LUXURY GOODS WORLDWIDE
MARKET STUDY
Fall−Winter 2015
A time to act: How luxury brands
can rebuild to win
By Claudia D’Arpizio, Federica Levato,
Daniele Zito and Joëlle de Montgolfier
Claudia D’Arpizio and Federica Levato are Bain & Company partners, and Daniele Zito
is a manager. All three are based out of the firm’s Milan office. Joëlle de Montgolfier
is the practice area senior director for Retail, Luxury and Consumer Products in EMEA.
She is based out of the firm’s Paris office. All four are members of Bain’s Global Retail
and Luxury practices.
Copyright © 2015 Bain & Company, Inc. All rights reserved.
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Table of contents
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 1
1.
Luxury spending trends in 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 5
2.
Regional highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 9
3.
Distribution trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 15
4.
Individual category performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 21
5.
Outlook for the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 27
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Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Page ii
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Executive summary
Currency fluctuations and globe-trotters boost the personal luxury goods market, but real
growth slows
The 14th edition of the Bain Luxury Study, published by Bain & Company for Fondazione Altagamma, the
trade association of Italian luxury-goods manufacturers, analyzed recent developments in the global luxurygoods industry.
The overall luxury industry tracked by Bain & Company comprises 10 segments, led by luxury cars,
luxury hospitality and personal luxury goods, which together account for 80% of the total market. The industry surpassed €1 trillion in retail sales value in 2015 and delivered healthy growth of 5% year over year (at
constant exchange rates), driven primarily by luxury cars (8%), luxury hospitality (7%) and fine arts (6%).
Aided by global currency fluctuations and continued purchases by “borderless consumers,” the personal
luxury goods market—the “core of the core” of luxury and the focus of the Bain Luxury Study—ballooned to
more than €250 billion in 2015. That represents 13% growth over 2014 at current exchange rates, while
real growth (at constant exchange rates) has eased to only 1% to 2%. The slowdown confirms a shift to a
“new normal” of lower sales growth in the personal luxury goods market, which we highlighted in previous
analyses. The challenge for luxury brands in this environment is to successfully navigate market volatility
driven by currency swings and fluctuating tourist flows.
Aided by global currency fluctuations and continued purchases by “borderless
consumers,” the personal luxury goods market—the “core of the core” of luxury and
the focus of the Bain Luxury Study—ballooned to more than €250 billion in 2015.
Currency swings affect regional performance
Boosted by a strong US dollar, the Americas emerged as the biggest global region for personal luxury goods purchases. However, in real terms, the US market did not deliver. The “super-dollar” was too expensive for
many global tourists and, although local consumption grew, it was barely sufficient to offset the decline in
tourism revenue.
Europe posted sound growth, primarily fueled by Chinese and US tourists attracted by a weak euro. The old continent has become “the world’s largest in-season outlet.” Our analysis of European tax-free shopping data,
conducted in partnership with Global Blue, showed that Chinese tax-free purchases in Europe increased by
64% while tax-free purchases by American tourists in Europe grew by 67%, primarily in the high end
of the luxury spectrum. Meanwhile, Russian and Japanese travelers cut their tax-free spending in Europe
by 37% and 16%, respectively.
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Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Across Asia, performance varied widely:
•
Japan has proven to be a consistent champion in both real and nominal terms, as a sound base of local consumers
and the emergence of Chinese tourists looking to capitalize on currency fluctuations are driving sales.
•
South Korea shined, with €11 billion in retail sales value, growing at 4% in constant exchange rates despite
the negative impact of the Middle East Respiratory Syndrome in the second half of the year.
•
Hong Kong and Macau faded, primarily due to government reforms against graft and the gray market
(respectively €7 billion and €1 billion in retail sales value, both declining at 25% in constant exchange rates).
•
Local spending in Mainland China continued to contract slightly.
Chinese consumers play a primary role in the growth of luxury spending worldwide. They account for the largest
portion of global purchases (31%), followed by Americans (24%) and Europeans (18%). Chinese shoppers continue to spend far more abroad than in Mainland China, which accounts for only 20% of their global purchases.
