The US, Japan and Italy are the largest luxury-goods markets of the globe, according to a research from Bain & Company. Looking at the top cities, New York leads the pack, followed by Paris and London. Bain in addition observes that international tourism is playing an increasing role in the luxury goods market, and focus should therefore be placed on nationality rather than geography of consumers.
Bain & Company recently released its 2014 market assessment of the global luxury-goods market, conducted in collaboration with Fondazione Altagamma, entitled ‘Luxury Goods Worldwide Market Monitor 2014’. The report shows that the luxury-goods market has more than tripled over the past 20 years from €73 billion in 1994 to €218 billion last year and is expected to reach €223 billion by the end of 2014.
Top luxury markets
In the report the top countries in the personal luxury goods market are identified. The list is topped by the US, with an estimated market size of €64.9 billion, which represents an increase of 3% compared to 2013 in Euros and 5% in Dollars. The US is followed by Japan, which is valued at €18 billion, which is a 10% increase compared to 2013 in local currency. The UK is found on the sixth place, but realised, with a growth rate of 9% in Euros, the largest growth in market size of the top 11 countries.
The report also lists the top 11 cities, a list that is slightly different, although the US again tops the list. New York is found on #1 with a total spending of €22.3 billion. Paris is the second largest luxury goods market, with €11.3 billion, and London is found on the third place, with €10.1 billion, both representing the vast majority of the volume of their countries’ luxury goods market.
Interestingly, the consultants find that the size of the market is strongly linked to the local vs. tourist mix of the population and the spending pattern of locals. According to the report, all luxury markets, except for Japan, China and South America, are currently driven by touristic consumption. For luxury retailers, it iplies that focus should shitt from who is buying instead of where one is buying. “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, Bain Partner in Milan.
Chinese consumers, who represent the fastest growing nationality for luxury, are spending more than three times abroad what they spend at home, and thus form an excellent example of this conclusion. The Japanese on the other hand, buy most of their luxury purchase at home, a result of the Yen devaluating by nearly 30% since 2012. For Europe and the US, tourist spending is increasingly relevant, with the highest percentage of luxury goods purchased by tourists in Europe. It is striking that while tourist spending is more and more important in the US and Europe, the ‘favour’ is not returned as the biggest percentage of luxury goods bought by Americans and Europeans are still bought locally.