Spending on personal luxury goods to top €270 billion this year

24 June 2019 Consultancy.eu 3 min. read
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The global personal luxury goods sector will grow by up to 6% this year, lifting the industry to a market value of around €276 billion, according to a new analysis by Bain & Company in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.

Growth is the result of an increase in European tourism, which is picking up this year despite socio-political turmoil in countries like the United Kingdom and France. But much more so, growth comes on the back of the growing spending of mainland Chinese consumers on luxury brands such as Gucci, Louis Vuitton, Prada and Versace. “China continues to dominate the luxury scene,” said Claudia D’Arpizio, a partner with Bain & Company in Italy. 

Thanks to solid consumer confidence and willingness to buy, especially among young generations, spending in China’s mainland market is to boom by 18% this year (at constant exchange rates). This acceleration is coming at the expense of the country’s neighbours, Hong Kong and Macau, which are losing ground to major Chinese shopping hubs.

Illustrating how important Chinese consumers are becoming for the global luxury market, D’Arpizio said, “By 2025, Chinese customers will account for 45%+ of the global market, with half of their luxury purchases happening in Mainland China.” By then, the industry is forecast to be worth between €320 and 365 billion, depending on the development of economic fundamentals.Market size of the global personal luxury goods sectorFor Asia as a whole, the researchers expect the regional luxury market to grow by 10%. 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. Japan remains an attractive market for luxury brands in terms of sales volume, although growth is expected to remain slow, at 2% this year. However, tourist spending is expected to rise ahead of the Tokyo Olympics in 2020, which will pull the growth rate for 2020 closer to the 4% mark. 

Europe’s personal goods luxury sector rebounded in 2018, experiencing positive growth due to an influx of tourism driven by the weakening of the Euro against all major currencies. In 2019 and 2020, growth is expected to sit between 1% and 3%, with the actual rate much dependent on how key economic developments such as sociopolitical upheaval, the macro-economic outlook, Brexit, and the Euro currency unfold. 

In the Americas, growth of 2% is expected in the current year. This comes after a lacklustre 2018, when malls and department stores continued to struggle with decreasing traffic and a newly issued US tax reform plan negatively impacted domestic spending on personal luxury goods.

From a products perspective, leather, jewelry and handbags were the fastest growers last year, followed by beauty and skin-care products. Fragrances booked a mild performance in 2018, while apparel and watches remained sluggish, with mixed trends across regions.

Looking forward, Bain & Company and Fondazione Altagamma expect a number of mega-trends to reshape the face of the luxury market. These include more focus on post-ownership (a shift in consumption favouring access over ownership), sustainability (circular fashion will be the new mantra), and digitisation (which will in particular impact the way shopping experiences are delivered). 

Federica Levato, a partner with Bain & Company in its Milan office, points at the important role that insurgent brands will play in accelerating this transition. “They will challenge established brands, pushing for a real paradigm shift with a more creative approach that goes beyond the product itself and impacts all facets of business.”