Global personal luxury goods market growth endures despite weakening consumer confidence

Photo by bruce mars from Pexels

By: Inside Retail Asia

Global personal luxury goods market growth has reached a “new normal” pattern, following back-to-back years of strong performance in 2017 and 2018, according to the luxury goods industry advisory service Bain & Company.

Last year, six percent global growth led to €260 billion (US$292 billion) in sales, which is expected to balloon to €271–276 billion ($304.3–310 billion) this year, registering an expected four-percent to six-percent growth at constant exchange rates.

According to Bain, the growth has been driven primarily by the acceleration in domestic spending of mainland Chinese consumers and an increase in European tourism, which fueled positive growth in the region through last year’s holiday season. This is despite socio-political turmoil in countries like the UK and France,

Meanwhile a temporary weakening of consumer confidence in North America, as well as a decrease in traffic to malls and department stores, negatively impacted personal luxury spending during last year’s holidays stateside.

The findings were part of the Bain Luxury Goods Worldwide Market Study, Spring 2019.

The report showed that mainland Chinese consumers are demonstrating a strong preference for purchasing luxury goods at home thanks to price harmonization, consumer-centered strategies, and governmental initiatives. Solid consumer confidence and willingness to buy, especially among young generations, are expected to drive year-over-year growth of 18–20 % in the region.

Japan remains an exclusive and attractive market for luxury brands, with forecast growth of 2-4% in 2019. Tourist spending is expected to rise ahead of the Tokyo Olympics in 2020, with Chinese consumers already confirming their interest in the area.

Across the rest of Asia the outlook is positive, apart from Hong Kong and Macau, which continue to lose out to Mainland China. Bain & Company asserts that the luxury market in the region is set to grow by 10–12 %. An expanding middle class with increasing disposable income is fueling growth in Indonesia, Philippines and Vietnam, while sustained growth in South Korea is the result of local consumers and a mild rebound of tourism.

The rest of the world is expected to be flat or see a slight decrease of 2 %, with the Middle East remaining stagnant as domestic consumer spending begins to flow outside of the region.

The article is first published HERE on June 18, 2019.