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CHINA LEADS THE WAY, AS LUXURY MARKET CONTINUES UPWARD TREND

The luxury goods market is looking like it will have a banner year in  2018, reported Bain & Company, basing its findings on data collected during the first half of the year. According to the company, positive trend across all regions will drive sales higher by 6 percent to 8 percent, at constant exchange rates, reaching a total high as $320 billion by the end of the year.

It is a trend that Bain and CO. expects will continue. With “China” and the “millennial state of mind” remaining the buzzwords, the luxury products sector is expected to achieve annual sales of  $450 billion globally by 2025.

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“2018 is off to a strong start,” said Claudia D’Arpizio, a Bain & Co. partner and lead author of the study, which was produced jointly with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation. “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.”

REGIONAL DYNAMICS IN THE LUXURY MARKET

Mainland China is expected to account for the lion’s share of growth in 2018, with Bain forecasting growth of 20 percent to 22 percent, at constant exchange rates. Brands are learning how to cater to local consumers, it stated, who are often young and heavily influenced by social media.

Purchases by tourists boosted spending in Japan during the first half of the year, 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. Bain & Company forecasts growth of 6-8 percent, at constant exchange rates, in that market.

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 percent, at constant exchange rates.

In the Americas, reported Bain & Co., 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 percent in 2018.

Europe was negatively impacted by a stronger euro, which had an impact on purchases by tourists. While certain countries, such as Russia, France, Switzerland benefited from stronger consumption, the United Kingdom and Germany experienced a slowdown. Bain & Company forecasts growth of 2-4 percent, at constant exchange rates, for the region.

The rest of the world is expected to be flat or see only slight growth of 2 percent, at constant exchange rates. Dubai remains stable and supported by international tourists, while Australia is set to benefit from a larger store footprint.

A woman overlooks China

Mainland China is expected to account for the lion’s share of growth in 2018, with Bain forecasting growth of 20 percent to 22 percent, at constant exchange rates. (Photo courtesy of Yiran Ding @ Unsplash)

FOUR TRENDS SHAPING PERSONAL LUXURY GOODS

Bain & Co.’s research identifies four trends that will drive the luxury market in 2018 and beyond:

Chinese customers in first place: Chinese consumers will be a key nationality driving the growth of the luxury market. Buyers of luxury in China are young, increasingly fashion-savvy and well aware of the price-value equation.

Click, Click, Click: Online continues to gain ground as boundaries blur with traditional physical channels. Social media continues to influence purchases especially for younger consumers.

Casual and streetwear: Streetwear categories experienced standout growth in 2017, driven by casualization of workplace attire and younger buyers of luxury goods. This segment remains a key lever to attract new customers.

Consolidating new normal: Volume is driving market growth, not just price increases. Exchange rate fluctuations are redistributing spend among regions but not impacting global growth.

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