Consulting firm Bain & Companys’ new report suggests a return to growth of the Luxury goods market following the effects of global unrest, economic fluctuations, and volatile politics, reports the New York Times. A recent article ran in the NY Times back in May signals the rebirth of a stagnated Luxury Goods market, which is good news, if somewhat late as we near the end of July 2017.
It seems that the big spenders can only wait so long before getting back in the game. The world has been occupied with fears of terrorism, poor currency rates and unpredictable politics slowing the movement of tourists through traditional luxury goods markets and cities such as Paris, but the Bain report offers a more optimistic view of the market place for the coming year.
The return to growth suggested by the report estimates a global personal luxury goods market of between $284 billion and $289 billion in 2017, with a constant exchange rate, up 4 percent from €249 billion on last year. The report notes three important factors responsible for the return to growth, firstly, the resurgence in Chinese consumer spending at home and abroad, secondly, the return of tourism confidence in Europe, and the efforts made by luxury brands to identify and respond to the tastes of increasingly important consumer groups with particularly interest in millennials.
So, the report bases the growth on a cooling of the fear factor, following terrorist attacks in Paris, Brussels, and Nice, that saw European sales of luxury goods slow down over an 18 month period, while shoppers decided to spend closer to home. With a more normalized attitude towards travel, Luxury sales have grown 4 percent over the first quarter of 2017 from the same period last year, with sales in accessories, jewelry in mainland China, as well as in Europe.
Leaving China and Europe out of the equation for a second to look to the so-called Trump bump in the US, that saw an increase in enthusiasm among investors and businesses following the presidential election, appears to be giving way to what some are calling a “Trump slump.” The previously strong American luxury market is still feeling some pressure from falling tourism, probably brought on by factors like President Trump’s targeted travel bans and in-flight restrictions. This, of course, is not helped by the strength of the dollar and poor performance of department stores, a crucial national sales channel.
Still Good News
These factors aside, the Bain report offers a cautiously optimistic global outlook for the sector. The trend to move away from high-end goods and the travel apprehension that lead to shopping closer to home is beginning to normalize. As suggested by Claudia D’Arpizio, partner at Bain & Company, a specialist in the luxury goods market remarked, “It is a sad state of affairs, but people are becoming more accustomed to uncertainty being part of their lives,” and “The impact of events like terror attacks are becoming less strong on the luxury market.”
In the final analysis, the Bain report expects annual sales of personal luxury goods, including high-end fashion, handbags, and jewelry, to total €280 billion to €290 billion by 2020. Which is nothing to turn your nose up at?
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