However, the depreciation of the euro boosted the country to the global luxury podium; it is now the third-biggest
market in the world, after the US and Japan. The most popular travel destinations for Chinese luxury shoppers
shift—typically to Europe, South Korea or Japan—in response to currency fluctuations, which create temporary
favorable price gaps.
Chinese consumers play a primary role in the growth of luxury spending worldwide. They account for the largest portion of global purchases (31%), followed
by Americans (24%) and Europeans (18%).
Wholesale still dominates, but company-owned retail and e-commerce are growing faster
Wholesale is still the dominant selling channel within the personal luxury goods market, capturing
66% of the total market. However, retail continues to gain share, driven by network expansion (600
new directly operated stores opened globally in 2015, a decline from the 750 opened in 2014) and
growth in same-store sales (13% at current exchange rates). The wholesale channel’s slower performance stems from three factors: the ongoing “retailization” of luxury (converting franchised locations
into company-owned stores or joint ventures); the lackluster performance of US department stores
across product categories (particularly in leather goods); and the decreasing sales of Asian watch
retailers, which are coping with excessive stock and a reduction in the overall store network.
E-commerce grew to a 7% market share in 2015, nearly doubling its penetration since 2012. Specialized e-commerce players are outperforming the market globally, with Chinese e-tailers progressively
extending their geographic reach and gaining share on a global basis. The e-commerce sites of European and American retailers (such as department stores) continue to grow, a response to customers’
demands for an omnichannel experience. Luxury brands are losing share online overall, with highly
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Luxury Goods Worldwide Market Study | Bain & Company, Inc.
variable performance: The largest brands with established direct online and omnichannel platforms
are outperforming but the majority of brands still lag, especially European brands.
Luxury globe-trotters have also fueled the performance of airport retail, which posted a 29% growth rate in
current exchange rates (18% in constant exchange rates) and now accounts for 6% of the global luxury market.
With the growing middle class in markets such as China seeking good quality and good value, and consumers in mature markets looking for bargains, the off-price channel has more than doubled to nearly
€26 billion. Markdowns are also increasing in prevalence across more than 35% of the luxury market.
Accessories remain the leading category
Among specific categories of personal luxury goods, accessories remained the leader, capturing 30% of the
market and growing by 3% in 2015 (at constant exchange rates). That was faster than the next two largest
categories, apparel (which grew 2% at constant exchange rates) and hard luxury (which contracted by 3%).
Within accessories, high-end shoes (4%) continued to grow faster than leather goods overall (2%). Jewelry was the star category within hard luxury, growing at 6% in constant exchange rates, while watches
were strongly hit by the channel overstocking in Asia and contracted by 6% in constant exchange rates.
Page 3
1.
Luxury spending
trends in 2015
• The global luxury market tracked by Bain &
Company comprises 10 segments, including
personal luxury goods, cars, luxury hospitality,
luxury cruises, designer furniture, fine food, fine
wines and spirits, yachts, private jets and fine art.
The overall market exceeded €1 trillion in 2015.
Growth in the luxury car market was solid, up 8%
from 2014, driven by positive trends in both the
US and Europe. Luxury hotel sales, up 7%, benefited
from steadily growing demand, particularly in Europe.
• Personal luxury goods—the “core of the core” of
luxury and the focus of the Bain Luxury Study—
ballooned to more than €250 billion in 2015, more
than tripling over the past 20 years. This represents
13% growth over 2014 at current exchange rates,
while real growth has slowed to only 1%–2%.
• The year was marked by a strong depreciation of
the euro vis-à-vis most global currencies, resulting
in a double-digit positive impact on the overall
market value.
