Luxury on the rise with momentum provided by China and the Millennials
Luxury footwear will experience 7% growth in 2018: this is what emerges from the Fondazione Altagamma’s Personal Luxury Goods Study elaborated in collaboration with Bain & Company.
The findings of the study presented this past 7 June in Milan outline how growth in the luxury segment of footwear, leather goods, and accessories in 2018 is perfectly aligned with that of the entire sector of personal luxury goods, which should grow by +6.8%, reaching 281 billion euros. This forecast surpasses the 2017 year-end performance, which rose by +5% rise, for 262 billion euros in sales. And in the future, positive growth should continue at an estimated 4 to 5 percent annual growth rate, with the market reaching a value of 390 billion euros.
Among the markets of destination for personal luxury goods, China is one that is destined to take on an increasingly important role, as the sole market with a +20-22% double-digit growth forecasted in 2018. Such a performance would see its global market share increase from 8 to 10%. An important market standing, which becomes even more important when considering the shopping done by Chinese tourists outside of their own country.
The announcement that China will lower its custom duties on many products imported as of July 1st, including apparel, accessories, and furnishing accessories, could lead to even further growth for global personal luxury purchases by Chinese nationals. The difference in price between a product purchased in China and abroad could undergo a significant reduction (from today’s 75% price difference to only 20%), bringing a good part of the luxury products purchased by Chinese tourists in the world’s capitals of shopping back to Mainland China: a factor that could lead the Chinese market to experience even greater growth in the luxury segment.
Moreover, the entire area of Asia is expected to experience a 9-11% rise in luxury good purchases in 2018, with just a few exceptions: if Macau and Hong Kong are expected to experience an upward trend, a slowdown is forecasted for South Korea because of political tensions. Japan, instead, should experience a +6-8% rise.
And in the West? Growth will be quite moderate: in Europe, there will only be an increase between 2-4%, because of the strength of the Euro’s exchange rate that will penalise tourist purchases and the slowdown in Great Britain and Germany. Even the USA will experience only a moderate growth between +3-5%, supported by European and Asian tourists.
Another important driving force, according to the study done by Altagamma and Bain & Company, will be the Millennials, who are also responsible for the accelerated growth in online sales and social media shopping.
The last finding outlined by the study is the importance of Italy as a hub for luxury: not only because non-EU tourists make most of their luxury purchases in the boot. But also because of the fact that 80% to 90% of global luxury products are manufactured in Italy, not only as Made in Italy, but also as subcontracted products for French, British, and American companies.