The study found that global luxury sales would increase by four to five per cent in 2013
Luxury sales to ease, but good news on horizon
Though worldwide sales in luxury goods are expected to ease slightly in
the short term, news that the market in 2025 will be five times greater
than it was in 1995 may alleviate some concern.
The findings come from a new report titled, Luxury Goods Worldwide Market Study, Spring 2013 Update, which was conducted by world-wide business consultancy, US-based Bain & Company, in collaboration with Italian luxury trade body Altagamma.
According to the study, while global luxury goods sales – including jewellery and watches – increased by 10 per cent last year (at current exchange rates), luxury revenues would only increase four to five per cent in 2013.
It also found sales in the category would rise at a compound annual growth rate of five to six per cent between 2013 and 2015 (constant exchange rates) and that the total size of the market would reach €250 billion (A$329.6 billion) by mid-decade.
The study covers worldwide spending on luxury ready-to-wear items, perfume and cosmetics, watches, jewellery, and accessories. Watch consumption has reportedly dropped considerably “as retailers de-stock and as Chinese luxury consumers slow their purchasing”.
While sales in China are expected to stabilise to seven per cent in 2013 – down from 10 per cent last year – South East Asia is said to experience a 20 per cent increase, driven by a wave of new store openings and increasing strength and relevance of second-tier markets.
Furthermore, the report found tourists were changing consumption habits by travelling to new destinations like Australia and South East Asia as opposed to Europe – which “remains a challenge for the industry”. Sales in Europe were expected to increase by 2 per cent this year, compared to 3 per cent in 2012.
The study predicted that high consumer confidence, increased store openings and intensive investment in linking physical and online shopping would help increase revenue in the US, while demand in Brazil and Mexico would remain strong. It also said Japan was returning to positive spending results, helped by the country’s efforts to stimulate the economy, and that the Middle East was increasing at a steady pace.
Get ready for the future
According to Bain & Company, the key for winning in the luxury market over the next 10 to 15 years is "to get ready for Luxury 2.0," where success will be defined by a focus on three luxury goods management principles: superior customer experience; flawless retail management; and people excellence.
In terms of customer experience, consumers are said to expect every interaction – bricks-and-mortar, online and mobile devices – to be premium, differentiated and targeted to their tastes and preferences. Luxury will depend more than ever on word-of-mouth promoters who share their delight with products and experiences.
The era of the disengaged, formal shopping experience is also reportedly ending, and customers now expect an inviting and personalised service. In addition, physical and digital storefronts need to be more compelling in order to attract the luxury consumer.
The Luxury Goods Worldwide Market Study, Spring 2013 Update analysed the market and financial performance of more than 230 of the world's leading luxury goods companies and brands. Bain & Company published its first annual Luxury Goods Worldwide Market Study in 2000.