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 1: The global luxury market exceeded €1 trillion in 2015, posting overall growth of 5%, driven by
cars, hospitality and fine arts
Worldwide luxury market, 2015E (€ billions)
40
45
64
32
21
7
2
1,044
176
405
253
Personal
luxury goods
Growth,
2014–15E
13%
1–2%
Growth,
2014–15E
(at constant
exchange rates)
Luxury
cars
15%
Luxury
hospitality
17%
Fine wines
and spirits
10%
Fine
food
13%
Fine
art
19%
Designer
furniture
9%
Private
jets
14%
Yachts
Luxury
cruises
Total 2015E
2%
16%
14%
8%
7%
3%
4%
6%
4%
–1%
–1%
4%
5%
Note: Discrepancy in total is due to rounding
Source: Bain & Company
Figure 2: Currency fluctuations inflated the personal luxury goods market to more than €250 billion, while
real growth slowed down
Global personal luxury goods market, 1994−2015E (€ billions)
Socioeconomic turbulence
SARS
Subprime and
financial crisis
September 11 Spike in
$/€
exchange
rate
Chinese stock
market turmoil
253
Year-over-year growth at current exchange rates
212
Year-over-year growth at constant exchange rates
218
224
3%
3%
7%
3%
192
128
73
77
85
92
96
133
133
128
136
147
108
159
170
167
173
153
13%
1–2%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E
Source: Bain & Company
Page 6
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 3: Exchange rate fluctuations resulted in a double-digit growth rate
Global personal luxury goods market at current and constant exchange rates, 2013−2015E (€ billions)
253
26
Year-over-year growth at current exchange rates
3%
13%
Year-over-year growth at constant exchange rates
3%
1–2%
3
7
224
−1
218
2013
Constant
growth
Currency
effect
2014
Constant
growth
Currency
effect
2015E
Source: Bain & Company
Figure 4: The general trend was a depreciation of the euro vis-à-vis most other global currencies
Evolution of key currencies against the euro
2014 vs. 2013
US
19%
0%
UK
5%
Switzerland
Russia
2015E vs. 2014
11%
1%
14%
–17%
–23%
Brazil
–8%
Japan
–8%
–12%
4%
Mainland China
Hong Kong
1%
0%
South Korea
Singapore
18%
19%
4%
12%
–1%
10%
United Arab Emirates
0%
19%
Saudi Arabia
0%
19%
Source: Bain & Company
Page 7
2.
Regional
highlights
• Boosted by a strong dollar, the Americas emerged
as the biggest global region for personal luxury
goods purchases. The US alone accounted for €79
billion of the €85 billion regional market (or more
than 90%), and remains the largest global market
by far, bigger than the next four combined (Japan,
China, Italy and France). However, in constant
exchange rates, the US market did not deliver.
• The depreciation of the euro also boosted Mainland
China to the No. 3 spot in terms of global luxury
value, overtaking Italy and France and trailing only
the US and Japan. However, local spending in
M a i n land China (which represents only 20% of
global Chinese shoppers’ purchases) continued to
contract slightly.
• New York City, Paris and London are the largest luxury
cities globally, each representing a market in excess
of €10 billion. Luxury goods purchases in New York
City alone outweigh those across all of Japan.
• Since 2009, the US market has contributed 1.7 times
as much growth in absolute value as the largest
growth contributors in Asia. Mature markets in
Europe also contributed meaningful growth over the
period, equivalent to 80% of the growth Asia
contributed. The UK and France contributed 20%
more growth in absolute value than China did over
the period.
• Chinese consumers played a primary role in the
growth of luxury spending worldwide: they made up
the largest portion of global luxury purchases (31%),
followed by Americans (24%) and Europeans (18%).
In 2000, Japanese consumers represented more than
one-quarter of global luxury purchases; they now
account for only 10%.
• Luxury consumers in mature markets, such as
Europe, the US and Japan, tend to purchase locally.
However, growth in these regions increasingly
depends on spending by tourists.
