Report

Luxury Goods Worldwide Market Study Fall 2013

Propelled by Chinese tourism and new store openings, the Americas region surpasses China as the luxury goods growth leader.

By Claudia D'Arpizio

First published on octubre 28, 2013
min read


Reversing the trend of recent years, the Americas region is the king of the luxury goods spending hill, estimated to grow at 4% in 2013 versus 2012, surpassing the estimated 2.5% growth rate for China, as luxury spending in that country moderates. A steady pace of store openings in second-tier cities in the U.S. interior has fueled sales growth in the U.S. In a twist, an additional factor driving the growth in the Americas is luxury spending by the increasing number of Chinese now visiting in western cities in the U.S. such as Las Vegas and Los Angeles; this according to the 2013 Luxury Goods Worldwide Market Study, presented in collaboration today in Milan with Altagamma, the Italian luxury goods manufacturers industry foundation. Overall worldwide, luxury goods spending will grow by 2% to €217 billion at current exchange rates over 2013, as challenging economics in Europe continue and as China shifts from market expansion to network maintenance of major luxury brands which entered China over the past several years. However, it is important to note that the growth figure masks a significant impact from exchange rates. At constant exchange rates, market growth would have reached 6% for the year, compared to 5% in 2012. The devaluation of the yen is responsible for over half of this year’s gap. “The hypergrowth of recent years was destined to moderate,” said Claudia D'Arpizio, a Bain partner in Milan and lead author of the study. “The silver lining for luxury brands is that they can now change their focus from keeping up with the present to planning for the future.” Beyond the Americas, the study also surfaces significant regional differences in the luxury market: Europe will see 2% growth, with increasing spending by tourists counteracting slower spending by European nationals. Tourist spending now drives half of revenues in Italy, 55% of revenues in the U.K., and 60% of revenues in France Japan will experience a 12% decline. Although in real terms, Japanese consumption increased by 9% after a long period of stagnation, the sharp depreciation of the yen imposed a steep penalty on the final revenues for luxury brands, even while consumers are responding well to brands’ offerings Greater China’s growth of 4% includes a split in performance between the Mainland, which will grow at 2.5%, and Hong Kong and Macau, which increasingly capture Chinese spending as the nearest-to-home touristic markets. Overall, Chinese consumers have increased from 25% to nearly 30% of the luxury market, including local luxury consumption, and purchases made by tourists abroad Southeast Asia has become the rising star of the Asia Pacific region, with growth of 11%, not only in its historic core of Singapore but in Malaysia, Indonesia, Vietnam, and Thailand, as well The Middle East remains relatively strong, with 5% growth. Sales remain strong in Dubai as well, while Saudi Arabia is also gaining share to become the region’s second largest luxury market Africa is increasingly demonstrating its attractiveness as a high-potential region, with 11% growth and expansion into new markets such as Angola and Nigeria beyond its traditional strongholds of Morocco and South Africa Online sales continue to grow faster than the rest of the market, turning in 28% annual growth for the year and reaching close to 10 billion Euros, nearly 5% of total luxury sales and larger than luxury revenues for all of Germany. In online sales, shoes are the top-performing category. Bain identifies this level of online penetration as a point where brands have to treat their online channel as a seamless part of their overall channel strategy, rather than an incidental source of additional revenue. In addition, Bain’s “Luxury Goods Worldwide Market Study” finds accessories, including leather goods and shoes, have definitively become the largest segment, growing 4% for 2013 to reach 28% of total revenues. By contrast, apparel is now a quarter of the market, growing at 1%. Hard luxury and perfumes and cosmetics will finish up 2013 with 2% growth. Beyond personal luxury goods, Bain’s analysis and forecasts for luxury cars, wine and spirits, hotels, in-home and out-of-home food, home furnishings, and yachts all show growth, with luxury cars, wine and spirits, and hotels outpacing personal luxury goods and leading to an overall 2013 market of €800 billion of affluent spending, up 6% over 2012. This figure is on track to approach €1 trillion within the next five years. Finally, Bain’s study underlines that in the long run, Italian brands have gained the largest market share of luxury sales, moving from 21% in 1995 to 24% today, nearly equaling French brands’ share of 25%. But in a consolidating market, French conglomerates are a driving force, owning 29% of the market compared to 25% in 1995. “The luxury goods market is becoming more and more complex and, in some aspects, starting to look like more competitive industries such as fast-moving consumer goods. Brands find themselves having to adapt by bringing in the level of detailed customer insight that food or drink brands need to drive growth,” concluded D'Arpizio. “While still showing steady, if not extravagant growth, brands are adjusting to a new set of scientific tools in order to keep creativity and product excellence at the center of their strategies and organizations.” For a copy of Bain’s “Luxury Goods Worldwide Market Study, 12th Edition” or to schedule an interview with Claudia D'Arpizio, please contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102.

