Chinese, Millennials to Drive Luxury Business

Bolstered by China and an increasingly younger consumer, the luxury market continues to grow, increasing 5 percent to 1.2 trillion euros globally in 2017. And the growth is expected to continue over the next three years with a 4 to 5 percent compounded annual rate expected, bringing the market for personal luxury goods to 295 billion to 305 billion euros by 2020.

According to the Bain Luxury Study, published by Bain & Co. for Fondazione Altagamma, the Italian trade association of luxury goods manufacturers, this growth takes forms, led by luxury cars, whose sales were up 6 percent to 489 billion euros, and experiences such as luxury cruises whose sales rose 14 percent.

The market for luxury goods reached a record high of 262 billion euros, up 5 percent in the year, with Chinese consumption jumping 15 percent to 20 billion euros.

Japanese consumers also embraced luxury last year with the market increasing 4 percent to 22 billion euros, while European sales bounced back to post a 6 percent gain to 87 billion euros in sales. The U.S., in contrast, was up only 2 percent to 84 billion euros.

Other standouts last year included the continued dominance of online, which posted a 24 percent increase in sales and now accounts for 9 percent of the overall business.

The study also pointed to a “generational shift” in the luxury market with 85 percent of the growth last year fueled by Generations Y and Z. “This shift in mindset is pushing luxury brands to redefine what they deliver to customers and how they deliver it,” the study said. For example, top category included reinterpreted streetwear pieces such as T-shirts, down jackets and sneakers which grew 25 percent, 15 percent and 10 percent respectively in 2017.