellery will jump by 4% in 2010, a figure that stood at 5% for accessories, shoes and related leather products.

By region, Asia Pacific – excluding Japan, which has suffered especially heavily during the financial crisis – will see totals climb by 10% in 2010.

Within this, China is due to deliver growth of 15% compared with 2009, with many analysts expecting the country to become the largest single outlet for high-end goods in the near future.

In contrast, the US will generate a decline of 4%, with Europe and Japan both off by 3%, although this still constitutes a significantly better performance than in the recent past.

Bain reported that the luxury sector contracted by 8% to €153bn worldwide in 2009, the lowest returns registered for five years.

Just 2% of the 220 businesses assessed by Bain saw their revenues rise by more than 5% in 2009, with these firms responsible for a 10% share of the market.

Looking at the overall climate, D'Arpizio said the industry is "structurally changing", with the major players likely to enhance their position while many "lagging brands" could go bankrupt.

"The biggest lesson from the crisis is that bigger brands were better equipped to weather and respond," she said.

"This polarisation creates fertile conditions for market concentration," D'Arpizio continued, suggesting that mergers and acquisitions will be a key feature of the landscape in 2010.

Data sourced from Business Week/Financial Times; additional content by Warc staff