The luxury industry is growing, which according to data from the Altagamma Observatory exceeded 2015 billion euros in global market value in 1.000, confirming a positive trend that has been going on since 2010, after the halt in 2009. The market, which as defined by parallel research by Bain & Company includes 10 segments, led by autos, hotels and personal luxury goods accounting for 80% of the total, recorded a growth of 5% compared to 2014 (at constant exchange rates), driven mainly by cars (8%), hotels (7%) and the art market (6%).
Supported by currency fluctuations and by consumers increasingly without geographical barriers, the lion's share is the market for personal luxury goods, grown to over 250 billion euros. While global tourists flocked to Europe and Japan to take advantage of weak euros and yen, the US market, static in real terms, grew thanks to the "super dollar", accounting for more than a third (34%) of the global market in 2015.
The result has arrived despite Asia having the worst performance in history (at constant exchange rates) due to a weak trend in China (Mainland) and the sharp contraction in sales in Hong Kong and Macao. These are the main evidences that emerged from Bain in the 14th edition of the “Altagamma Monitor on World Markets 2015”, presented a few days ago in Milan in collaboration with Altagamma, the Foundation that brings together the Italian excellence in the sector. The personal luxury goods market – which includes leather goods, clothing, hard luxury and perfumes and cosmetics – therefore reached 253 billion in 2015.
This translates into one 13% growth at current exchange rates, while in real terms growth slows down significantly to 1-2%. “In recent years, we have defined the slowdown in the personal luxury goods market as 'luxury's new normal'. Today we are starting to feel the impact of this slowdown,” he said Claudia D'Arpizio, Bain's partner in Milan and lead author of the study. “In these circumstances, the challenge for luxury brands is to make their way through a highly volatile and unpredictable environment”.
According to Bain, the main challenge that luxury brands will face concerns the definition of a smarter pricing model. The rise of e-commerce and the growth of global tourism are driving greater transparency on international price differentials. Furthermore, increasingly price-conscious buyers are finding it difficult to bring the price of luxury goods back to their true value.
As a result, luxury brands need to consider how to mitigate volatility and achieve better results both locally and globally. This includes warehouse management that allows you to adapt to tourist fluctuations or a coordination of prices and mark-downs on different markets and channels. Luxury brands also face numerous other challenges such as rethink their network of stores and their role in an increasingly digital world or cater to local consumers when masses of tourists flock to mature market shops.
“The continuous increase in prices over the last ten years, aimed at creating a more exclusive positioning on the market and maximizing tourist flows, is starting to backfire on luxury brands,” said Claudia D'Arpizio. “Luxury brands are faced with the challenge of rebuild credibility and trust among consumers in a long-term perspective, rather than simply applying short-sighted, tactical price adjustments to react to market fluctuations.”
