Sector to double in five years as brands approach new markets.
The UK luxury sector is set to double in the next five years to a value of £12.2 billion, according to data released by Walpole British Luxury.
This year alone the UK luxury sector is set to grow 12% to a value of £7.4 billion, with Walpole offering that 83% of luxury brands based in the UK expect a rise in sales in 2013.
Walpole, the organisation representing the UK luxury industry and leading British brands including Burberry and Harrods, worked in collaboration with luxury market research firm Ledbury Research on the annual UK luxury study.
The study is now in its fourth year, positioning itself as "the most comprehensive analysis of the UK luxury industry", covering the performance, expectations and issues facing leading luxury brands in the UK and internationally.
Luxury hubs in the UK
The study reports that the UK luxury industry is set for strong growth, despite a difficult environment in Europe, with the sector predicted to see double digit growth, annually, for the next five years. British luxury brands remain optimistic about the outlook with 83% of luxury brands expecting to see a rise in sales in 2013.
After London, Manchester and Edinburgh are considered to be the UK’s next most important luxury hubs.
81% of luxury brands have a presence outside the capital with the south east and north west remain the next largest regions for luxury shoppers, while Manchester is the city that had the strongest luxury sales outside of London in 2012, according to 24% of respondents.
Tourism and luxury spend
Tourist shoppers remain crucial to the British luxury industry. 64% of respondents will target this group specifically through various initiatives including introducing foreign payment methods, such as Union Pay and hiring foreign speaking staff. Whilst Americans remain the most important nationality of luxury visitors to the UK, the Chinese are considered the fastest growing group of luxury shoppers to the UK.
Key potential growth for UK luxury brands is seen in the BRIC economies (Brazil, Russia, India and China). Only 13% of British luxury brands have operations in Brazil, but with the Olympics and World Cup coming up, 52% of brands have plans to enter the market.
India also remains a key target market for UK luxury brands, only 23% of British luxury brands are currently present in India however over 50% have interest in entering the market in the long term. The biggest challenges facing luxury brands looking to enter India are the lack of infrastructure, understanding of local business culture and the local regulatory environment.
Outside of the BRIC economies, South Korea, Mexico, Indonesia and Vietnam were seen as the most important target markets for UK luxury brands.
Innovating luxury brands
Digital innovation remains a top priority for UK luxury brands in the coming year. The most popular marketing initiative carried out by British luxury brands in 2012 was investment in e-commerce and social media. Mobile commerce is set to become increasingly important with nearly double the respondents involved in the study investing in m-commerce this year, compared to 2012.
Looking ahead, the two most important challenges facing British luxury businesses in 2013 are maintaining product quality, and reaching the next generation of consumers. Almost all of the surveyed brands (98%) believe that reaching the next generation will be a challenge to some degree.
Julia Carrick, chief executive of Walpole, said: “We are delighted to be collaborating with Ledbury Research on the UK luxury benchmark study, for the fourth year running. The findings from this year’s study provide an insightful look at the changing landscape of the UK luxury industry and the key priorities and challenges facing senior luxury executives in the coming year.
"Despite the backdrop of the Eurozone crisis and a difficult economic environment, the UK luxury industry remains extremely robust and is forecast to grow significantly in size”.
Innovation, it seems, will be the big focus of many luxury brands in the coming years, according to Ledbury Research director James Lawson: "Behind some buoyant numbers, this year’s results reveal the key theme of innovation for the British luxury market. Innovation from the brands – including their use of technology and social media – and a next generation of new and inquisitive luxury consumers who are voracious users of these new platforms.”