The luxury goods sector is expected to grow by 2 percent to 223 billion euros, and 5 percent to $283.2 billion at current exchange, in 2014 compared to a year ago, according to research by Bain & Co. and Fondazione Altagamma, the Italian luxury goods association. In 2013, sales grew by 3 percent and 7 percent at constant exchange compared to the previous year.
Geopolitical uncertainties and declining consumer confidence in Europe contributed to the overall weakness.
According to The Wall Street Journal, China’s growth rate has slowed in the last couple of years after a 20 percent jump in 2012.
Sales are projected to drop by 2 percent for mainland China, which would be the first luxury sales decline in over a decade. The decline is largely attributed to the Chinese government’s austerity measures that have now expanded beyond public officials to businesses. This has led to lower sales in several luxury categories such as watches and men’s clothing.
“This situation has some benefits,” said Claudia D’Arpizio, analyst at Bain. “The luxury bubble [skewed by gift-giving], which supported the market for years, is now playing down. We finally see the real condition of the Chinese market and which companies are the real winners and losers.”
Meanwhile, Chinese travelers have been supporting European luxury sales. Sales to tourists were either flat or down in several European countries such as the United Kingdom and Germany, but Italy and France fare much better due to a boost in spending by Chinese shoppers, according to Global Blue, a firm that tracks foreign tourists’ purchases. Global Blue projects Chinese spending to rise by 10 percent next year.
Global Blue noted that Italy, France, Germany and the U.K. account for over 70 percent of foreign spenders
According to D’Arpizio, it no longer makes sense for luxury companies to think exclusively in terms of geographies. “The attention shifts onto consumers with trends and local preferences that represent only a part of the global picture. This new perspective carries significant implications for luxury brands: it requires a rethinking of the offer in a global way, with the concept of season, a key pillar of this industry, becoming increasingly obsolete.”
The majority of luxury sales still come from retail stores, but the online channel is the fastest growing, estimated to grow by 28 percent in 2014 according to Bain, reports Women’s Wear Daily.
Accessories is the top category with 29 percent of sales and growing 4 percent, largely due to growth in the footwear category. Hard luxury, particularly watches, is hurt by weaker sales in Asia.
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