Luxury Back in Fashion Despite Downturn

The market for luxury goods has come back with a bang in the past couple of years, despite volatility elsewhere in the market.

Aligator Purse
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Aligator Purse

Developing markets such as China are causing huge excitement in companies such as Louis Vuitton Moet Hennessey (LVMH) and PPR , owner of Gucci and Bottega Veneta.

Angela Ahrendts, chief executive of Burberry , told CNBC: "For us, it's about reach, it's about awareness, and then about engagement with the consumers."

Global sales of luxury goods will reach 185 billion euro ($254 billion) in 2011, according to consultants Bain & Co.

"The global industry went from recession to resurgence in one year, between 2009-10," Marc-Andre Kamel, head of Bain & Co.'s luxury practice for Europe, the Middle East and Africa, told CNBC's Luxury Edge.

Torsten Müller-Ötvös, chief executive of Rolls Royce , said: "It's not only the bling or the spirit of ecstasy or the logo in itself, it is definitely the substance you're going to buy for your money."

Despite the gloom in much of the Western world, there is still plenty of wealth-creation going on.

Credit Suisse’s Second Annual Global Wealth Report showstotal global wealth increased 14 percent from January 2010 to June 2011, to $231 trillion from $203 trillion a year and a half ago.

Much of this increase is coming from the Asia-Pacific region, Credit Suisse analysts said.

"There are spots in the world that are still doing well," said Kamel.

Bain predicts that China will become the third-largest luxury market in the world within five years.

So, when worries started growing about a slowdown in China recently, luxury stocks such as Burberry suffered falls.

"Slowdowns are relative in China," said Stephen Lussier, chief executive officer of De Beers' Forevermark. "There's such opportunity for brands in China as we expand into Tier 2 cities."

China's secondary cities are "new territories where everything has to be reinvented," Kamel said.