The past week I read an interesting article regarding the analysis of the global luxury market .The article highlights some of the key finding from the report: Luxury Goods Worldwide Market Study 2012. In the report Bain & Company, in cooperation with Altagamma—the flagship trade association for the Italian luxury goods industry—has analysed the market and financial performance of more than 230 of the world’s leading luxury goods companies and brands.
Following some interesting points related to the global luxury market:
- The luxury market can be segmented in 7 categories: 1) Personal luxury goods, 2) Cars, 3) Hospitality, 4) Wines and spirits, 5) Food, 6) Furniture, 7) Yachts. The total value of the market expected in 2012 is €750B, with a growth 2011-2012E of 9%
- The value and growth between 2011-2012E in each categories are: 1) Personal luxury goods €212B/+10%, 2) Cars €290B/+4%, 3) Hospitality €127B/+18%, 4) Wines and spirits €51B/+12%, 5) Food €38B/+8%, 6) Furniture €18B/+3%, 7) Yachts €7B/+2%
- The global personal luxury goods sector has continued to soar to post-crisis heights in 2012, with its third year of double-digit growth
The report analyses in more detail the personal luxury goods segment. Following some key points:
- Chinese consumers have enormous impact at home and abroad. One-in-four global luxury consumers are now Chinese. At €27 billion, Greater China (Mainland, Hong Kong, and Macau) has bypassed Japan as the luxury sector’s second market, behind the United States
- The luxury formula is changing more quickly than ever. New channels are gaining ground. Ecommerce is growing at 25% year and off-price (i.e., discount), and outlets at 30% a year. Together, these emerging channels amount to €20 billion. Luxury is shifting away from apparel. For the first time this year, leather goods and shoes are the largest piece of the market. Tourists now account for 40% of global luxury spending. Men are steadily gaining share globally. They now make 41% of luxury purchases, up from 35% in 1995
- CAGR 2012E-2015E (at constant exchange rate) is expected to be in the 5-6% range
The report analyses in less detail the other 6 categories. Following some key points:
- Cars are the largest luxury category with a value of €290B for 2012E. Accessible offer is losing share, whereas super-luxury cars continue to grow
- Wines and Spirit: quality is the key word, higher prices, and lower volumes. Champagne accounting for 30% of total luxury wine sales. China to become leader in luxury wine imports in 5-10 years
- Hospitality: 2011 confirmed to be a record year. Travellers are looking for rare and rewarding experiences. Social networks and internet reviews have a growing role in the decision process
- Food: Consumers becoming ever more selective, looking for quality and local products
- Furniture: Lighting (€2.6B, CAGR 10-12E, 6-7%) and bathroom are the main growth drivers of the last two years, outperforming the other categories. Made-in-Italy proves to be the first choice in design and furniture, especially for emerging market customers
- Yachts: 2011 the market showed the first signs of a slow recovery thanks to an increase in order taking from emerging markets. Macroeconomic conditions undermine a full market recovery, causing a slowdown in growth in 2012 (e.g.: Leasing difficulties). More optimistic expectations for emerging markets especially through alternative ownership configurations (i.e. fractional ownership and time sharing). Lack of adequate port infrastructure still representing a major drawback to full expansion of yacht sales
In the present changing luxury world, what has worked so far may not be enough anymore. Some key trends changing the market are: 1) Retailization of unexpected categories, like in the food segment where the brand power is slowly being replaced by retailer power, 2) Evolution from emerging markets to emerging consumers (more global in their luxury shopping thanks to increasing mobility), 3) Online/Realtime is gaining importance to engage the customer in a constant communication between brands and consumers.
To be successful in the coming years the author of the research highlights the following recommendations: 1) Perfect value proposition, 2) Enhance customer experience, 3) Achieve operational excellence.
Which is you experience buying luxury products online and offline?