The Strategist

Bain & Company: Luxury goods market will be growing to 2025

11/16/2018 - 14:26

The international consulting company Bain & Company calculated that the world market for luxury goods was growing in 2018. The total volume of the market amounted to € 1.2 trillion, which is 5% more than a year earlier. Researchers believe that due to the growing demand from Asia, the growth trend will continue until 2025.

The report says that market growth has been noted in almost all segments of goods. The volume of the market for personal luxury goods (jewelry, clothing, accessories, etc.) this year will amount to € 260 billion, up 6% from a year earlier. Cars, the largest segment of the market, increased by 5%, to € 495 billion. The segment of luxury hotel services also grew by 5%, to € 190 billion. Premium wines and alcoholic beverages - by 4%, to € 71 billion, premium products food - by 6%, to € 50 billion, art - by 6%, to € 41 billion, furniture and other luxury items - by 4%, up to 21%. A decrease of 3%, to € 21 billion, was noted only in the segment of yachts and private jets.

Bain & Company experts believe that the growth of the personal luxury goods market will continue at least until 2025 with an average annual increase of 3-5% to € 320–365 billion.

At the same time, the report notes, “the socio-political situation, trade policy and potential short-term recessions can make this path more difficult in the short term.” “Last year, we saw the market return to sustainable growth,” said Bain’s partner and lead author of the report Claudia d'Aprizio. “This trend continues in 2018, reinforcing the “new norm ” predicted by us, which is characterized by rapid demand from Chinese consumers, online sales and the growing influence of younger generations on the consumption of luxury goods ”.

Indeed, Chinese consumers remain one of the main drivers of market development. Since 2015, they have added half of the total growth to the market. In 2018, their share was 33%, whereas a year earlier - 32%. Sales in China this year will grow by 18%, to € 32 billion, which is explained not only by rising prices, but by increasing the demand itself. In general, throughout Asia (excluding China itself), retail sales of luxury goods increased by 7%, to € 39 billion, thanks to demand from residents of South Korea, Singapore and Thailand. American consumers purchased 5% more luxury goods and services in 2018, worth € 80 billion. Experts explain this by the growth of the US economy and, as a result, incomes of US citizens. In turn, Europe showed only 1% growth this year - up to € 84 billion. Experts explain the low dynamics by the growth of the euro.

This trend is observed in all channels of sales of luxury goods - retail sales increased by 4%, wholesale - by 1%.
The rapid growth of sales continues in the online segment as well: by 22%, to € 27 billion. Americans are the most active in online sales; their share amounts to 44%. “New technologies play into the hands of online and mobile sales,” emphasizes Bain’s partner and co-author of the report Federica Levato. “At the same time, such rapid growth in online sales can potentially bear risks for traditional retail sales channels.”