Luxury market booms to over €1 trillion thanks to personal goods consumption

08 February 2018 4 min. read
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The global luxury market hit nearly €1.2 trillion last year, buoyed by wealth creation across Asia. The personal luxury good market saw growth of 5%, hitting €262 billion. New analysis shows that Europe has retaken its spot as the top area by sales revenues, while online channels are the fastest to grow, up 24% from the previous year to 9% of total sales.

Luxury goods and experience sales are on the rise, as the global economy picks up and the middle class in developing economies expand. The 16th edition of Bain & Company’s ‘Luxury Goods Worldwide Market Study’, shows the latest trends in the market.

The research found that the global luxury market is estimated to have grown to almost €1.2 trillion in 2017, a 5% increase from the previous year. ‘Luxury cars’ is the most significant segment by size, at €489 billion, up 6%, while personal luxury goods take the secondary spot at €262 billion, up 5%. Luxury hospitality came in at €191 billion; a 4% increase.

Global luxury market growth

The segment to see the fastest level of growth was that of luxury cruises, up 14%, but relatively the smallest segment at €2 billion. ‘Private jets & yachts’ was the only segment to see a decline, down by 2%, to €23 billion total.

Personal goods

The personal luxury goods segment was up by €12 billion from €250 billion in 2016. Europe saw the most significant increase at 7% in 2017, beating out the Americas for the most significant share of the global market, at 33% vs. 32%. The rest of Asia saw 9% growth, although the proportion of the total market remained stable at 14% of the market.

Mainland China has, meanwhile, increased its share from 7% in 2016 to 8% in 2017, with growth up at 18%, by far the most significant level of growth. The increasing market for personal luxury goods in China is so rapid that it has been forecast to be worth as much as $1 trillion RMB by 2025.

Personal goods luxury growth

In terms of channels through which the products and experiences are sold, mono-branded stores have a 30% share, with 2% growth in the most recent period. Specialty stores take the second spot, with a market share of 22%, which saw a 5% level of growth. Department stores saw a small decline, down 1% to a total share of 21%. Off-price stores continue to see strong growth, increasing by 8% last year to 12% of the total market. Online continues to dominate the growth channels, with forecasts showing an increase of 24% from 2016, to a market share of 9%.

Online acquisitions

The continued swift increase in online options is likely to impact the long-term market share of the sales channel, and suggests that rapid growth is likely to impact physical store sales in the longer term.

By 2025, around a quarter of total sales will be through online channels, with the other 75% continuing to involve physical stores. Mono-brand stores are projected to lose market share to 25% of total, with speciality stores also seeing a 5% drop to a total of 17%. Airport stores, which represent quality assurance, are likely to see a slight increase to 7%, while department stores see the most significant declines of the wider channel options, falling from 21% in 2017 to 13% in 2025.

Online market conditions

Online options are the most frequently used for accessories, (41%), apparel (26%) and beauty items (18%). These segments tend to allow for relatively simple returns. When it comes to the region most likely to see an online sale for the €23 billion channel, it Is the Americas, at 47% of total, followed by Europe at 25% of the total.

The channel leverage to access to goods online tend to be e-retailers (39%), followed by branded websites (31%) and retailer websites (30%). The authors state, “Stores will have to pivot from a transactional role to become venues for a broader range of customer interactions. Luxury brands have grown accustomed to presenting a monologue about themselves in stores that feel like temples. Increasingly, they will need to transform stores into places that feel like home, delivering distinctive, immersive experiences and engaging in a genuine dialogue with customers.”