Global luxury goods market to grow 6-8% in 2018: Bain

16 Jun '18

3 min read

A positive trend in the luxury market across all regions is set to drive it higher by 6-8 per cent this year to reach €276-281 billion, according to the Bain & Company’s Luxury Study 2018 Spring Update. ‘China’ and ‘millennial state of mind’ remain the buzzwords in an industry that could reach €390 billion globally in sales by 2025, says the study.

The study released in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation, identifies four trends that will drive the luxury market in 2018 and beyond. It says that Chinese consumers will be a key nationality driving the growth of the luxury market. Online continues to gain ground as boundaries blur with traditional physical channels. Social media continues to influence purchases especially for younger consumers. Streetwear categories will remain a key lever to attract new customers. It notes that volume is driving market growth, not just price increases. Exchange rate fluctuations are redistributing spend among regions but not impacting global growth.

“2018 is off to a strong start,” said Claudia D’Arpizio, a Bain & Company partner and lead author of the study. “Currency fluctuations will have an impact, but we expect the healthy trend to continue across all regions and customer segments. Chinese consumers continue to stand out as a growth-driver for the industry, and are more fashion-savvy and digitally advanced than ever before, accelerating the shift of the industry to the millennial state of mind.”

In the Americas, the US luxury market benefitted from a weaker dollar during the crucial holiday season. Tourists from Asia and Europe boosted key cities while local consumers were drawn to luxury again. Canada is growing while performance in Latin America is mixed. The region as a whole is expected to grow between 3 to 5 per cent in 2018.

Europe was negatively impacted by a stronger euro, which had an impact on purchases by tourists. Some countries benefited from stronger consumption (Russia, France, Switzerland) while UK and Germany experienced a slowdown. The study forecasts growth of 2-4 per cent for the region.

Mainland China is expected to account for the lion’s share of growth in 2018. Bain & Company expects this market to grow by 20-22 per cent. Brands are learning how to cater to local consumers, often young and heavily influenced by social media.

Purchases by tourists boosted spending in Japan, especially Tokyo and Osaka, though it was partially redirected towards experiences. Local influencers and social media are also key decision influences for younger local customers. It could grow at the rate of 6-8 per cent.

Across the rest of Asia, Hong Kong and Macau continue on their recovery trajectory. South Korea benefits from visitors from China, but political tensions in the region could have a crucial impact on 2018 growth trends. Bain & Company believes this region could grow by 9-11 per cent.

The rest of the world is expected to be flat or see only slight growth of 2 per cent. Dubai remains stable and supported by international tourists, while Australia is set to benefit from a larger store footprint, notes the study.

Looking ahead to 2025, Bain & Company expects growth to pick up to 4-5 per cent per year increasing the market size to €366-390 billion.

“Luxury brands should view themselves as the masters of their own destiny,” said Bain & Company partner and report co-author Federica Levato. “Customers are responding to targeted strategies, and top performing brands are already winning over the customers of tomorrow.” (KD)

Fibre2Fashion News Desk – India

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