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Bain & Co. Expects Luxury Goods Sales to Rise 10%

Oct 18, 2010 12:10 PM   By Denise Romano
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RAPAPORT... Bain & Company predicted a 10 percent increase in worldwide luxury goods sales for 2010, according to their annual '‘Luxury Goods Worldwide Market Study.'’ The group also determined that for the luxury goods sector the  recession ended in the fourth quarter of 2009. Luxury goods sales fell 8 percent in 2009, the first annual decline measured since 1995. Bain noted that the economic turn-around for the luxury sector was due to double-digit increases on sales, on average, in the second and third quarters of this year; a quick return of shoppers to luxury brand stores; the continued growth of China; a rebound of U.S. sales and particularly strong sales of leather, shoes and accessories.

The study predicted that with this year's uptick in revenue to about $236 billion, all categories would experience strong gains. Bain predicted that apparel sales would grow 8 percent for the year. Hard luxury goods —including watches and jewelry—is projected to rise by 13 percent. Accessories, shoes and leather goods would finish the year 16 percent higher. Perfume and cosmetics were expected to increase 4 percent for 2010.  Bain predicted that luxury sales online would fare even better than overall growth by increasing 20 percent in 2010. Discounted luxury goods sales accounted for 30 percent of online revenue, whereas 70 percent of online purchases were being made at full price.

So far this year, luxury sales increased 6 percent in the first quarter, 16 percent in the second quarter, 13 percent in the third quarter and they are projected to grow 5 percent in the fourth quarter, which includes Christmas. Bain forecasts growth of 3 percent to 5 percent in 2011, keeping in mind the 2011 forecast assumes a constant exchange rate, and may increase or decrease based upon growth or decline of the Euro and the dollar.

“The shift from wholesale to retail shows that luxury brands have much more control over their own fates, but also much more responsibility. While the sector is not entirely out of the woods, we see strong growth signals in key markets and channels that suggest a full rebound in luxury goods sales to pre-recession levels,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “We are going to see a decade where the balance shifts to brands that have the best retail management, the best shopping experience, and the greatest capacity to invest.”

Looking to the Far East, Bain forecasted that sales in China would increase 30 percent year-over-year growth in 2010, likely becoming the world’s third largest luxury goods market by the middle of this decade. The Asia-Pacific region, expect for Japan, would experience a 22 percent increase in 2010. U.S. sales would  increase 12 percent, representing the largest absolute revenue increase for the year. Europe is estimated to from 6 percent in 2010 and only Japan sees a decline, decreasing by only 1 percent, as mature luxury consumers reduce spending and younger shoppers avoid traditional luxury brands.

“We’ve seen a number of new behaviors and trends emerge now that the crisis is reversing,” concluded D’Arpizio. “The luxury shopper of this decade is more likely to be Chinese, more likely to be male, and more likely to be young. Brands that meet the needs of these new segments will be in the best position to keep growing for the next 10 years.
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Tags: Denise Romano , Denise Romano, Economy, Jewelry
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