Global luxury goods market exceeds €1tn
New report finds strong sales of luxury cars and art despite personal luxuries market being hit by weaker demand in China and Hong Kong
Growth in the personal luxury goods markets, which includes jewellery, watches and leather goods, slowed to 1-2% from 3% in 2014. It is now worth €253bn.
Strong sales of luxury cars and fine art have helped push the global luxury goods market higher than €1tn (£700bn) for the first time, according to a new report, despite slowing demand for personal luxuries such as jewellery and handbags.
The personal luxury market has been hit by weaker demand in China and Hong Kong, said the annual report from consultancy Bain & Co. Chinese consumers account for 31% of global luxury sales, followed by US consumers at 24% and Europeans at 18%.
Chinese consumers are still spending, but they are now heading to Europe and Japan – attracted by the weak euro and yen – rather than their traditional shopping destinations of Hong Kong and Macau. About 80% of Chinese luxury goods shopping is done abroad.
The findings echo recent comments from British luxury fashion house Burberry, which has blamed a sharp sales slowdown on weaker demand among shoppers in China.
The fastest growth was for sales of luxury cars, up 8% year on year, and fine art, up 6% – with postwar and contemporary work particularly strong.
Growth in the personal luxury goods markets, which includes jewellery, watches and leather goods as well as fashion and perfumes, slowed to 1-2% from 3% in 2014. It is now worth €253bn. Back in 2011, 2012 and 2013, the market grew by 13%, 5% and 6% respectively.
“For the last several years, we’ve referenced ‘luxury’s new normal’ with a deceleration of the personal luxury goods market. Now, we are starting to feel the impact of that slowdown,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “The challenge for luxury brands in this environment is how to successfully navigate through hard-to-predict volatility.”
Another reason for the slowdown is the retreat of Russians, particularly from their shopping hotspots such as Dubai and Milan. They cut their tax-free spending in Europe by 37%. A year ago, they were the world’s second biggest buyers of luxury goods behind the Chinese, but their purchasing power has halved with the rouble’s devaluation.
Asia registered its worst performance ever, due to the lacklustre trend of mainland China and a sharp drop in sales in Hong Kong and Macau. However, in Europe, Chinese tax-free purchases increased by 64% while Americans increased their spending in Europe by 67%.
The “super dollar” made the US too expensive for many global tourists. Nevertheless, the US remains the world’s largest luxury market at €79bn; New York City alone outweighed all of Japan.
Local buying by Europeans and Americans has fallen in the past five years. D’Arpizio said many major brands had alienated local consumers by raising prices for certain items such as bestselling handbags.
The increases, which she estimated at 30-50% over the past three years for some items, were partly driven by the desire to bring prices into line with other regions such as Asia, where prices were higher due to tariffs and other factors.
D’Arpizio said: “I think some luxury brands focused on China too much and lost focus on the local European customer base and as a result, some of them feel betrayed by these brands. Those who could afford these goods in Europe started asking themselves: ‘Why should I pay so much money for this product?’”
Local European and American consumers increasingly prefer to shop at discount outlets. Bain estimates the outlet market now represented 10% of total luxury sales, with its revenue doubling in the past three years to €26bn.
All figures are at constant exchange rates.