MILAN: Tourism is a major driver of the luxury market and recent currency fluctuations have had "an immediate impact on touristic flows and spending patterns" according to a new report.
Consulting firm Bain & Company, whose Worldwide Luxury Markets Monitor 2015 Spring Update was produced in association with Fondazione Altagamma, the Italian luxury goods manufacturers' industry foundation, said that this had especially affected Chinese tourism.
Chinese consumers make up more than 30% of global luxury spending and, Bain reported, are largely responsible for the shift from local consumption to the touristic spending that now accounts for around half of all luxury spending.
Bain highlighted the experience of Japan, where tourism "completely changed the country's market dynamics, requiring new initiatives to serve customers". Chinese consumer spending there already represents up to 20% of total sales.
But luxury does not preclude having an eye for a bargain. Bain said that price awareness and consciousness among consumers had increased significantly, leading to a rise in the off-price luxury market, which now represents more than 30% of total luxury sales.
"Current market dynamics shine a light on how the industry has changed over the last 15 years," said Claudia D'Arpizio, a Bain partner and lead author of the report.
"Pricing, distribution and customer strategy remain at the top of the agenda for luxury companies, but the old models are being called into question.
"In this new environment, brands must undergo a fundamental paradigm shift if they want to win in the years to come."
One example of this, according to Luxury Daily, is that even if many consumers are spending abroad, they still tend to do their research and make their purchasing decision at home.
Consequently luxury brands need to ensure the right level of digital activity of brands, finding an appropriate balance of content, visibility and utility.
Data sourced from Bain & Company, Luxury Daily; additional content by Warc staff