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

08 February 2018 Consultancy.uk

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.”

Profile

More news on

×

Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”