(RAPAPORT) Luxury goods sales are projected to grow 8 percent in 2011 to approximately $275 billion (EUR 185 billion), according to a new report by Bain & Company. The global consulting firm cited strong first quarter momentum for luxury goods sales across the U.S. and Europe and continuing growth in China, as well as demand for goods in fast growing markets such as Russia, Brazil and the Middle East.
In Bain & Company's "Spring 2011 Update: Luxury Goods Worldwide Market Study," which was unveiled today in Milan, luxury good sales surged 14 percent during the Christmas holiday season in 2010, helping to bring total sales from the luxury goods market to a new record of $256 billion (EUR 172 billion) for 2010.
Already this year, Bain & Company found that department stores and direct-owned luxury stores saw continued double digit sales increases in February and March versus 2010, selling out on much of their first half inventory. Additionally, stores have already been placing "robust orders" for the upcoming 2012 fashion season and have restocked sold-out inventory levels, especially in accessories, such as leather goods and jewelry and watches. Retailers interviewed for the Bain study expressed a "high level of confidence that consumers will keep coming into stores and continue making purchases with the same vigor that preceded the global financial crisis," according to the report.
Claudia D'Arpizio, Bain & Company partner in Milan and lead author of the study, stated, "Luxury has made a brilliant return to the retail stage, but the script has been re-written. More demanding customers, generational shifts, new loyalty rules, an increasingly integrated offline and digital customer experience and the continued growth of China and other fast-growing markets are transforming the luxury industry."
By region, Bain forecasts that luxury retail sales in the Americas will increase 8 percent year on year in 2011 to $77 billion, while China will experience a 25 percent increase and that growth across Europe will reach 7 percent. The group expects Japan to experience a 5 percent decline in luxury goods sales this year, however, the Bain study estimated that luxury sales would stabilize in third quarter as consumption recovers from the monstrous earthquake and tsunami.
The study also predicted that growth from emerging markets would remain the focus of luxury manufacturers for the next two to three years. Meanwhile, lifestyle changes have renewed a drive for luxury goods in Russia and new store openings will fuel growth in the Middle East. Brazil would experience heavy investment by international brands this year, which will help improve luxury goods sales from 10 percent to 15 percent, Bain concluded. China's fast-growing wealth will fuel both same-store sales growth and new store openings.
"The emerging market consumer continues to create the most exciting challenges for our industry," said Santo Versace, chairman of the conference host Fondazione Altagamma. "Even as we adjust to the maturing of the North American and European markets, consumers in countries like China are becoming more demanding and more sophisticated in their luxury tastes."
Bain & Company also predicted that looking ahead to year 2014 and beyond, the luxury goods retail market would approach $318 billion to $328 billion and therefore the group suggested three key areas of focus to "owning the luxury goods future."
Luxury marketers must maintain a deep focus on emerging market penetration and a tailored value proposition; adapt to the continuing generational shift from baby-boomers retiring from consumerism, while Generation Z remains connected online 24x7; and continuously enhance the customer experience, increase loyalty and satisfaction, and integrate online and offline experiences with unrelenting service.
"Emerging markets are doing more than generating revenues," said D'Arpizio. "New consumers are also forcing luxury brands to become much more nimble in the merchandise selection and customer experience they offer to increasingly diverse consumers."