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 5: The Americas became the biggest global region in 2015, primarily because of the “super dollar”
Personal luxury goods market by region, 2007–2015E (€ billions)
CAGR
CAGR
CAGR
(’07−’09) (’09−’15E) (’14−’15E)
Rest of world
253
218
212
224
0%
11%
17%
Japan
–9%
3%
13%
Asia
9%
14%
11%
Europe
–5%
6%
9%
Americas
–10%
11%
18%
192
170
173
167
153
2007
2008
2009
2010
2011
2012
2013
2014
2015E
Note: Growth rates in current exchange rates
Source: Bain & Company
Figure 6: The US remained the largest global market but did not deliver real growth; China joined the global
luxury podium
Personal luxury goods, top countries, 2015E (€ billions)
78.6
72.1
China
France
Italy
20.1
17.9
17.3
17.1
15.6
11.9
Japan
Global rank
in 2014
Growth in euros
2014–2015E
US
Japan
China
Italy
1
2
5
3
20%
13%
17%
6%
10%
16%
9%
–1%
6%
10%
5%
0%
Growth in local
currency, 2014–2015E
France
4
Source: Bain & Company
Page 10
UK
6
10.8
8.1
6.8
3.2
South
Korea
Middle
East
Hong
Kong
Russia
8
10
9
11
14%
16%
19%
–11%
–25%
14%
4%
0%
–25%
–2%
Germany
7
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 7: Local spending in mainland China continued to contract in real terms; mainland China accounts for
20% of global Chinese shoppers’ purchases
Personal luxury goods market in
mainland China, 2007–2015E (€ billions)
Where shoppers from mainland China bought
luxury goods in 2015E, by region (%)
Year-over-year growth at current exchange rates
18
Rest of world
Japan
+17%
Americas
Year-over-year growth at constant exchange rates
15
15
15
13
±0%
Europe
–2%
10
CAGR ’07−’13:
+23%
7
6
–1%
Asia
5
Mainland China
2007
2008
2009
2010
2011
2012
2013
2014 2015E
Source: Bain & Company
Figure 8: New York City, Paris and London each account for more than €10 billion of luxury sales; luxury goods
purchases in New York City outweigh those across all of Japan
Personal luxury goods, top cities, 2015E (€ billions)
27
20
13
13
9
8
7
6
6
New
Paris
Tokyo
Hong
Las
York
Kong
Vegas
City Japan
Beijing
London
Seoul
Source: Bain & Company
6
5
5
Honolulu
Los
Angeles
5
Milan
Shanghai
Page 11
4
4
4
3
Osaka
Taipei
Rome
4
Munich
3
Miami
Singapore
3
3
Moscow
Dubai
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 9: Since 2009, the US market alone contributed 1.7 times as much absolute value growth as Asia;
Europe contributed 80% of the growth of Asia
Personal luxury goods: growth contribution in absolute value, by region and top contributing market, 2009–2015E (€ billions)
37.4
x1.7
21.6
Japan
US
~80%
18.3
Italy
Hong Kong
Germany
South Korea
France
China
UK
Americas
Russia
–1.3
Europe
Asia
Source: Bain & Company
Figure 10: Chinese consumers now represent about one-third of the global market, up from only 1% in 2000;
Japanese consumers, who accounted for a quarter of the market in 2000, now make up 10% of global purchases
Global personal luxury goods market by consumer nationality, 2000–2015E (€ billions)
Rest of world
Asian
Chinese
Japanese
American
European
2000
2010
2013
Source: Bain & Company
Page 12
2014
2015E
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 11: Europe is largely supported by tourists; consumers from mature markets buy primarily domestically
Personal luxury goods spending by consumer nationality
and location of purchases, 2015E (€ billions)
Personal luxury goods spending by local
consumers vs. tourists by region, 2015E (€ billions)
100%
83
Regional
tourists
85
20
18
100%
~45
Rest of
world
Rest of
~60
Europe
Americas
80
~25
Europe
Americas
Japan
Americas
80
Extraregional
tourists
~80 world
Asia
China
60
60
Americas
Europe
40
Asia
40
Japan
20
Local
consumers
20
Europe
0
Europe
Americas
Japan
Mainland
China
0
Source: Bain & Company
Page 13
European
consumers
American
consumers
Japanese
consumers
Chinese
consumers
3.
Distribution trends
• Wholesale was still the dominant selling channel
within the personal luxury goods market, capturing
66% of market share. However, retail continued
to gain share. It is up 2 percentage points in 2015
and is growing twice as fast as the wholesale
channel at current exchange rates.
• Retail and monobrand distribution continued to be
winning formats.
• E-commerce grew to 7% market share in 2015, nearly
doubling its penetration since 2012. The channel
was particularly strong in the Americas, and is
skewed to the accessories and fashion categories.
• Luxury globe-trotters have fueled the performance
of airport retail, which posted a 29% growth rate
in current exchange rates (18% in constant exchange
rates) and now accounts for 6% of the global
luxury market.
• With the growing middle class in markets such as
China seeking quality and good value and consumers in mature markets looking for bargains, the
off-price channel has more than doubled in the
past three years, to nearly €26 billion.
