It is expected that worldwide luxury goods market revenues will grow as much as 50 per cent faster than global GDP, according to a new report issued by consulting firm Bain & Company.

Unveiling their latest findings at a conference hosted by Italian luxury goods association Fondazione Altagamma, Bain confirmed that luxury revenues grew by 10 per cent in 2012, given the strong growth present in the first half of last year.

What changed in the second half of the year? Subdued spending in Europe and slower growth in China are mainly to blame.

The total size of the luxury market, which was €212 billion euros in 2012 is expected to reach €250 billion by mid-decade.

Bain’s report confirms that luxury spending is no longer restricted to traditional markets in Europe and America, but tourists are now expanding their dollars to countries such as Australia, South East Asia and Dubai.

In today’s society, the rise of the middle class in emerging countries is polarising the competitive arena, becoming a “new baby boom sized generation” for luxury brands to target.

So what luxury items are on consumers’ radar right now? Bain reports that absolute luxury items are leading the way, meaning no logos, highest quality materials and exquisite craftsmanship. This is a slight change from years ago when logos were everywhere and accepted by society.

When it comes to breakdown of products, leather goods and accessories are expected to continue to grow. Apparel spending recovered slightly, whilst watch purchases continue to decline, mainly due to the Chinese Government’s ruling of a stop in luxury gifting and a decrease in spending.

WIth cosmetics also being considered a luxury item, whilst they are slowing down in mature markets, they are continuing to grow in emerging markets.

Geographically, Europe remains a challenge for the luxury industry. With tourism numbers slowing down in this region, so is spending. With Europeans, especially in southern Europe,  Bain expects a flat-to-two per cent growth.

The U.S continues to grow and impress at the same time. Consumer confidence is at a high, retailers are rethinking their strategies when it comes to digital shopping and there are more stores opening. The rest of the Americas (Central and South) is also expecting to rise by a further 5-7 per cent.

When it comes to regions, Asia has been on the top in the last few years, with the help of strong consumer spending coming from the Chinese. But Bain’s forecast for the region now paints a different picture. Growth in the Asia-Pacific region, excluding mainland China, would reach 7-9 per cent this year, down from 10 per cent last year at constant currencies. For mainland China, it forecast growth of 6-8 per cent at constant currencies.

Japan’s growth continues to grow steadily as the country’s monetary policy depreciates the yen and pushes local consumption. The Middle East is also growing at a steady pace, with Dubai continuing to be the center of gravity and the only city that is attracting foreign luxury consumers – think Russians, Indians and Africans.

“We are seeing a more even distribution of global growth,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. “In turn, brands are refocusing from short-term, reactive hot spot thinking to long-term sustained growth strategies.”

By Cassandra Murnieks

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