Management consultancy firm Bain & Company has released its 2013 Luxury Goods Worldwide Market study, revealing that more than half of luxury goods sales in the UK are driven by tourism.
The findings have been presented in collaboration with Altagamma, the Italian luxury goods manufacturers industry foundation.
The study has also revealed that the US has surpassed China as global luxury goods growth leader, with luxury goods spending in the Americas region is set to grow by about 4% in 2013 versus 2012, surpassing a forecast 2.5% growth rate for China.
Findings also show that the steady pace of store openings in second-tier cities in the US has fuelled sales growth, while an increasing number of Chinese tourists are now visiting in western cities in the US such as Las Vegas and Los Angeles.
Overall worldwide, luxury goods spending will grow by 2% to €217 billion (£185bn) at current exchange rates over 2013, as challenging economics in Europe continue and as China shifts from market expansion to network maintenance of major luxury brands which entered China over the past several years.
However, it is important to note that the growth figure masks a significant impact from exchange rates. At constant exchange rates, market growth would have reached 6% for the year, compared to 5% in 2012. The devaluation of the yen is responsible for over half of this year’s gap.
Bain & Co. partner Claudia D’Arpizio said: “The hypergrowth of recent years was destined to moderate. The silver lining for luxury brands is that they can now change their focus from keeping up with the present to planning for the future.
Global luxury markets
The outlines clear regional differences in the luxury market, with Europe set to show 2% growth in 2013, with increasing spending by tourists counteracting slower spending by European nationals. Tourist spending now drives half of revenues in Italy, 55% of revenues in the UK, and 60% of revenues in France.
Japan will experience a 12% decline owing to the sharp decline of the yen, while Greater China’s growth of 4% includes a split in performance between the mainland, which will grow at 2.5%, and Hong Kong and Macau, which increasingly capture Chinese spending as the nearest-to-home touristic markets. Overall, Chinese consumers have increased from 25% to nearly 30% of the luxury market, including local luxury consumption, and purchases made by tourists abroad.
The Middle East remains relatively strong, with 5% growth. Sales remain strong in Dubai as well, while Saudi Arabia is also gaining share to become the region’s second largest luxury market.
Findings also outline how the emerging African market is increasingly attractive to luxury brands as a high-potential region, with 11% growth and expansion into new markets such as Angola and Nigeria beyond brands’ traditional strongholds of Morocco and South Africa.
Online luxury retail
According to the Bain and Altagamma study, online sales continue to grow faster than the rest of the market, turning in 28% annual growth for the year and reaching close to €10 billion (£8.6bn), nearly 5% of total luxury sales and larger than luxury revenues for all of Germany.
The Luxury Goods Worldwide Market study also shows that accessories, including leather goods and shoes, have become the largest segment of online luxury sales, growing 4% in 2013 to reach 28% of total revenues.
In terms of brand heritage, the study also shows that, in the long run, Italian brands have gained the largest market share of luxury sales, moving from 21%in 1995 to 24% today, nearly equalling French brands’ share of 25%. But in a consolidating market, French conglomerates such as Kering are a driving force, owning 29% of the market compared to 25% in 1995.
D’Arpizio added: “The luxury goods market is becoming more and more complex and, in some aspects, starting to look like more competitive industries such as fast-moving consumer goods. Brands find themselves having to adapt by bringing in the level of detailed customer insight that food or drink brands need to drive growth.
“While still showing steady, if not extravagant growth, brands are adjusting to a new set of scientific tools in order to keep creativity and product excellence at the centre of their strategies and organizations.”