Despite Europe’s sick-man economy, Russia’s conflict with the West over Ukraine and the turmoil in Hong Kong, the global luxury market is on track to grow by 5% this year to €223 billion, according to a report released by consulting firm Bain & Company. The growth though represents the slowest pace since 2009 and going forward the market is set to transition into a more sustainable ‘new normal’.
For the 13th year in a row, Bain & Company has conducted, in collaboration with Fondazione Altagamma, a market assessment of the global luxury-goods market. The just released 2014 edition of the report (‘Luxury Goods Worldwide Market Monitor 2014’) shows that over the past two decades the luxury-goods market has more than tripled, from €73 billion in 1994 to €218 billion last year. In 2014 the global luxury market is on target to reach €223 billion, which represents a 5% growth, down just slightly from 7% in 2013.
Luxury-goods demand increased in all markets, The Americas, which accounts for roughly a third of the total market, were according to Bain the undisputed growth driver in 2014, delivering 6% growth. The growth could have been higher, had it not been that North America was hit by a harsh winter. Despite persistent economic challenges and socio-political tensions in Russia and Ukraine, Europe managed to book a 2% growth, although a large share can be attributed to on-the-ground consumption by tourists. Japan performed the best (+10%), while luxury spend in China for the first time showed a negative trend (-1%).
Cross-pollination of luxury spending
In the report the consultants find that the key driver for growth is touristic spending – implying that who is buying is becoming increasingly important compared to where consumers are buying. For example, Chinese consumers – who represent the fastest growing nationality for luxury – spend abroad more than three times what they spend locally. “With such cross-pollination of luxury spending, it no longer makes sense to think only in terms of geographies. The focus is shifting to consumers, with local trends and tastes representing only part of the picture,” says Claudia D’Arpizio, partner at Bain.
Going forward, the authors are optimistic about the luxury-goods market, expecting the industry to grow to €250 - €265 billion by 2017, although the double-digit growth rates of the past are not likely to be achieved. “The industry is acclimating to lower, but more sustainable long-term growth. That is the ‘new normal’ for the global luxury market,” concludes D’Arpizio.