• Markdowns were also increasingly prevalent
across more than 35% of the luxury market, particularly in department stores, specialty stores and
e-commerce platforms.
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 12: Wholesale still dominates among distribution channels, but company-owned retail
grows faster
Personal luxury goods market, by channel, 2007–2015E (€ billions)
253
224
218
212
CAGR
(’07–’15E)
192
170
173
167
66
153
3%
Retail
11%
68
69
71
Wholesale
72
79
73
78
75
21
23
25
27
28
2007
2008
2009
2010
2011
29
31
32
2012
2013
2014
34
2015E
Source: Bain & Company
Figure 13: Retail and monobrand distribution continue to be winning formats
Global personal luxury goods market, by channel and format, 2015E (€ billions)
2014−2015E growth
trend in real terms
6%
253
253
7%
10%
23%
Wholesale
66%
Multibrand
47%
25%
Market
share
29%
Monobrand
53%
Retail 34%
Monobrand
stores
Department
stores
Specialty
stores
Off-price
stores
Source: Bain & Company
Page 16
Online
Airport
Global
luxury
Global
luxury
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 14: The online luxury market has grown tenfold since 2005, rising to 7% market share
Online personal luxury goods market, 2003–2015E (€ billions)
7%
Year-over-year growth at constant exchange rates
16.8
5%
4%
12.0
9.8
3%
5.8
2%
4.5
Online market share 1%
1.3
2003
2004
37%
Year-over-year
growth
3.5
2.2
2.6
2.9
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015E
31%
29%
18%
12%
21%
29%
29%
33%
27%
22%
40%
1.7
1.0
7.7
22%
Source: Bain & Company
Figure 15: The online channel is particularly strong in the Americas and is skewed to the accessories
and fashion categories
Online personal luxury goods market, 2015E (€ billions)
16.8
16.8
Other 5%
Rest of world 19%
Hard luxury 11%
Beauty 17%
Europe 25%
Apparel 27%
Americas 56%
Accessories 40%
By geography
By category
Source: Bain & Company
Page 17
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 16: Luxury globe-trotters have fueled the performance of airport retail
Airport personal luxury goods market, 2012−2015E (€ billions)
Other 2%
Market share 6%
14.1
14.1
Rest of world 9%
Americas 16%
14.1
Hard luxury 10%
Apparel and
accessories 13%
CAGR
+18%
Market share 4%
8.7
Europe 31%
Beauty 75%
Asia and Japan
44%
2012
Growth since 2014
Growth since 2014 (at constant exchange rates)
2015E
29%
By geography
By category
18%
Source: Bain & Company
Figure 17: The off-price channel has more than doubled over the past three years
Off-price personal luxury goods market, 2012−2015E (€ billions)
Market share 10%
25.9
Other 1%
25.9
25.9
Rest of
world 20%
Hard luxury 9%
Beauty 5%
Europe 21%
Market share 5%
12.6
Apparel and
accessories 85%
CAGR
+27%
2012
Americas 59%
2015E
Growth since 2014
35%
Growth since 2014 (at constant exchange rates)
23%
By geography (%)
Source: Bain & Company
Page 18
By category (%)
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 18: The share of markdown is quickly increasing across formats and reaches over one-third of the
total market
Global personal luxury goods market, share of markdown by format, 2015E (€ billions)
253
Growth trend for markdown
in real terms
Apparel
Beauty
Accessories
Hard luxury
Markdown
~35%
Monobrand
stores
Department
stores
Specialty
stores
Off-price
stores
Source: Bain & Company
Page 19
Online
Airport
Global
luxury
4.
Individual category
performance
• Accessories remained the leading personal luxury
goods category, capturing 30% of the global
market and growing by 3% in 2015 (at constant
exchange rates). Apparel was the second-largest
category (at 24% of the market, with 2% growth
at constant exchange rates), followed by hard
luxury (22% of the market, contracting by 3%).
• The performance of the fashion and apparel
category was slightly soft, with both women’s and
men’s ready-to-wear segments (accounting for €30
billion and €29 billion in retail sales value,
respectively) growing at only 2% in constant
exchange rates.
