Global personal luxury goods market growth endures despite weakening consumer confidence
Global personal luxury goods market growth has reached a “new normal” pattern, following back-to-back years of strong performance in 2017 and 2018, according to the luxury goods industry advisory service Bain & Company.
Last year, 6 per cent global growth* led to €260 billion (US$292 billion) in sales, which is expected to balloon to €271–276 billion ($304.3–310 billion) this year, registering an expected 4-per-cent to 6-per-cent growth at constant exchange rates.
According to Bain, the growth has been driven primarily by the acceleration in domestic spending of mainland Chinese consumers and an increase in European tourism, which, despite socio-political turmoil in countries like the UK and France, fuelled positive growth in the region through last year’s holiday season.
Meanwhile a temporary weakening of consumer confidence in North America, as well as a decrease in traffic to malls and department stores, negatively impacted personal luxury spending during last year’s holidays stateside.
The findings were part of the Bain Luxury Goods Worldwide Market Study, Spring 2019 presented this week in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.
“This year looks to be on par with our new normal of growth in the market,” said Bain & Company partner and lead author of the study Claudia D’Arpizio. “China continues to dominate the luxury scene. Elsewhere we are continuing to see geopolitical uncertainty shape and reshape tourism spending patterns, with Chinese consumers choosing to spend domestically with more frequency. Overall we are seeing moderate growth in most markets.”
The report showed that mainland Chinese consumers are demonstrating a strong preference for purchasing luxury goods at home thanks to price harmonisation, consumer-centered strategies, and governmental initiatives. Solid consumer confidence and willingness to buy, especially among young generations, are expected to drive year-over-year growth of 18–20 per cent* in the region.
Japan remains an exclusive and attractive market for luxury brands, with forecasted growth of 2–4 percent* in 2019. Tourist spending is expected to rise ahead of the Tokyo Olympics in 2020, with Chinese consumers already confirming their interest in the area.
Across the rest of Asia the outlook is positive, apart from Hong Kong and Macau, which continue to lose out to Mainland China. Bain & Company asserts that the luxury market in the region is set to grow by 10–12 percent*. An expanding middle class with increasing disposable income is fueling growth in Indonesia, Philippines and Vietnam, while sustained growth in South Korea is the result of local consumers and a mild rebound of tourism.
The rest of the world is expected to be flat or see a slight decrease of 2 per cent*, with the Middle East remaining stagnant as domestic consumer spending begins to flow outside of the region.
“We expect stable growth in 2019,” said D’Arpizio. “But under the surface of this new normal, the future of luxury is taking shape with a number of key characteristics, including Chinese Generation Z, access, ownership, sustainability and social responsibility, the impact of digital across the entire value chain, preference for luxury experiences over products, and consumer networks as a new measure of value.”
(*at constant exchange rates).