Global luxury sales to rise

19 October 2010

MILAN: Luxury sales should post a double-digit expansion globally in 2010, with China and the US among the markets leading the recovery.

Consultancy Bain & Co predicted category revenues will rise 10% this year, reaching €168bn ($235bn; £147bn) overall.

Such a figure marks a considerable improvement on the 4% increase outlined in April, when the company's previous forecast was published, and would see demand return to 2008 levels.

Although the growth rate might fall in the 4–5% range in 2011, this is in line with historical totals, and signifies stabilisation after an 8% contraction last year to €153bn.

According to Bain, the recession has favoured major brand owners capable of absorbing shocks, invest in innovation and heighten their presence in emerging markets.

China is expected to generate a 30% revenues surge in 2010, and is likely to become the largest single outlet for high-end goods in the coming five years.

Asia as a whole will deliver a 22% uptick this year, indicating the wider attractiveness of the region for manufacturers.

Despite the financial challenges facing the country, US shoppers are anticipated to boost spending by 12% in 2010, measured against 6% for their European counterparts.

Conditions may prove more adverse in Japan - traditionally a profitable locale for exclusive products - where a 1% decline is probable.

"The main drivers are China and Asia but the real surprise has been the rebound in the US," said Claudia D'Arpizio, a partner at Bain.

"It is really impressive how customers have rebounded in their approach to these purchases, in particular in the United States and in Europe."

One specific trend highlighted by Bain was the impact of "new" Chinese tourists, who are snapping up luxury offerings while abroad.

"The big surprise of the last few years are the Chinese ... Now they are very visible in Europe and also the United States. They are traveling all over the world," said D'Arpizio.

The report forecasts sales of premium items in airports and similar sites to top €16bn this year.

Elsewhere, purchases of leather goods are thought likely to expand 16% to €43bn, with apparel due to enjoy an 8% leap, hitting €45bn.

More broadly, it was argued male buyers would receive greater attention, as lines like watches, shoes and clothing have seen faster improvements among this demographic than alternative products for women.

Bain suggested increasing numbers of corporations could be expected to support collections and store formats with male customers in mind, especially in rapidly-growing economies, where men are leading demand.

"We call it the feminization of society. Men are less conservative around fashion, they browse more on the Net to find their favourite brands and production, they are more educated and more knowledgeable," D'Arpizio said.

In spite of the better trading climate, Bain & Co forecast mergers and acquisitions might characterise the sector going forward, as large companies swallow up smaller rivals.

Data sourced from Financial Times/Associated Press; additional content by Warc staff