Chinese millennials are driving faster growth than expected for worldwide sales of luxury goods, says consultancy Bain & Co.
It says there is a thriving demand in China for items such as high-end handbags, shoes and jewellery.
After stalling in 2016, revenues from personal luxury goods are set to rise 6 per cent at constant exchange rates this year to €262 billion (US$308 billion), Bain forecasts in an annual report compiled with the help of Altagamma, the trade association for Italian luxury brands. Earlier projections were for 2 to 4 per cent growth.
Already, stronger earnings are being reported by luxury retailers including Brunello Cucinelli and LVMH, which owns Bulgari and Louis Vuitton.
Bain says retailers’ efforts to connect with younger buyers and to bridge a price divide between Europe and Asia (more expensive) were also paying off.
“Luxury goods companies have rethought strategies and are now regaining the trust they lost from customers,” says Bain partner Federica Levato, who co-authored the report.
She says this year’s growth is “healthier”, being driven by a rise in volumes rather than in prices, and is balanced between tourist purchases and local buyers.
Chinese buyers now make up 32 per cent of the luxury goods market, more than any other nationality, thanks to increased purchases in both their home market and abroad.
As a whole, the industry could notch up annual growth rates of 4 to 5 per cent until 2020, says the Bain report, with online sales growing steadily and expected to reach a quarter of all sales by 2025, up from the present 9 per cent.
Millennials already represent a third of the market, with the later “generation Z”, which grew up with smartphones, starting to make a dent in the luxury market, says Bain.
Brands have been increasingly turning to social media or pairing up with pop stars and influencers, and branching into casualwear and streetwear, with t-shirts, sneakers and denim.
However, while 65 per cent of luxury firms will grow sales this year, only 35 per cent will manage to increase their operating profit, says the report.
