Economy

Strong sales of luxury goods in the bag this year

By Andrew Roberts (China Daily)
Updated: 2011-05-10 10:33

Only-child teenagers from wealthy families and a new generation of working women in China are increasing their spending habits. [Photo / Provided to China Daily]

PARIS - Sales of luxury goods may rise 8 percent this year, matching 2010's pace, as demand strengthens in the United States and Europe and emerging-market shoppers splurge on luxury goods, according to the consulting company Bain & Co.

Spending on luxury apparel, accessories, watches, jewelry, perfume and other products may climb to 185 billion euros ($274 billion) in 2011 from 172 billion euros last year, excluding currency moves, the consulting company said on Monday in a report. Bain predicted in October growth of 3 percent to 5 percent on the same basis.

Sales of luxury goods jumped to a record last year, exceeding the 170 billion euros spent in 2007 - the previous best year since at least 1995 - as demand rebounded after the recession, Bain estimated. "In 2011, luxury goods will continue to enjoy strong momentum," the report said.

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LVMH Moet Hennessy Louis Vuitton SA, the world's largest maker of luxury goods, Burberry Group Plc and PPR SA reported strong quarterly sales last month, suggesting that the March 11 earthquake in Japan won't stall the industry's rebound.

The long-term effect of the disaster, which left more than 25,000 people dead or missing and triggered the world's worst nuclear crisis in a quarter century, won't be "significantly negative" on the luxury sector, Bain predicted.

"The situation in Japan came back to normality after the earthquake," said Claudia D'Arpizio, a Milan-based partner at Bain. Though Japanese demand for European and American luxury brands was already stagnating, consumption won't be "dramatically different from last year", she said.

Japan recovery

Japan, the second-largest market for luxury goods, may see the first signs of recovery in the third quarter as consumers increase spending and reconstruction boosts the economy, D'Arpizio said. Annual luxury sales in the country will decline to 17 billion euros from 18 billion euros, Bain estimated.

The Chinese mainland will remain the fastest-growing market for luxury goods in 2011 as sales rise 25 percent to 11.5 billion euros, Bain predicted. The country is on course to become the world's third-largest luxury market in five years, it said. The US is the largest market, accounting for 48.1 billion euros in 2010, according to Bain.

In China, only-child teenagers from wealthy families and a new generation of working women with increasing spending habits mean luxury brands need to change the way they target offers and interact with consumers in the country, D'Arpizio said.

"It's a big market where you need to be sophisticated in your approaches," she said.

Sales in Europe this year may climb 7 percent and the Americas by 8 percent, which together account for more than two-thirds of global luxury consumption, Bain said. Store traffic has increased and shoppers are spending more on average, it said.

"Retailers interviewed for the Bain study expressed a high level of confidence that consumers will keep coming into stores and continue making purchases with the same vigor that preceded the global financial crisis," Bain said.

Excluding China, sales will increase 15 percent in the Asia-Pacific region. Lifestyle changes are driving sales increases in Russia and new stores will fuel growth in the Middle East and Brazil, Bain said.

Bloomberg News