Bain Luxury Report- The Middle East luxury goods market achieved a growth of 10 to 15 per cent from 2011 to 2012, establishing the region as the 10th largest luxury goods market in the world; this according to Bain & Company, the leading advisor to the global luxury goods industry, in the 11th Edition of its industry bellwether “Luxury Goods Worldwide Market Study,” which was unveiled at a recently concluded conference hosted by Fondazione Altagamma (the Italian luxury goods industry trade association).
The report further stated that personal luxury goods spending in the Middle East has reached AED 30 billion. The report also revealed that worldwide luxury goods market revenues will grow by 7 per cent in the final 3 months of 2012 versus the same period in 2011, culminating in full-year growth in 2012 of 10 per cent, and pushing total luxury goods revenues to an estimated €212 billion. The 10 per cent increase estimated for the market in 2012 represents the third straight year following the “great recession” that luxury goods revenues will grow annually by double-digits.
Asia-Pacific sales, driven by China, are projected to grow by 18 per cent, while the Americas region is also projected to post strong gains, with revenues rising by 13 per cent by year’s end. Growth in Europe will approximately halve versus last year, expected to grow by 5 per cent this year. Bain estimates that the luxury goods market will grow, in real terms (i.e. using constant exchange rates) by 4 to 6 per cent per year between 2013 and 2015, pushing the market to between €240 and €250 billion by the middle of the decade.
“Concerns about market weakness are somewhat overblown,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “But we are seeing sharp disparities between brands that are not keeping up with the quickening pace of change in the market and those that are adjusting to shifts in tastes and demographics.”
Cyrille Fabre, Bain & Company partner who leads the Retail & Consumer Products practice for the Middle East, said: “The Middle East has been a key growth market for luxury goods and will continue to attract major brands in the long term. The new Luxury Goods Worldwide Market Study has reported that the Middle East market will grow by up to 15 per cent and become the 10th largest in the world, strongly validating the immense market potential of the Middle East. The robust growth outlook will certainly be a key factor in generating greater global attention towards the region’s luxury goods sector.”
While overall growth in revenues finds its new level, however, the nature of that growth is shifting substantially in several key ways.
- Chinese consumers have further transformed the luxury market, with growth in domestic sales and continued voracious spending as tourists. Greater China has bypassed Japan as the sector’s second market, behind the United States. Chinese consumers now make half of the luxury purchases in all of Asia, and nearly one third of those in Europe. Globally, one in four purchases of personal luxury goods comes from Chinese consumers
- Ecommerce is continuing to grow at 25 per cent growth a year, while sales at off-price (i.e., discount) outlets will see 30 percent growth. Together, these emerging channels amount to €20 billion, effectively the equivalent of sales in Japan
- The study finds a generational shift under way as young consumers seek significantly different experiences from luxury consumption, seeking uniqueness over heritage, 24/7 access over exclusivity, and entertainment over mere shopping
- Accessories have become the core category in personal luxury goods. For the first time, leather goods and shoes have become the largest piece of the market, now at 27 per cent of sales. The category is seeing increasing levels of male spending, and increasing interest in higher quality, higher price items
- Tourists now account for 40 per cent of global luxury spending. As tourism and luxury spending become more tightly intertwined, the experiential dimension of luxury consumption becomes as critical for brands to deliver as their products
In addition, Bain’s “Luxury Goods Worldwide Market Study,” includes a wide range of additional areas of luxury goods. Analysis and forecasts for luxury cars, hotels, in-home and out-of-home food, home furnishings, and yachts all show growth, and contribute to an overall 2012 market of €750 billion of affluent spending, up 9 per cent over 2011. The study suggests this figure will approach €1 trillion within the next 5 years.
“Fundamentals for growth remain strong, but it’s going to be a bumpy ride,” concluded D’Arpizio. “The strategies that brands relied on to win in the past simply aren’t going to connect with the segments that will matter most in the second half of the decade.”
Category Revenues Growth Forecast
2012 (est) 2012
Leather Goods €33 bn 16%
Shoes €12 bn 13%
Men’s Apparel €26 bn 10%
Women’s Apparel €27 bn 9%
Fragrances €20 bn 4%
Cosmetics €23 bn 5%
Jewelry €11 bn 13%
Watches €35 bn 14%
Total €212bn 10%
Cars €290 bn 4%
Hotels €127 bn 18%
Food €38 bn 8%
Home furnishings €18 bn 3%
Yachts €7 bn 2%
Market Revenues Growth Forecast
2012 (est) 2012
Europe €75 5%
Americas €65 13%
Japan €20 8%
Rest of Asia €42 18%
Rest of World €10 5%
About the Bain ‘Luxury Goods Worldwide Market Study’
Bain & Company, in cooperation with Altagamma – the flagship trade association for the Italian luxury goods industry – has analyzed the market and financial performance of more than 230 of the world’s leading luxury goods companies and brands. The database of companies, known as the ‘Luxury Goods Worldwide Market Observatory,’ has become a leading and much studied source for the international luxury goods industry. Bain publishes its annual findings in its ‘Luxury Goods Worldwide Market Study,’ which was first published in 2000.
About Bain & Company
Bain & Company is the management consulting firm that the world’s business leaders come to when they want results. Bain advises clients on strategy, operations, technology, organization, private equity and mergers and acquisition, developing practical insights that clients act on and transferring skills that make change stick. The firm aligns its incentives with clients by linking its fees to their results. Bain clients have outperformed the stock market 4 to 1. Founded in 1973, Bain has 49 offices in 31 countries, and its deep expertise and client roster cross every industry and economic sector.
About Bain in the Middle East
Bain & Company’s work in the Middle East spans multiple industries including Financial Services, Energy and Industrials, Public Sector, Telecommunications, Media & Technology, Consumer Goods & Retail, Private Equity and Sovereign Wealth Funds. Our clients are major listed companies, state-owned enterprises, government entities, financial investors and private or family-owned business. Our consultants have graduated from the best international and regional schools and bring extensive practical experience working in the region and beyond. We work seamlessly as part of the global network bringing the best of Bain’s industry and functional expertise to our clients.