• Within hard luxury, jewelry (with €16 billion in
retail sales value) was the star category, growing
at 6% in constant exchange rates, while watches
(€36 billion in retail sales value) suffered from
overstock in Asian channels and contracted by 6%
in constant exchange rates.
• Within accessories, the growth of high-end shoes
(€16 billion in retail sales value) continued,
surpassing that of leather goods (€43 billion in
retail sales value) and growing at 4% vs. 2% at
constant exchange rates.
• Wi t h i n t h e b e a u t y c a t e g o r y, f r a g r a n c e s
( € 2 3 billion in retail sales value) and cosmetics
(€27 billion) grew at moderate rates in constant
exchange rates (2% and 1%, respectively, at
constant exchange rates).
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 19: Accessories have been the biggest personal luxury goods category since 2011; they remain
the fastest growing
Personal luxury goods market, by category, 2007–2015E (€ billions)
CAGR
CAGR
(’07–’09) (’09–’15E)
253
218
212
Other
–10%
4%
Beauty
–3%
5%
224
192
170
173
167
153
Hard luxury
–7%
11%
Apparel
–8%
7%
Accessories –1%
2008
2007
2009
2010
2011
2012
2013
2014
12%
2015E
Source: Bain & Company
Figure 20: Ready-to-wear posted soft positive growth, with different dynamics across menswear and
womenswear
Men's ready-to-wear
Luxury men's ready-to-wear market, 2013–2015E (€ billions)
26
• Casual wear posting low single-digit growth, while formal wear continues
to suffer
- Mixed performance within both segments, with Absolute brands
experiencing a very sound trend, offset by negative Aspirational and
lackluster Accessible brands
29
26
13%
1%
2013
2%
2014
• Outerwear, denim and cashmere categories outperforming, in line with 2014
- Growing success of fur and shearling
- Denim maintaining momentum also driven by a new fashion twist and
the success of customization services
2015E
Women's ready-to-wear
Luxury women's ready-to-wear market, 2013–2015E (€ billions)
30
26
26
14%
3%
2013
2014
Year-over-year growth at
current exchange rates
2%
2015E
Year-over-year growth at
constant exchange rates
• Overall positive trend for women's ready-to-wear, with high resilience
across markets and categories
- Brisk growth of denim and outerwear across the board
- At the extremes of the spectrum, activewear and haute couture showing
strong dynamism
- Daywear positive trend driven both by Absolute brands and first lines
and Accessible segment
- Formal wear lagging behind in terms of growth due to the underperformance of Aspirational brands
• Increasing brandization of patterns and creative motifs as new icons of
the category
Source: Bain & Company
Page 22
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 21: Within accessories, shoe sales continue to outpace leather goods
Leather goods
Luxury leather goods market, 2013–2015E (€ billions)
43
38
36
- Surging success of the off-price channel and increasing promotional activity
by full-price stores
14%
5%
2013
• Overall trend undermined by prices (excluding Accessible brands)
- Brands’ attempts at preserving the entry price range by offering a wider
selection of lower-priced items were effective from a volume standpoint only,
causing the price mix to decline
• Ongoing polarization among segments
- Absolute brands outgrowing the overall category, while Aspirational brands
show mixed performance, with ongoing turnaround of key brands
2%
2015E
2014
- Highly volatile consumers affecting brands in the Accessible segment
Shoes
Luxury shoes market, 2013–2015E (€ billions)
14
13
16
16%
6%
2013
4%
2015E
2014
• Consistent positive performance of shoes, the status symbol at the price
sweet spot
- Outperformance of the Absolute segment
• Men's segment continuing on its positive trajectory, women's showing
increased dynamism
- Ongoing sneaker phenomenon now influencing other segments
(e.g., formal shoes with thick rubber sole)
• Lifestyle brands registering slightly brisker growth than shoe specialists
Year-over-year growth at
constant exchange rates
Year-over-year growth at
current exchange rates
Source: Bain & Company
Figure 22: Within hard luxury, jewelry continues growing, while watches remain affected by a negative
trend in Asia
Watches
Luxury watches market, 2013–2015E (€ billions)
36
• Luxury watches still impacted by Asian uncertainty
- Asian retailers overstocked with declining sales and shrinking store networks
38
36
• The Absolute segment performs better; Europe is buoyed due to touristic
purchases in brands' own stores
+7%
+0%
2013
• The impact of smartwatches remains limited to the premium segment (not
competing with high-end time pieces playing on different value dimensions)
- Luxury brands launch their own smartwatches and smart accessories for
watches, with limited volumes
−6%
2014
• Exposure to Swiss watchmakers impacted the overall category, with the Swiss
franc appreciating over the euro and consequent price adjustments
2015E
Jewelry
Luxury jewelry market, 2013–2015E (€ billions)
• Luxury branded jewelry continues to outperform the overall category
• Strong performance of Absolute and high-ticket items
16
