Report

Luxury Goods Worldwide Market Study Fall-Winter 2014: The Rise of the Borderless Consumer

Luxury spending continues to grow amid demand for tourism and transportation.

글 Claudia D’Arpizio, Federica Levato, Daniele Zito and Joelle de Montgolfier

First published on 12월 31, 2014
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Executive summary The 13th edition of the Bain Luxury Study, published by Bain & Company for Fondazione Altagamma, the industry association of the manufacturers of Italian luxury goods, analyzed recent developments in the global luxury-goods industry. Slower, steadier growth for luxury goods The overall luxury industry comprises nine segments in total, one of which is personal luxury goods. Factoring all segments, the overall luxury market exceeded €850 billion in 2014, showing healthy growth of 7% overall, driven primarily by luxury cars (10%) and luxury hospitality (9%). Bain research finds that international travel and tourism is fueling an appetite for 360-degree luxury experiences, such as high-end transportation, that includes highly customized “super cars” and yachts, as well as luxury hotels and cruises. Not to be outdone, personal luxury goods—the “core of the core” of luxury—continue to buoy the market. The overall market is on target to reach €223 billion in 2014, triple its size 20 years ago. Yet that growth is slowing: in 2013, luxury goods grew 7%, and in 2014, growth slowed to 5% at constant exchange rates (2% at current rates). That slower pace is, however, more sustainable, and it reflects the “new normal” for luxury goods, particularly as the global economy continues its sluggish recovery from the financial crisis of 2008. Demand from Chinese consumers, mature consumers in the US, and Japanese shoppers returning to luxury goods have all helped shore up growth. It is worth noting that luxury spending doesn’t always take place at home. The luxury-goods industry in most markets is now driven by touristic spending, which means that who the buyers are matters more than where they buy. There are exceptions, however. Japanese citizens make most of their luxury purchases at home, primarily owing to currency factors. (The value of the yen has declined nearly 30% since 2012.) But Chinese consumers now represent the top and fastest-growing nationality for luxury, spending abroad more than three times what they spend locally. Tourists are also increasingly influencing the luxury market in the Americas. With such cross-pollination of luxury spending, it makes less and less sense to think only in terms of location. Instead, the focus is shifting to consumers, with local trends and tastes representing only part of the picture. This new mind-set has important implications for luxury brands. It requires thinking about the product offerings from a more global perspective, with the concepts of seasons and national boundaries—key pillars of this industry—becoming obsolete. The following are specific regional trends: Americas—The Americas were the undisputed growth engine in 2014, delivering 6% growth at constant exchange rates (3% at current rates). Growth in the US could have been even more robust if it hadn’t been for a harsh winter. Brazil posted disappointing results due to local currency devaluation, but Mexico and Canada both maintained positive performance. Europe—Growth across the continent was up 2%, despite persistent economic challenges, socio-political tensions in Eastern Europe, and less dynamic tourism. The market continues to heavily rely on international tourism, as deteriorating consumer confidence halted any significant effects from the partial recovery among local spenders. Japan—Japan regained a growth leadership position in 2014, driving a positive trend through an increase of 10% at constant exchange rates (2% at current rates) that made it the best-performing market in real terms. China—Luxury spending in China showed a negative trend for the first time: –1% growth this year at constant exchange rates (–2% at current rates), due to greater controls on luxury spending and changing consumption patterns. Simultaneously, less established and younger accessible brands have endeared themselves to the growing upper-middle-class “wannabe” consumer segment, which is expected to double by 2017. The Rest of Asia—Greater China is flattening while South Korea strengthened its position as a trendsetter and influencer for fashion and luxury. In Southeast Asia, Malaysia and Singapore were hampered by the Malaysian airline accidents, but most of the rest of the region experienced a brisk pace of growth. Within specific categories of luxury goods, accessories captured 29% of the market and grew by 4% in 2014 (at current exchange rates)—more than apparel and hard luxury (jewelry and high-end watches), the next two largest categories. For the first time since 2007, the growth of high-end shoes surpassed that of leather goods, emerging as an evident status symbol, albeit at a lower ticket price than other leather goods. At the opposite end, watches took a hit from the downturn in Asia. In response, many watchmakers cut production to sidestep the risk of oversupply. Across most categories, the retail channel is growing, comprising approximately 30% of the market. There is an ongoing retailization of historical wholesale formats and markets. For instance, increasing numbers of US department stores are adopting a concession-based model. Markets such as Russia and the Middle East have also shifted to joint ventures over the past few years. When it comes to a physical shopping experience, consumers prefer a monobrand environment, which still makes up more than 50% of the market. Conversely, online, they love variety and assortment and prefer buying in a multibrand e-environment. Register to read the full report

Executive summary
The 13th edition of the Bain Luxury Study, published by Bain & Company for Fondazione Altagamma, the industry association of the manufacturers of Italian luxury goods, analyzed recent developments in the global luxury-goods industry.
Slower, steadier growth for luxury goods

The overall luxury industry comprises nine segments in total, one of which is personal luxury goods. Factoring all segments, the overall luxury market exceeded €850 billion in 2014, showing healthy growth of 7% overall, driven primarily by luxury cars (10%) and luxury hospitality (9%).

