Per­sonal Lux­ury Goods to Grow in ’18

WWD Digital Daily - - News - BY SAN­DRA SALIBIAN

The mar­ket is fore­cast to reach 276 bil­lion eu­ros to 281 bil­lion eu­ros this year, ac­cord­ing to stud­ies by Al­t­agamma and by Bain & Co.

MI­LAN — “We will be able to give you only good news,” said Al­t­agamma vice pres­i­dent Ar­mando Bran­chini here on Thurs­day, in­tro­duc­ing the up­dated data by the Al­t­agamma World­wide Mar­ket Mon­i­tor and by the Bain & Co. study.

First on the list was that the global per­sonal lux­ury goods in­dus­try is ex­pected to grow 6 to 8 per­cent at con­stant ex­change rates to 276 bil­lion eu­ros to 281 bil­lion eu­ros this year. This fig­ure was up com­pared to the data re­leased in Oc­to­ber, which fore­cast a 5 per­cent growth for this year. Ac­cord­ing to the stud­ies, the mar­ket is seen reach­ing 390 bil­lion eu­ros by 2025, reg­is­ter­ing a 4 to 5 per­cent com­pound an­nual growth rate.

Over­all, ex­pec­ta­tions for av­er­age growth in earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion in 2018 are up to 10 per­cent com­pared to the fig­ure re­leased in Oc­to­ber, which was 7 per­cent.

Sales of ac­ces­sories, jew­elry and cos­metic goods will be driv­ing this year’s pos­i­tive per­for­mance, as said cat­e­gories are ex­pected to grow 7 per­cent, 7 per­cent and 6 per­cent, re­spec­tively. In par­tic­u­lar, footwear will con­tinue to play a ma­jor role, boosted by the pop­u­lar­ity of sneak­ers and the street style-re­lated trends. On the other hand, ap­parel will grow at a slower rate of 4 per­cent.

Re­gard­ing the mar­kets, ac­cord­ing to Al­t­agamma’s study, Asia will be key, grow­ing 12 per­cent com­pared to the 10 per­cent in­crease fore­cast in Oc­to­ber.

The per­sonal lux­ury goods mar­ket in North Amer­ica, which in Oc­to­ber was fore­cast to grow by 4 per­cent this year, is now seen ex­pand­ing by 6 per­cent, while Europe, last fall seen up 4 per­cent in

2018, is now seen slow­ing down to 3 per­cent this year, in part due to less fa­vor­able cur­rency con­di­tions and stag­nant cir­cum­stances in some coun­tries, as Ger­many and the U.K.

Key, trav­el­ing Asian shop­pers — who are on the hunt for bar­gains —are more in­clined to travel to the U.S. rather than Europe, where the strength­en­ing of the euro neg­a­tively im­pacts tourists’ flow and spend­ing. Lo­cally, Amer­i­can cus­tomers are seen show­ing more con­fi­dence in pur­chas­ing lux­ury goods com­pared to Ger­man and English ones who are re­strained by po­lit­i­cal un­cer­tainty in the re­spec­tive coun­tries.

Oc­to­ber’s data for Ja­pan, Latin Amer­ica and Mid­dle East were con­firmed, as sales of per­sonal lux­ury goods in these mar­kets are seen grow­ing 5 per­cent, 3 per­cent and 2 per­cent, re­spec­tively.

The per­sonal lux­ury goods mar­ket’s pos­i­tive fore­casts will be boosted by two ad­di­tional el­e­ments, ac­cord­ing to Bran­chini.

“Starting from July, China will re­duce a se­ries of im­port du­ties for a range of prod­uct cat­e­gories, in­clud­ing ap­parel, fash­ion ac­ces­sories and some cat­e­gories re­lated to fur­ni­ture,” he said. In par­tic­u­lar, for these goods, du­ties will be halved, which will im­pact their pric­ing in China.

An­other pos­i­tive el­e­ment is the align­ment of shop­pers’ way of dress­ing. “I think this could be re­ally the turning year in the so­ci­ol­ogy of con­sump­tions,” Bran­chini said, ref­er­enc­ing to how in the past there were neat dif­fer­ences be­tween gen­er­a­tions and cus­tomers’ pro­files, while the lines are now be­ing blurred “be­tween teenagers and se­niors, and sim­i­lar­i­ties are in­creas­ing.”

Pick­ing up from Bran­chini, Claudia D’Ar­pizio, part­ner at Bain & Co., said that “ca­su­al­iza­tion” of cus­tomers’ habits is one of the four macro-trends shap­ing the mar­ket growth in 2018 and inducing also clas­sic, her­itage com­pa­nies to ex­pand their prod­uct of­fer­ing and de­velop ded­i­cated strate­gies to en­gage new cus­tomers.

“Street style and ca­su­al­wear rep­re­sent a change of par­a­digm, as there are no spe­cial, fixed oc­ca­sions any longer, no dress­ing dik­tats,” said D’Ar­pizio, un­der­scor­ing also an un­prece­dented el­e­ment of com­fort and well­be­ing in the “here to stay” trend.

Among the other macro-trends, D’Ar­pizio re­it­er­ated Chi­nese shop­pers’ prom­i­nent role in driv­ing the lux­ury mar­ket ac­cel­er­a­tion. “This is the kind of cus­tomer to win over,” she said, defin­ing it as a young, fash­ion-ed­u­cated and price-per-value-dis­cern­ing shop­per. On­line and so­cial me­dia are Chi­nese cus­tomers’ pri­mary in­stru­ments, es­pe­cially to in­ter­cept trends, dis­cover new brands and com­pare prices.

On a global scale, D’Ar­pizio de­fined cus­tomers’ new ap­proach as “Mil­len­nial state of mind,” as older gen­er­a­tions are also ac­quir­ing Mil­len­ni­als’ same set of val­ues.

“The real trans­for­ma­tion lies in the com­mu­ni­ca­tion rather than the prod­uct. This [com­mu­ni­ca­tion] is en­abled by new dig­i­tal tools but that’s not the key fea­ture; it’s the mes­sage that is chang­ing,” she noted.

“We are in a post-as­pi­ra­tional era of lux­ury: [cus­tomers] don’t buy a prod­uct be­cause it’s a sta­tus sym­bol per se, but be­cause it’s more a show off of other val­ues, not of money but more of the taste, the abil­ity of choos­ing wisely and liv­ing a good life….So opin­ions are more im­por­tant than the sta­tus; ex­clu­siv­ity is no longer a con­cept that sells, while in­clu­siv­ity and a con­tin­u­ous nar­ra­tion of con­tents is needed to keep the re­la­tion­ship with cus­tomers alive.”

The Bain & Co. part­ner un­der­scored how best-per­form­ing lux­ury com­pa­nies are be­ing proac­tive in im­ple­ment­ing strate­gies to ex­pand “con­ver­sa­tion fields” to dif­fer­ent themes, mim­ick­ing con­sumer brands of the likes of Coca-Cola. Win­ning ex­am­ples in fash­ion in­clude Gucci, which “talks to cus­tomers all the time, it deals with a lot of top­ics — as sus­tain­abil­ity, art, mu­sic — and it rides even the neg­a­tive news about the com­pany it­self. They have opened a di­a­logue with a large num­ber of cus­tomers and this is what peo­ple likes, be­yond the prod­uct it­self,” con­cluded D’Ar­pizio.

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