Bain & Company: Local luxury sector continues to suffer

Global consulting firm Bain & Company predicts that the world’s luxury market will remain flat this year given the continuous impact of global challenges, noting that the city’s luxury sector will continue to suffer. According to the Bain Luxury Study 2016 Spring Update, released earlier this week, the global personal luxury goods market reached 253 billion euros (MOP2,259 billion/US$282 billion) in revenue for the whole of 2015, an increase of one per cent year-on-year in real terms. The firm explained that the flat performance is due to a slowdown in the U.S. holiday season, decreased tourism across Europe, instability in the Middle East and a downturn in China, forecasting that the trend would continue throughout this year. ‘The 2015 slowdown seeped into the first quarter of 2016 with only 1 per cent growth – a trend that is expected to continue throughout the year,’ the firm wrote in a press release. Macau to struggle Nevertheless, the report says that the luxury sector in Greater China is showing signs of a rebound. ‘Particularly in Mainland China, which is on the verge of reversing a three-year decline,’ it noted. But it added that the cases of Hong Kong and Macau would be different. ‘Hong Kong and, to a minor extent Macau, will continue to struggle,’ the press release states, claiming Taiwan, meanwhile, will hold steady in terms of its luxury sales. And the firm’s expectation has been proven true. According to official data released on Wednesday by the Statistics and Census Services (DSEC) the local retail sales value of watches, clocks and jewellery fell 18.3 per cent year-on-year to MOP3 billion for the first three months of the year, whilst the sales volume of such products plunged by 12.3 per cent year-on-year. “The luxury market is stuck in a holding pattern for the foreseeable future,” said Claudia D’Arpizio, a Bain partner and lead author of the study. “All eyes are again on Mainland China, which is the key to unlocking recovery around the world,” she said. The consulting firm anticipates the personal luxury goods market will continue measured growth of between 2 and 3 per cent through 2020, generating estimated revenue of between 280 and 295 billion euros. ‘That outcome is heavily contingent upon continuous growth in Mainland China. Chinese shoppers – particularly the middle class – are expected to make up approximately 34 per cent of global luxury consumers in the next four years, well ahead of American and European consumers,’ the report reads. Young generations the new catalysts On the other hand, the Bain report indicated that younger generations would be the new catalysts for the world’s luxury sector for the coming four years. ‘Growing spending among Generation X shoppers, as a result of changing consumption habits, and the increasing growth of Generation Y, driven almost entirely by the Chinese middle class, will pump an estimated 50 million new consumers into the market,’ the firm anticipates. “The luxury market will continue to receive a substantial boost from Generation Y and Generation X. Together with Generation Z, which will continue to make up just a sliver of luxury spending, these younger consumers will comprise three-quarters of the global luxury market by 2020,” the report’s co-author Federica Levato predicts.