Reversing the trend of recent years, the Americas region is the king of the luxury goods spending hill, estimated to grow at 4% in 2013 versus 2012, surpassing the estimated 2.5% growth rate for China, as luxury spending in that country moderates. A steady pace of store openings in second-tier cities in the U.S. interior has fueled sales growth in the U.S. In a twist, an additional factor driving the growth in the Americas is luxury spending by the increasing number of Chinese now visiting in western cities in the U.S. such as Las Vegas and Los Angeles; this according to the 2013 Luxury Goods Worldwide Market Study, presented in collaboration today in Milan with Altagamma, the Italian luxury goods manufacturers industry foundation.

Overall worldwide, luxury goods spending will grow by 2% to €217 billion at current exchange rates over 2013, as challenging economics in Europe continue and as China shifts from market expansion to network maintenance of major luxury brands which entered China over the past several years. However, it is important to note that the growth figure masks a significant impact from exchange rates. At constant exchange rates, market growth would have reached 6% for the year, compared to 5% in 2012. The devaluation of the yen is responsible for over half of this year’s gap.

“The hypergrowth of recent years was destined to moderate,” said Claudia D'Arpizio, a Bain partner in Milan and lead author of the study. “The silver lining for luxury brands is that they can now change their focus from keeping up with the present to planning for the future.”

Beyond the Americas, the study also surfaces significant regional differences in the luxury market:

Europe will see 2% growth, with increasing spending by tourists counteracting slower spending by European nationals. Tourist spending now drives half of revenues in Italy, 55% of revenues in the U.K., and 60% of revenues in France
Japan will experience a 12% decline. Although in real terms, Japanese consumption increased by 9% after a long period of stagnation, the sharp depreciation of the yen imposed a steep penalty on the final revenues for luxury brands, even while consumers are responding well to brands’ offerings
Greater China’s growth of 4% includes a split in performance between the Mainland, which will grow at 2.5%, and Hong Kong and Macau, which increasingly capture Chinese spending as the nearest-to-home touristic markets. Overall, Chinese consumers have increased from 25% to nearly 30% of the luxury market, including local luxury consumption, and purchases made by tourists abroad
Southeast Asia has become the rising star of the Asia Pacific region, with growth of 11%, not only in its historic core of Singapore but in Malaysia, Indonesia, Vietnam, and Thailand, as well
The Middle East remains relatively strong, with 5% growth. Sales remain strong in Dubai as well, while Saudi Arabia is also gaining share to become the region’s second largest luxury market
Africa is increasingly demonstrating its attractiveness as a high-potential region, with 11% growth and expansion into new markets such as Angola and Nigeria beyond its traditional strongholds of Morocco and South Africa

Online sales continue to grow faster than the rest of the market, turning in 28% annual growth for the year and reaching close to 10 billion Euros, nearly 5% of total luxury sales and larger than luxury revenues for all of Germany. In online sales, shoes are the top-performing category. Bain identifies this level of online penetration as a point where brands have to treat their online channel as a seamless part of their overall channel strategy, rather than an incidental source of additional revenue.

In addition, Bain’s “Luxury Goods Worldwide Market Study” finds accessories, including leather goods and shoes, have definitively become the largest segment, growing 4% for 2013 to reach 28% of total revenues. By contrast, apparel is now a quarter of the market, growing at 1%. Hard luxury and perfumes and cosmetics will finish up 2013 with 2% growth. Beyond personal luxury goods, Bain’s analysis and forecasts for luxury cars, wine and spirits, hotels, in-home and out-of-home food, home furnishings, and yachts all show growth, with luxury cars, wine and spirits, and hotels outpacing personal luxury goods and leading to an overall 2013 market of €800 billion of affluent spending, up 6% over 2012. This figure is on track to approach €1 trillion within the next five years.

Finally, Bain’s study underlines that in the long run, Italian brands have gained the largest market share of luxury sales, moving from 21% in 1995 to 24% today, nearly equaling French brands’ share of 25%. But in a consolidating market, French conglomerates are a driving force, owning 29% of the market compared to 25% in 1995.

“The luxury goods market is becoming more and more complex and, in some aspects, starting to look like more competitive industries such as fast-moving consumer goods. Brands find themselves having to adapt by bringing in the level of detailed customer insight that food or drink brands need to drive growth,” concluded D'Arpizio. “While still showing steady, if not extravagant growth, brands are adjusting to a new set of scientific tools in order to keep creativity and product excellence at the center of their strategies and organizations.”

For a copy of Bain’s “Luxury Goods Worldwide Market Study, 12th Edition” or to schedule an interview with Claudia D'Arpizio, please contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102.