Report from Bain & Co shows market positivity despite cooling Q1.
A new report from consultancy firm Bain & Co. created in partnership with Italian luxury goods organisation Altagamma has revealed "cooling" luxury goods growth in Q1 2013, following double-digit growth in 2012.
Despite this the report forecasts positive global outlook despite economic uncertainty, with growth across the world’s leading and emerging luxury markets anticipated in 2013.
The Altagamma Monitor report shows that global growth of personal luxury goods increased for the third consecutive year in 2012, totalling more than €200 billion (£169bn).
Asia remained the major growth engine in 2012 while, in terms of product, accessories and hard luxury items such as watches and jewellery outperformed the market in 2012, up 12% compared to 2011 and totalling 23% of personal luxury sales.
However this latest report reveals that Q1 2013 growth has cooled, with unfavourable impact from exchange rate fluctuations.
A drop in tourism has also impacted sales in Europe, with a particular decline in tourists coming to Europe from Japan. The average spend by Chinese tourists has also reported dropped due to narrowing price gaps between Europe and China, potentially due to luxury brands wishing to increase spend within Asia. Similarly Chinese tourists are changing their travel habits with many more flocking to Australia as a new retail destination.
Within Europe itself the report says local consumption has not recovered yet, especially in Mediterranean countries, while price increases further threaten sales, as well as the rise of premium brands gaining market share, such as Michael Kors.
The report also outlines the sense of caution among luxury good wholesalers, with a "clean-up of independent wholesale distribution networks" – some brands have cut the number of retail outlets they work with – and cautious retail plans such as new format stores in key locations and popup stores that can be trialled without the full commitment of a long-term lease.
In the US, however, luxury personal goods are a growing sector thanks to high consumer confidence and reaction from retailers who are offering synchronised in-store and online shopping, bolstered by a boost in interest in luxury goods from younger consumers.
In China high single-digit growth for domestic consumption is anticipated, according to trends recorded so far in 2013, while Chinese e-commerce is set to grow at double digit rate thanks to a new generation entering luxury arena through e-tail and digital platforms.
At the same time China is experiencing polarisation of consumers’ attitudes. While some are still shopping for high-end and sophisticated luxury is booming there is a simultaneous "fatigue of logo-businesses", with aspirational consumers seeking out accessible luxury or premium brands.
The changes to gifting, impacted by the new Chinese government anti-corruption campaign, has also hit luxury sales, in particular for watches, with a shift towards women’s apparel.
Blogging and social networking have also lead to the growth of a "negative buzz" around luxury ostentation.
In Greater China Hong Kong and Macau have been benefiting from a shift in tourist flows previously targeting Europe, while South Korea is suffering against political tension which has lowered consumer confidence, adding to a slowdown in luxury consumption that began in late 2012.
In South East Asia Singapore remains a major retail hub – it is the 8th luxury destination in the world – while Malaysian and Indonesian consumers are becoming more familiar with luxury brands and as a result these brands are considering more direct presences in the region.
The report concludes that 2013’s market outlook is positive despite economic uncertainty. Luxury goods growth in Europe could increase by 2%, while the Americas could grow by up to 7% and the Asia Pacific and mainland China region by up to 9%. The rest of the world could grow by 6%.
The report follow’s Walpole’s recent report focused on the UK luxury sector, which is set to double in the next five years to a value of £12.2 billion,