Oct 21, 2016
World luxury goods market set to slump by 1% in 2016
Oct 21, 2016
According to the annual survey by consulting firm Bain & Co., the world luxury goods market is expected to close 2016 with a 1% downturn at current exchange rates. Long-accustomed to growth, the market has been affected by exchange rate fluctuations as well as by the terrorist attacks in Europe. As a result, in 2016 the revenue of the global market for personal luxury products, i.e. leather goods, fashion, watches, jewellery and premium fragrances and cosmetics, is expected to be worth €249 billion, compared to €253 billion in 2015.
At current exchange rates, the market grew by 12% on a yearly basis in 2015, and by 3% in both 2014 and 2013. Bain & Co.'s survey was published on Thursday, in partnership with the Altagamma Foundation, comprising the major names in the Italian luxury industry. According to the survey, exchange rate fluctuations and terrorist attacks in Europe have had a notable "impact on consumer confidence and on tourism flows."
The survey also noted that, while Chinese domestic consumption of luxury products grew, it "was not sufficient to counterbalance the decline in purchases by Chinese tourists abroad, especially in Europe." Bain & Co. underlined that "for the first time in history, the Chinese consumers' contribution to the global luxury goods market fell, from 31% in 2015 to 30% in 2016." The sector continues to slump in Hong Kong and Macao too, where a 16% downturn at current exchange rates is forecasted.
As for the USA, the market will suffer a 3% decrease on a yearly basis at current exchange rates, since "luxury brands operating in the USA continue to be affected by both a decline in tourism due to the strong dollar and by weak domestic consumption."
In Europe, while the pound's depreciation generated an increase in tourist shopping in the UK, France and Germany suffered from the terrorist attacks’ aftermath.
"The luxury goods market has reached maturity. We are beginning to perceive the development of a clear polarisation in performance between winners and losers," stated Claudia D'Arpizio, a partner at Bain & Co. and the survey's chief author.
By 2020, the consultancy firm's annual study, a benchmark for the luxury goods industry, is forecasting that the market may be worth €280-285 billion, equivalent to "a yearly growth between +3% and +4% from 2017," though it remains "prudent" given the difficulties that may emerge along the way.
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