The Middle East luxury market will grow by 15 per cent this year leading the strong performance of the worldwide luxury market, according to a new study.
Global luxury goods sales are defying initial concerns over Eurozone turmoil and fears of a cool down in emerging markets, and will exceed euros 200 billion ($242 billion) in 2012, said Bain & Co, a global management consulting firm in its study.
Bain's Spring 2012 update to its industry bellwether “Luxury Goods Worldwide Market Study” was unveiled recently at a conference hosted by Fondazione Altagamma, the Italian luxury goods industry trade association.
Cyrille Fabre, Bain & Company partner, who leads the Retail & Consumer Products practice for the Middle East, said: “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. Bain’s latest Luxury Goods Worldwide Market Study reaffirms the robust shape of the global luxury market and likewise underlines the huge growth potential of the Middle East region.”
Bain also expects an average of 7 to 9 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 2 to 4 per cent in Europe, 5 to 7 per cent in the Americas, and as much as 2 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 2 to 4 per cent a year.
“Fast growth is bringing even faster change to the luxury sector,” concluded 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.”