ME luxury market to grow by 15% on global recovery

Bain’s latest study reaffirms the robust shape of the global luxury market and likewise underlines the huge growth potential of the Middle East region. The region’s luxury market will grow by 15 per cent in 2012, leading the strong performance of the global luxury market. While global luxury goods market to increase six to seven per cent in 2012, the study forecast.

“The Middle East remains a crucial component in the sustained growth of the global luxury market. The region has opened exciting growth possibilities for key industry players and continues to be a major destination for a wide range of luxury brands,” Cyrille Fabre, Bain & Company partner who leads the Retail & Consumer Products practice for the Middle East, said.

Global luxury goods sales are defying initial concerns over eurozone turmoil and fears of a cool down in emerging markets, and will exceed €200 billion in 2012, according to Bain.

Bain also expects an average of seven to nine per cent annual increases in global sales to fuel luxury brands’ growth aspirations until the middle of the decade. The study points to a continuation of the core market trends that created sharp recovery from luxury’s 2008-09 recession: growth of online sales, rapid expansion in China, and shift from wholesale to direct-owned retail remain factors to watch.

As the industry matures around its global retail and e-commerce capabilities, however, the Bain study identifies new factors to watch in the mix of consumers and products that define the industry. Most important, Bain finds that luxury has become a more truly global market. Growth for 2012 of two to four per cent in Europe, five to seven per cent in the Americas, and as much as two per cent in Japan will generate the highest sales in terms of absolute numbers. At the same time, China’s growth of 18 to 20 per cent now stands alongside resumed growth in India and Russia, where recovery was delayed, and in a host of new markets where the luxury market is solidifying, including Azerbaijan, Brazil, Indonesia, Kazakhstan, Malaysia, Mexico, South Africa, Turkey and Vietnam.

“Brands must develop strategies with much wider reach than ever before,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “The lessons they learned in earlier emerging markets will help, but they now must manage even broader diversity of consumer preferences, and more variations in their model of how to take products to market.”

As consumers and product trends evolve, the study also finds that hard and soft accessories will consistently outperform even the rapid-growing luxury sector, as much as double the growth rate of other luxury categories. Market growth is tilting to the absolute end of the luxury spectrum, with the true highest-end brands and products outperforming more accessible offerings by two to four per cent a year.

Bain has identified the top market-defining factors for luxury in the next three to five years - Chinese consumers, including their spending as tourists, now account for over 20 per cent of global luxury sales. Asian consumers (i.e., adding Japan, Korea, and Southeast Asia) account for more than 50 per cent. Thirty per cent of global luxury sales now occur within emerging markets. Women are encroaching on traditional male purchases (business attire, luxury watches), as women’s spending becomes increasingly independent. Men are increasingly likely to seek traditionally female brand dimensions around “fashion” and “beauty” as well as product functionality

“Fast growth is bringing even faster change to the luxury sector,” concluded Bain’s D’Arpizio. “With more markets to manage and accelerating trends to anticipate, brands that struggle to respond quickly may find the markets’ rapid growth a double-edged sword.”

abdulbasit@khaleejtimes.com