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Bain & Company eyes comeback for luxury market growth in 2017
Says global personal luxury goods market will grow by 2-4 percent
By: Diamond World News Service
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May 30 2017 8:51AM
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Reference: 15243  

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Bain & Company, released its “Bain Luxury Study 2017 Spring Update” which states that the luxury market is set to get back to growth in 2017, driven by healthier local consumption in China and increased tourism and consumer confidence in Europe. The report was prepared in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers’ industry foundation.

A firm Chinese rebound with purchasing both at home and overseas as well as increasing customer confidence in Europe will boost global personal luxury goods market growth by 2-4 percent (at constant exchange rates) in 2017 to €254-259 billion. The report suggests that as the gap between winners and losers continues to widen, brands must rethink their strategies and adapt to a millennial state of mind, which will be a key driver to push the market to €290 billion in sales by 2020.

“This year looks promising so far,” said Claudia D’Arpizio, a Bain partner and lead author of the study. “After a difficult 2016, the first quarter of 2017 brought some relief to the luxury industry. Factors such as the continuous repatriation of Chinese consumption as well as a positive outlook in Europe both for locals and tourists will help drive overall market growth during the remainder of the year.”

Region-wise, the report notes that the U.S. luxury market continues to underperform, as a strong dollar, ongoing political uncertainty and struggling department stores combine to create an uneven outlook for 2017. Europe is facing a recovery from decreased tourist flows in 2016 and a comeback in consumer confidence. Mainland China is also rebounding, as local consumers demonstrate a strong preference for purchasing luxury goods at home, which is expected to drive growth of 6-8 percent (at constant exchange rates). However, Chinese tourists will still account for a sizable portion of luxury purchases abroad. Japan remains a safe market for luxury brands. Local consumption supports a market where tourism has decreased, leading to flat growth for the year. Across the rest of Asia, Bain believes the market is set to shrink by -2 to-4 percent (at constant exchange rates). Hong Kong, Macau and Singapore are on the mend, but Taiwan and Southeast Asia face decreased tourism, particularly from China and South Korea, which has been impacted by domestic political turmoil.The rest of the world is expected to be flat or see only slight growth of 2 percent (at constant exchange rates), with Middle East remaining stagnant (outside of Dubai).

Bain’s research identifies five key topics that will drive the market for personal luxury goods going forward: the U.S. market landscape, Chinese increased purchases at home and abroad (mostly in Europe), ever-growing influence of digital, a widening gap between winners and losers, and the new wave of millennial consumers.

Looking ahead to 2020, Bain expects mild growth of 3-4 percent per year (at constant exchange rates) as the market size increases to €280-290BN. “Brands need to be customer obsessed and millennial minded,” said Bain partner and report co-author Federica Levato. “Buying a luxury good now is not just walking into a store. It has become a journey of engagement through multiple touchpoints well before the point of sale.”

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