Cars race ahead as luxury stalls

Luxury growth is at its weakest since 2009 with just a two per cent increase in sales this year, compared to a rise of three per cent in 2013 and 10 per cent in 2012 (at current exchange rates).  So says management consultants Bain in its Luxury Goods Worldwide Market Monitor, which paints a picture of a market battered by currency fluctuations, political turmoil in Hong Kong and Crimea, and economic weakness in Europe. However it says strong demand from the US, China and Japan will see the market reach 223bn euros ($282.7bn) in 2014, against 218bn euros in 2013.  

Profitability maintained

Global accountants EY make similar predictions in its Luxury and cosmetics financial factbook 2014.  Paul Wood, EY’s Global Luxury Leader, said the slowdown had caught luxury companies by surprise, but he said: 'While the growth rate declined, profitability in the sector has been maintained – largely due to volume growth, a high retail mix with greater margins, and an increased focus on efficiency.'

Beauty and cars hold up

EY predicts that the beauty industry will double in the next 10 to 15 years, with access to cosmetics estimated to increase by 50 per cent in emerging markets.  Luxury customers are getting younger, it says, largely owing to Chinese and Asian demographics.  This could see online business growing at a faster rate still – it currently accounts for 4.5 per cent of sales, but there has been 30 per cent year-on-year growth in this channel. Bain reports solid growth in the luxury car market, up 10 per cent from 2013, and private jet sales, up nine per cent.  Leisure is also strong with hotels up nine per cent, and cruises up five per cent.  Personal luxury goods grew by four per cent. 

China goes negative

Domestic luxury spend in China showed a negative trend for the first time.  But Chinese consumers spend abroad more than three times what they spend locally, Bain says.  This has fuelled a boom in the development of luxury shopping centres in Bangkok, according to Euromonitor’s latest Luxury Goods system.  A further cluster of retail malls are set to open over the next three years, and the Thai government is planning to cut import duties on luxury goods, giving the Chinese further incentive to shop there.