BrazilChina to account for nearly half of luxury goods market by 2025
The global personal luxury goods sector will grow by up to 6% this year according to a new analysis by Bain & Company, lifting the industry to a market value of around €276 billion.
A study into the global personal luxury goods sector, conducted by leading management firm Bain & Company in collaboration with Italian luxury goods manufacturers’ industry foundation Fondazione Altagamma, has projected the sector to grow by up to 6 percent this year to a worth of around €276 billion. While various factors contribute to the growth projection, the majority of the positive action will be driven from developments in China.
“By 2025, Chinese customers will account for 45%-plus of the global market, with half of their luxury purchases happening in Mainland China,” said Italy-based Bain partner Claudia D’Arpizio, in illustrating how important Chinese consumers are becoming for the global luxury market. “By then, the industry is forecasted to be worth between €320 and €365 billion, depending on the development of economic fundamentals.”
While growth is attributed in part to an increase in European tourism, which is picking up this year despite socio-political turmoil in countries like the United Kingdom and France, such figures are overshadowed by the rising spending of mainland Chinese consumers on luxury brands such as Gucci, Louis Vuitton, Prada and Versace; “China continues to dominate the luxury scene,” D’Arpizio states bluntly.
According to Bain’s projections, spending in China’s mainland market is to boom by 18 percent this year (at constant exchange rates) thanks to solid consumer confidence and willingness to buy, especially among young generations. Yet, this acceleration is coming at the expense of the country’s neighbours – Hong Kong and Macau – which are now losing ground to major Chinese shopping hubs.
The researchers also expect the regional luxury market of Asia as a whole to grow by 10 percent, with an expanding middle class and increasing levels of disposable income fueling growth in Indonesia, the Philippines and Vietnam. Meanwhile, sustained growth in South Korea is the result of local consumers and a mild rebound of tourism, while Japan should expect ongoing slow growth despite remaining an attractive market for luxury brands in terms of sales volume.
From a products perspective, leather, jewelry, and handbags were the fastest growers last year, followed by beauty and skin-care products. Fragrances booked a milder performance in 2018, while apparel and watches remained sluggish, with mixed trends across regions. Apparel, beauty and handbags however continue to make up the bulk of global luxury purchases, amounting to €60 billion, €56 billion and €51 billion, respectively.
Looking forward, Bain & Company and Fondazione Altagamma expect a number of megatrends to reshape the face of the luxury market. These include a greater 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). For now though, wholesale remains the largest channel for luxury goods, accounting for 62% of all global sales.