Bain research finds that international travel and tourism is fueling an appetite for 360-degree luxury experiences, such as high-end transportation, that includes highly customized “super cars” and yachts, as well as luxury hotels and cruises.

Not to be outdone, personal luxury goods—the “core of the core” of luxury—continue to buoy the market. The overall market is on target to reach €223 billion in 2014, triple its size 20 years ago. Yet that growth is slowing: in 2013, luxury goods grew 7%, and in 2014, growth slowed to 5% at constant exchange rates (2% at current rates). That slower pace is, however, more sustainable, and it reflects the “new normal” for luxury goods, particularly as the global economy continues its sluggish recovery from the financial crisis of 2008. Demand from Chinese consumers, mature consumers in the US, and Japanese shoppers returning to luxury goods have all helped shore up growth.

It is worth noting that luxury spending doesn’t always take place at home. The luxury-goods industry in most markets is now driven by touristic spending, which means that who the buyers are matters more than where they buy. There are exceptions, however. Japanese citizens make most of their luxury purchases at home, primarily owing to currency factors. (The value of the yen has declined nearly 30% since 2012.) But Chinese consumers now represent the top and fastest-growing nationality for luxury, spending abroad more than three times what they spend locally. Tourists are also increasingly influencing the luxury market in the Americas. With such cross-pollination of luxury spending, it makes less and less sense to think only in terms of location. Instead, the focus is shifting to consumers, with local trends and tastes representing only part of the picture. This new mind-set has important implications for luxury brands. It requires thinking about the product offerings from a more global perspective, with the concepts of seasons and national boundaries—key pillars of this industry—becoming obsolete.

The following are specific regional trends:

Americas—The Americas were the undisputed growth engine in 2014, delivering 6% growth at constant exchange rates (3% at current rates). Growth in the US could have been even more robust if it hadn’t been for a harsh winter. Brazil posted disappointing results due to local currency devaluation, but Mexico and Canada both maintained positive performance.
Europe—Growth across the continent was up 2%, despite persistent economic challenges, socio-political tensions in Eastern Europe, and less dynamic tourism. The market continues to heavily rely on international tourism, as deteriorating consumer confidence halted any significant effects from the partial recovery among local spenders.
Japan—Japan regained a growth leadership position in 2014, driving a positive trend through an increase of 10% at constant exchange rates (2% at current rates) that made it the best-performing market in real terms.
China—Luxury spending in China showed a negative trend for the first time: –1% growth this year at constant exchange rates (–2% at current rates), due to greater controls on luxury spending and changing consumption patterns. Simultaneously, less established and younger accessible brands have endeared themselves to the growing upper-middle-class “wannabe” consumer segment, which is expected to double by 2017.
The Rest of Asia—Greater China is flattening while South Korea strengthened its position as a trendsetter and influencer for fashion and luxury. In Southeast Asia, Malaysia and Singapore were hampered by the Malaysian airline accidents, but most of the rest of the region experienced a brisk pace of growth.

Within specific categories of luxury goods, accessories captured 29% of the market and grew by 4% in 2014 (at current exchange rates)—more than apparel and hard luxury (jewelry and high-end watches), the next two largest categories. For the first time since 2007, the growth of high-end shoes surpassed that of leather goods, emerging as an evident status symbol, albeit at a lower ticket price than other leather goods. At the opposite end, watches took a hit from the downturn in Asia. In response, many watchmakers cut production to sidestep the risk of oversupply.

Across most categories, the retail channel is growing, comprising approximately 30% of the market. There is an ongoing retailization of historical wholesale formats and markets. For instance, increasing numbers of US department stores are adopting a concession-based model. Markets such as Russia and the Middle East have also shifted to joint ventures over the past few years.

When it comes to a physical shopping experience, consumers prefer a monobrand environment, which still makes up more than 50% of the market. Conversely, online, they love variety and assortment and prefer buying in a multibrand e-environment.

Register to read the full report