American Marketer


Luxury goods spending could reach $275B in 2011: study

May 5, 2011

Consumers are buying again


Experts have predicted a possible $275 billion spend on luxury goods in 2011, an 8 percent growth from last year’s $255 billion, according to a new study from Bain & Co.

The study indicated that luxury retailers were confident that consumers will keep spending, maybe even to pre-recession levels. The study focused on emerging market China and the natural disaster toll on Japan's economy.

“Good sales growth in the emerging markets, where economic conditions have been favorable are the probable causes for the sales bump,” said Ron Kurtz, principal of Atlanta-based American Affluence Research Center.

“Also, a stronger pace of sales in the U.S., where our surveys have shown the affluent becoming more positive in their spending plans,” he said.

Mr. Kurtz is not affiliated with Bain or its study. He has agreed to comment as a third-party industry expert on the results.

Bain was not able to comment before press deadline.

Predictions, predictions

Luxury department stores and direct-owned stores saw double-digit increase in sales in February and March from 2010.

Furthermore, many stores have found that they are quickly running out of accessories, leather goods, jewelry and watches.

Another finding of the study is that most of the market shares in luxury spending have increased from last year.

The United States, which saw 48.1 market ranking; Japan, which saw 18 percent ranking; Italy, which saw 16.6; France, which saw a 12.6 marketing ranking; Britain, which saw an 8.8 market ranking; Germany, at 8; Korea, at 5.5; Russia, at 4..8 market share; and Hong Kong, at 4.4.

Greater China, comprising China, Hong Kong, Taiwan and Macau, had a 17.6 market share.

This region saw the most amount of growth year-over-year, at 23 percent.

Bain predicts that China will continue to be the fastest growing market. In fact, the study expects it will become the third luxury market in five years.

Additionally, more than 50 percent of the overseas market will account for Chinese spending.

Asia-Pacific and China will drive the luxury goods consumption worldwide.

The market will also see a consolidation of mature markets U.S. and Europe, which still hold the majority of personal wealth.

The March earthquakes in Japan devastated the northern shore of the country, as nuclear risks forced luxury retailers to close Tokyo stores for over 10 days.

However, strong performance after reopening leads experts to doubt that Japan’s economic hit in 2011 will be anything too significant.

“I don’t see anything really surprising, given data from various sources over the past two years, unless it is the strong optimism for fall/winter 2012 season of retailers in the study,” Mr. Kurtz said. “Given the many uncertainties, that could cause a relapse of currently favorable economic conditions.”

Moving forward

The study suggests that over the next 15 years, luxury spending will cross $400 billion.

In order to keep up with trends, marketers should look to China as a symbol for emerging markets, per Bain. This especially pertains to customer insight, good locations and flexible sourcing.

Marketers should also account for the generational shift. Baby boomers will start to retire and teenagers are proving to be big spenders.

Brands need to also be aware of Generation Z, which is always connected. Marketers could try to engage with them via new technology.

As always, brands should rely on enhanced customer experience, especially in-store.

“The luxury market is resilient, and the pundits who, two years ago, were predicting major changes and a dire future for the luxury business are being proven wrong,” Mr. Kurtz said. “The Chicken Littles were wrong – the sky is not falling.”

Final Take

Rachel Lamb, editorial assistant on Luxury Daily, New York