14
13
+18%
+8%
2013
Year-over-year growth at
current exchange rates
+6%
2014
2015E
Year-over-year growth at
constant exchange rates
• Jewels remain among top preferred investments due to intrinsic value of
raw materials
• The global demand for diamonds is still growing but at a more modest
pace, particularly in Asia as a consequence of the slowdown started last
year and the protests in Hong Kong
• For new store openings, Asian retailers rebalance the product offer toward
more jewelry than watches
Source: Bain & Company
Page 23
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 23: Within the beauty category, fragrances are on a positive trajectory; skincare’s performance
is lackluster
Fragrances
Luxury fragrances market, 2013–2015E (€ billions)
20
23
20
11%
2%
2%
• Mature markets post mixed performances, with Chinese and Middle Eastern
demand continuing to rise
- The growth in mature markets is mainly driven by price increases despite
an increasing weight of promotions
• The top end of the market, exclusive lines and essences, and artisanal niche
brands are outperforming
- Growing interest for customized products
- Brands refocus storytelling on scents, ingredients and nose
• Travel sizes experience a sustained trend
2014
2013
2015E
Cosmetics
Luxury cosmetics market, 2013–2015E (€ billions)
27
24
23
15%
2%
2013
Year-over-year growth at
current exchange rates
1%
2014
2015E
• Makeup is the main growth engine in the category, offsetting the overall
performance of skin care
- Sound trend of makeup across subcategories
- Devices show strong dynamism within skin care, while other
subcategories suffer
• Premium Korean brands are increasingly popular among Asian consumers
- Western players looking for potential acquisitions
Year-over-year growth at
constant exchange rates
Source: Bain & Company
Page 24
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Page 25
5.
Outlook for
the future
• The main challenge facing most luxury brands is
establishing the right pricing model. The rise of
e-commerce and global tourism growth create
greater transparency around international price
differentials. In addition, price-conscious luxury
shoppers are struggling to reconcile the price of
luxury products with their real value. As a result,
luxury brands must assess how to mitigate volatility
and how best to deliver at local and global levels.
This includes managing inventory to accommodate
fluctuations in tourist spending and coordinating
pricing and markdowns across markets and channels.
• Luxury brands also face a host of tough issues such
as rethinking the size of their store footprint and
the role of brick-and-mortar shops in a world of
growing digitization, as well as figuring out how
to delight local customers even as masses of tourists
flock to establishments in mature markets.
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 24: Strategic international pricing is becoming the main issue to be tackled in the industry
Until recently ...
• Relentless price increases
over the past 5−10 years
- To gain more exclusive
positioning and sell to
emerging consumers
with high disposable
income
• High price differentials
maintained across regions
... then ...
... now
• Exogenous effects
exacerbating price
differentials globally
(currency fluctuations,
import
tariff cuts)
• Increasingly priceconscious luxury
consumers look for
international bargains,
resulting in a change in
the market equilibrium
• Internet allowing full price
transparency
• Brands tactically adjust
international pricing,
sometimes with
shortsighted approaches
- To maximize touristic
flows and local
consumption (Japan)
Mature consumers are cut off from an industry they can't fully afford anymore and whose real value is strongly questioned,
while emerging consumers struggle in truly matching price and value of these products
Source: Bain & Company
Figure 25: The global personal luxury goods market: 10 key takeaways for 2015
A mature market strongly impacted by macroeconomic and sociopolitical events
Markets and consumers
Route to market
Value proposition
Still a Western market but
boosted by masses of
borderless consumers
Retail and monobrand are still
the favorite formats in which
to invest
Chinese consumers are the
top nationality, increasingly
traveling across regions
The current retail footprint
is under scrutiny in
some locations
Consumers shop across
categories and price points,
guided by an informed
point of view on players’
strategies
Consumers from mature
markets become more
demanding
and detached
E-commerce is starting to
become disruptive, yet brands
are still struggling with it
Wholesale formats try to hold
ground while attempting
to modernize
Tactical channels such as
off-price and airport retail
become increasingly strategic
Source: Bain & Company
Page 28
Growing value awareness
and blurred pricing
strategies are questioning
the overall value proposition
of luxury
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
Figure 26: Key strategic questions for luxury players going forward
How to reduce brand performance volatility at global and local levels?
