Luxury sales headed for a slowdown

Top selling luxury goods 2015
Top selling luxury goods 2015

The trillion-dollar global luxury market is losing some of its luster, as weakness in China, Russia and other emerging markets is weighing on sales of everything from Swiss watches and Gucci handbags to yachts and private jets.

Luxury sales worldwide are expected to grow 5 percent at constant exchange rates in 2015, to just over 1 trillion euros, according a report released Thursday by Bain & Co.

Sales of personal luxury goods, which include leather goods, jewelry, watches and fashion, are expected to grow only 1 percent at constant exchange, to 253 billion euros. That compares with growth of 3 percent last year and 7 percent in 2013.

"For the last several years, we've referenced 'luxury's new normal' with a deceleration of the personal luxury goods market," said Claudia D'Arpizio, a Milan-based Bain partner and lead author of the study.

"Now, we are starting to feel the impact of that slowdown," she said. "The challenge for luxury brands in this environment is how to successfully navigate through hard-to-predict volatility."

Zhang Peng | LightRocket | Getty Images

The report said sales in Asia registered the worst historical performance at constant exchange rates, driven by lackluster trends in mainland China and sharp sales declines in Hong Kong and Macau.

But there were some bright spots by category and country. Sales of luxury cars are expected to be up 8 percent at constant exchange, to more than 400 billion euros, helped by new entry-level luxury cars and SUVs.

Luxury hotels have also been strong, up 7 percent, thanks to a rebound in European tourism. And fine art sales are expected to rise 6 percent. That total includes estimates for private transactions, which account for 60 to 70 percent of sales in the category. Public auction sales have doubled over the past 10 years.

On the flip side, sales of yachts, private jets and fashion items remain weak. The report said yacht sales in Europe and the Middle East are recovering, but trends in emerging markets are slowing. In the jet segment, while sales of large jets are soaring, other sales are weak.

Luxury companies are grappling with an increasingly global consumer, as affluent travelers do more of their luxury spending in other countries. In the report, D'Arpizio called the new luxury spenders "borderless consumers," because their money is spread around the world.

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This year, global tourists have flocked to Europe and Japan to capitalize on the weak euro and yen. Luxury tourism slowed in the U.S., however, has been hurt by the strong dollar.

Around 80 percent of Chinese luxury spending is now outside mainland China, according to the report. Yet spending in Hong Kong and Macau fell more than 20 percent. Spending in the Middle East also slowed, in part due to weakness from Russian tourists.

Still, the report said Chinese consumers remain the largest consumers of luxury, accounting for 31 percent of purchases. They're followed by Americans with 24 percent and Europeans with 18 percent.

"Undoubtedly, Chinese consumers play a primary role in the growth of luxury spending worldwide," said Federica Levato, principal at Bain and co-author of the study.