The Middle East ranks in the top 10 list of global luxury markets,a report said, adding that regional consumption went up by 11 per cent in 2014, fuelled by the growth in tourism as well by a hike in the number of new malls in the GCC.
The Middle East ranks in the top 10 list of global luxury markets, a report said, adding that regional consumption increased by 11 per cent in 2014, fuelled by the growth in tourism flows.
The market is expected to continue to grow fast driven by a large number of mall openings throughout the GCC region the coming five years, added the 13th edition of the “Luxury Goods Worldwide Market Monitor” released recently by Bain & Company, a leading advisor to the global luxury goods industry.
“While the international luxury market is affected by a number of causes such as the economic slowdown, unrest in various parts of the world, and currency fluctuation, the Middle East continues to demand luxury goods,” said Cyrille Fabre, a Bain partner and leader of the Retail & Consumer Products practice in the Middle East.
“In fact, the Middle East consumer base for luxury products is rapidly growing with a relatively stable profile. Among all luxury products in the region, the luxury car market and more particularly ‘supercar’ segment is predicted to post a solid growth,” Fabre added.
Globally, the luxury market is on target to reach 223 billion euros ($275 billion) in 2014, aided by a 5 per cent bump in growth this year– down just slightly from seven per cent in 2013, the report said.
“The focus is shifting to consumers, with local trends and tastes representing only part of the picture,” said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study.
“This new mind-set has important implications for luxury brands. It requires that they think about their product offering from a more global perspective, with the concept of seasons, a key pillar of this industry, becoming increasingly obsolete.”
Bain’s research finds that international travel and tourism is also creating an appetite for 360-degree luxury experiences, such as high-end transportation, including highly customized ‘super cars’ and yachts, as well as luxury hotels and cruises:
• Growth in the luxury car market is solid, up 10 per cent from 2013, driven by emerging markets, where luxury vehicles are still seen as a symbol of status and a social enabler. The high degree of personalization for vehicles and even after-sales services is helping to double or in some cases triple the basic price tag.
• Hotels are benefiting from steadily growing demand, up 9 per cent. Younger generations (30+), who are seeking superior lifestyle experiences, helped to fuel 5 per cent growth in the cruise market.
• Yachts are bouncing back at a low, positive single-digit pace (2 per cent in 2014), while private jet sales are up 9 per cent, boosted by emerging market demand – notably Brazil.
Not to be outdone, personal luxury goods continue to buoy the market. Luxury accessories captured 29 per cent of the market and grew by 4 per cent in 2014 (at current exchange rates) – more than apparel or hard luxury, the next two largest luxury categories.
For the first time since 2007, the growth of high-end shoes surpassed that of leather goods, emerging as an evident status symbol, albeit at a lower ticket price than other leather goods. At the opposite end, hard luxury, specifically watches took a hit from the downturn in Asia. In response, many watchmakers cut production to sidestep the risk of over-supply.
Across all personal luxury categories, the retail channel is growing, weighting approximately 30 per cent of the market. When it comes to a physical shopping experience, consumers prefer a monobrand environment – more than 50 per cent of the market. Conversely, online, they love variety and assortment and prefer buying in a multi-brand e-environment.
In an interesting twist, Bain’s study found that many consumers are on the hunt for greater luxury value for their money. Mature consumers, who are capping their luxury budget and downgrading to more accessible brands, as well as mid-income, aspirational shoppers, are fostering the growth of upper premium brands and the second-hand market, which represented 16 billion euros ($19.7 billion) in 2014.
Off-price channels, such as outlets, have also nearly doubled market penetration over the last three years, driven by more sophisticated store designs and customer service that replicates a full-price luxury environment.
“We are seeing strong polarization among luxury brands and the fast growth of an ‘Alternative to luxury’ segment – those upper premium brands ‘winking’ at luxury ones and promoting an image of status that exceeds that of their products,” said D’Arpizio.
“Recently, we have also witnessed a revamp of the second hand-market, fostered by an online revolution. While this market threatens new product sales, it is simultaneously turning luxury goods into durables with an increasingly defined re-sell price, thus increasing their value,” she concluded.