Luxury sales to surge

05 May 2011

MILAN: Luxury goods are set to enjoy an 8% increase in sales this year globally, a new study from consultancy Bain & Company has predicted.

The firm estimated revenues would hit €185bn in 2011, topping the €172bn recorded in 2010, when figures leapt by 12%, surpassing the previous peak of €170bn registered in 2007.

"The market is back to pre-recession levels, so there has been a complete recovery from the crisis in 2008 and 2009," Claudia D'Arpizio, a Bain partner, said. "Luxury shame is now over."

Having seen a €17bn decrease in returns across 2008 and 2009, the premium goods industry observed a particularly strong close to 2010, as holiday sales climbed 14%.

The primary contributor to growth in 2011 will be China, as the world's most populous nation supplies a 25% uptick year on year, in constant currency terms, reaching €11.5bn.

Hardening affluence and the penetration of brands into smaller cities should encourage this process, and help mainland China become the third biggest luxury market in the coming five years.

When adding in Greater China and the fact the country's shoppers make around half of their purchases overseas, it has already assumed second position, Bain argued.

"China is the rising star," said D'Arpizio.

The US is also due to provide an 8% lift in 2011, to €52bn, measured against the €48.1bn posted during 2010.

Elsewhere, Japan suffered a 10% contraction last year, to €18bn, and despite recent events, Bain suggested the rate of decline should moderate, as totals slide by 5% in 2011.

"The situation in Japan came back to normality after the earthquake," said D'Arpizio.

Europe and the Americas, which presently account for two-thirds of global expenditure, are anticipated to witness increases of 7% and 8% respectively in 2001, while Asia Pacific, excluding China, rises 15%.

Looking to 2014, Bain forecast a further strengthening in global demand, to at least €214bn, and possibly attaining €221bn under a more optimistic scenario.

Its key guidance to operators in this space included enhancing infrastructure networks and routes-to-market in fast-growth economies, as well as creating a tailored value proposition for these countries.

"Emerging markets are doing more than generating revenues," said D'Arpizio.

"New consumers are also forcing luxury brands to become much more nimble in the merchandise selection and customer experience they offer to increasingly diverse consumers."

Alongside China's rapid expansion, over the next two to three years, Russia should deliver a jump in the 5-10% range, having logged €4.8bn in 2010.

The pace of this acceleration projected is 10-12% in the Middle East, pegged at €4.1bn last year, and 10-15% in Brazil, currently worth €1.8bn annually.

"We see Brazil being a major engine of growth going forward, but of course not of the same magnitude as China," D'Arpizio said.

Bain similarly posited that adapting to the changing needs of retiring baby boomers and the "always connected" younger audience of Generation Z constitutes another vital objective.

Equally, improving the shopper experience, both online and offline, with "unrelenting" service could boost buyer loyalty and satisfaction.

Data sourced from Bain & Company, Reuters, Wall Street Journal, Financial Times, Associated Press; additional content by Warc staff