Deloitte: The market in the Middle East continues to represent a big opportunity for luxury brands

• Emerging markets consumers continue to drive luxury market growth • France and Italy lead European top performers with currency-boosted growth • Multiple luxury goods companies double sales growth and lead profitability

Emerging consumers markets continue to drive luxury market growth. In China, Russia and the United Arab Emirates, markets that we have categorised as emerging luxury markets, the percentage of consumers claiming to have increased their spending in the last five years was 70%, compared to 53% in the more mature markets (EU, US and Japan), according to the fourth annual Global Powers of Luxury Goods report issued by Deloitte Global.

The report examines and lists the 100 largest luxury goods companies globally, based on publicly available data for consolidated sales of luxury goods in FY2015 (which we define as financial years ending within the 12 months to 30 June 2016). It also discusses the key trends shaping the luxury market and provides a global economic outlook.

“Travel and tourism is still a great growth opportunity for the luxury sector,” said James Babb, Clients and Industries leader, Deloitte, Middle East. “Almost half of luxury purchases are made by consumers who are travelling, either in a foreign market (31%) or while at the airport (16%). This rises to 60% among consumers from emerging markets, who typically do not have access to the same range of products and brands that can be found in more mature markets.”

“The market in the Middle East continues to represent a big opportunity for luxury brands: luxury markets in Abu Dhabi and Dubai have helped to promote these cities as desirable shopping destinations. Well established big-name brands have performed well in the region, and tourism is a major driver of sales in Dubai. However, the market saw a significant slowdown in 2016, caused by the low oil prices, higher gold prices and an increase in the cost of living,” added Babb. “The region is likely to feel the impact of political unrest as well as global economic uncertainty, but further growth is nevertheless expected as Dubai and Abu Dhabi continue to be attractive shopping destinations.

Based on publicly available data, the world’s 100 largest luxury goods companies generated sales of $212bn in FY2015. The average luxury goods annual sales for a Top 100 company is now $2.1bn.

“The essence of luxury is changing from an emphasis on the physical to a focus on the experiential and how luxury makes you feel,” said Babb. “However premium quality remains a ‘must have’ and consumers retain a keen eye for craftsmanship and hand-made products”. the Top 100, only six companies reported double-digit sales decline in FY2015; half of these were jewellers, the product sector which continued to experience volatile demand.