Luxury Spending Rebounds to Pre-Crisis Levels
The luxury sector is rebounding better-than-expected this year thanks in large part to wealthy Americans replenishing their wardrobes after a year of self-denial and nouveau riche Chinese indulging in a worldwide spending spree, according to a new study released Monday.
Sales of designer clothes, fine leather goods, jewelry, watches and other indulgences around the globe is forecast to surge 10 percent to 168 billion euros ($236.7 billion) in 2010, recovering from a disastrous 2009 when sales declined 8 percent to 153 billion euros, Bain & Co. said in its annual review of the sector commissioned by Italy's Fondazione Altagamma association of high-end producers.
"It is really impressive how customers have rebounded in their approach to these purchases, in particular in the United States and in Europe," said Bain partner and luxury goods expert Claudia D'Arpizio.
Sales in the U.S. market were up by 12 percent, compared with 6 percent growth in Europe and 22 percent growth in Asia, Bain said.
Leather goods, the only category to hold steady during last year's dramatic declines, is expected to grow by 16 percent to 43 billion euros, while apparel, the leading sector, grew by 8 percent to 45 billion euros.
The holiday season will solidify the results, and Bain is allowing for a final tally of 9 percent growth for modest increases and 11 percent if shoppers come out strong. Growth will cool in 2011 to 3 percent to 5 percent due to the likely continued lowering of the dollar against the euro and the strength of this year's sales.
Asian luxury sales were powered by China where sales grew by a whopping 30 percent and poising China to become the third largest luxury market in five years. Japan recorded a 1 percent contraction.
But the real story in Asia is the Chinese tourists, who have extended their spending-fueled travels beyond Asia.
"The big surprise of the last few years are the Chinese. ... Now they are very visible in Europe and also the United States. They are traveling all over the world," D'Arpizio said.
Bain figures show luxury goods sales in airports and airlines are expected to total euro16 billion in 2010, a sign that high-end travel is on the uptick. D'Arpizio said that reflected a strong impact from "new" Chinese tourists.
Larger brands are doing better than smaller ones, having had the scale to weather the crisis and invest in new products to draw customers back in. The weakness of smaller brands is expected to lead to a period of consolidation in the sector, with bigger brands buying up smaller ones and forming new groups, D'Arpizio said.
And menswear sales are growing faster than womenswear. Men are the driving luxury sales in emerging markets, with women following, while in mature markets men's shopping habits are starting to mimic that of women, D'Arpizio said. And no longer are men's purchases relegated to special occasion tuxedos or watches.
"We call it the feminization of society. Men are less conservative around fashion, they browse more on the Net to find their favorite brands and production, they are more educated and more knowledgeable," D'Arpizio said.