Luxury sales to top $1.5tr

06 June 2012

NEW YORK: Sales of luxury goods and experiences could surpass $1.5tr worldwide this year, according to a forecast from the Boston Consulting Group.

Based on a survey of 1,000 affluent shoppers in 12 markets – including Brazil, China, France India, Germany, the UK and US – the company reported spending on what this panel perceived as “luxury” stood at $1.4tr in 2011.

Some $350bn of this figure can be attributed to premium cars, and personal goods secured $280bn. By contrast, $770bn is provided by experiences from art auctions to bespoke holidays.

The 4% growth rate logged by personal luxury items per year from 2009 to 2011 also lagged the equivalent 6% expansion delivered by experiences.

“Even in brand-obsessed China, where personal luxury goods serve as a strong badge of status and success, with sales surging 22% annually, experiential luxury dominates, growing at 28% each year,” BCG added.

Looking ahead, BCG predicted that the category should enjoy a compound annual growth rate of 7% from 2012 to 2014 if another economic crisis is avoided, with a “worst case scenario” of a 3% improvement per year.

“Overall, the next few years will show slower growth for luxury goods and services than the 2010-2011 period which saw a ‘catch-up' surge in sales following the 2008-2009 slump,” the firm's study added.

BCG also identified the price multipliers which could be established between “core” luxury and mass segments. As an example, the typical “core” high-end timepiece was 163 times more expensive than a mass market line.

This gap stood at 139 for wine, 83 for mobile devices, 25 for handbags and 11 for make-up. Such a “multiplier”, however, stood at a more modest seven for cars and fragrances.

Among the other changing features of the luxury sector is a shift online. Burberry, for example, has seen its social media fan base increase from 600,000 to 12.6m between February 2012 and May 2012.

Similarly, Gucci and Dior have 7.8m fans each, having started at 405,000 and 26,000 apiece in early 2010. However, brands do face the challenge of balancing their prestige position with such a widespread reach.

Based on an assessment of 25 global luxury firms, BCG also found management structures were too narrow, as 82% of Western executives work in their home market, and only 0.5% had moved to emerging nations.

Data sourced from Boston Consulting Group; additional content by Warc staff