May 20, 2014
Luxury goods market growth to slow in 2014
May 20, 2014
MILAN, Italy - Sales of luxury goods are expected to grow more slowly in 2014 compared with last year as weakness in China, Russia and Europe counters rising global tourist shopping and strong demand in Japan and the United States, a study said on Monday.
Worldwide sales of personal luxury goods are set to rise 4-6 percent this year at constant exchange rates compared with a 6.5 percent increase in 2013, Bain & Co said in the study presented with Italian luxury industry association Altagamma.
So far this year the market is performing in line with 2013, the study said, with worldwide sales of luxury clothing, watches, perfumes, cosmetics, jewellery and accessories such as belts, ties and shoes up 6 percent at constant exchange rates.
"We are entering a new phase for the sector, call it a new normal," said Claudia d'Arpizio, partner at the consultancy whose forecasts are closely watched by the industry.
"There are unlikely to be more booms like the recent one in China soon, and mature markets can cope better with economic crisis, so growth should be more stable," said d'Arpizio.
Currency volatility wiped 3-4 percent off the value of the market in the first quarter, the study said, as the euro - in which many of the world's luxury companies report earnings - appreciated against the U.S. dollar, renminbi, and the yen.
While travel retail, outlet stores and online shops are expected to perform well as people travel more and search for bargains, new shop openings are expected to slow in 2014 as brands seek to maintain exclusivity.
Japan will be the main growth driver in 2014, with luxury sales rising 9-11 percent to 19-20 billion euros, as both Japanese shoppers and Chinese tourists take advantage of the weaker yen, but this could be affected by brands hiking prices.
The Russian market is showing signs of a potential structural crisis as political turbulence worsens an already deteriorating economic outlook, the study said, forecasting a 4-6 percent drop in luxury sales there this year.
Russians, traditionally the most important nationality among foreign luxury shoppers in Italy, are travelling less to Europe due both to the political crisis and a weakening ruble.
While Chinese people will make more than 30 percent of global luxury purchases this year, d'Arpizio said, the local market will grow just 2-4 percent, down from 20 percent in 2012, as higher prices at home and a crackdown on conspicuous consumption drive shopping abroad.
Increasing consumer confidence and tourism will support 4-6 percent growth in the United States. D'Arpizio said this was likely to be "closer to 6 percent than 4 percent".
Chinese and Middle Eastern tourists will make up for weak demand in much of Europe, where Germany is one of the few markets where local consumption is rising, d'Arpizio said.
In a separate report also presented on Monday, Altagamma forecast growth of around 6 percent at constant exchange rates for the sector in 2014, with better results in the second half.
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