Markets and consumers
Route to market
How to manage globetrotting consumers?
How to rethink the size, role
and format of the retail
network?
How to remain strategically focused on local
customers?
How to reengage
disillusioned consumers
in mature markets?
How to maximize the
effectiveness of all distribution channels in an
omnichannel world?
How to strategically
manage full prices and
markdowns within and
across channels?
Value proposition
How to (re)build
aspiration, credibility
and trust for
luxury products?
How to broaden brand
territories and platforms
to bond with tomorrow's
consumers?
How to turn digital (besides
e-commerce) into a
competitive advantage?
Source: Bain & Company
Figure 27: Key strategic themes for luxury CEOs
Markets and consumers
Route to market
Value proposition
Design a “locally global” pricing strategy and execution
Personalize customer
experiences in store
Locally tailor value
propositions: assortment,
buying, marketing
Refocus distribution strategy
and footprint with a
forward-looking perspective
Master brand content
and storytelling
Evolve toward a value-driven
“fast luxury“ model
Foster consumer engagement across all touchpoints
Develop, grow and retain best-in-class talents
Source: Bain & Company
Page 29
Luxury Goods Worldwide Market Study | Bain & Company, Inc.
App endix: Bain’s global luxury goods market study methodology
Revenues tracked at retail sales value
• Revenues at retail sales value represent total sales valued at retail price (final price paid by consumers at point of purchase)
• Each player’s consolidated sales are brought back to retail sales value through the following methodology
Application of estimated markups
by geography and category
Retail
Retail
Wholesale
Wholesale at retail value
Licenses
Licenses at retail value
Player consolidated sales
Player sales at retail value
Application of estimated royalty
rates and markups by geography
and product category
Bottom-up and top-down estimates
Bottom-up
Top-down cross-check
• Category-specific data in the main geographic markets
• Comparison between market breakdown and turnover
breakdown of key players
• Expert interviews (top management of brands, distributors,
department stores)
Player 1
Player 2
Player 3
• Consistency check and fine-tuning
Player 4... Player 290 Total
Source: Bain & Company
Page 30
Key contacts in Bain’s Luxury Goods practice
Europe,
Middle East
and Africa
Claudia D’Arpizio in Milan (claudia.darpizio@bain.com)
Federica Levato in Milan (federica.levato@bain.com)
Daniele Zito in Milan (daniele.zito@bain.com)
Marc-André Kamel in Paris (marc-andre.kamel@bain.com)
Joëlle de Montgolfier in Paris (joelle.demontgolfier@bain.com)
Serge Hoffmann in Munich (serge.hoffmann@bain.com)
Oliver Merkel in Johannesburg (oliver.merkel@bain.com)
Americas
Darrell Rigby in Boston (darrell.rigby@bain.com)
Asia-Pacific
Bruno Lannes in Shanghai (bruno.lannes@bain.com)
About the Bain Luxury Goods Worldwide Market Study
Bain & Company analyzes for Fondazione Altagamma the market and financial performance of more than 290
leading luxury-goods companies and brands. This database, known as the Luxury Goods Worldwide Market
Observatory, has become a leading and much-studied source in the international luxury-goods industry. Bain
has published its annual findings in the Luxury Goods Worldwide Market Study since 2000. The study’s lead
author is Claudia D’Arpizio, a Bain partner in Milan. Fondazione Altagamma is led by Andrea Illy, who was
named chairman in 2013.
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