Global Luxury Goods Market Settles into ‘New Normal’

Milan—The global personal luxury goods market has reached a “new normal” pattern of growth after strong performances in both 2017 and 2018, according to Bain & Co.

In its recently released “Bain Luxury Goods Worldwide Market Study, Spring 2019,” the management consulting firm reported that the market grew 6 percent year-over-year in 2018 to approximately $293.63 billion in sales.

An acceleration in domestic spending from mainland China consumers and an increase in European tourism drove the growth, though the report also noted that moderate growth is being seen in most markets.

Bain expects sales to remain steady in 2019—4 to 6 percent growth (at constant exchange rates), with sales totaling between $306.07 and $311.71 billion.

In the Americas, the U.S. luxury market was “tepid, with mild growth” throughout 2018.

The new tax reform plan created some uncertainties for consumers and negatively impacted domestic spending on personal luxury goods, Bain said, while malls and department stores continued to struggle with decreasing foot traffic.

Mono-brand stores in the region, meanwhile, maintained a positive growth trend.

Bain & Co. is forecasting 2 to 4 percent growth in the Americas this year, with a rise in domestic consumption in full-price stores but fewer Chinese tourists.

Meanwhile, despite socio-political turmoil in the U.K. and France, Europe also saw positive growth last year due to an influx of tourism spurred by the Euro’s weakening against all major currencies.

Ongoing turmoil in the region, as well as a weakening macro-economic outlook, continue to pose a threat to luxury goods spending, with a modest 1 to 3 percent growth forecast for 2019.

Mainland China continues to reign as a dominant market for luxury goods, as local consumers show a strong preference for purchasing in the domestic market; price harmonization, consumer-centered marketing strategies and government initiatives are all to thank for this trend.

“Solid” consumer confidence and a willingness to spend, especially when it comes to the younger generations, are expected to drive year-over-year-growth of 18 to 20 percent in mainland China in 2019.

Japan is still an “exclusive and attractive” market for luxury brands, Bain said, with forecasted growth of 2 to 4 percent in 2019 and tourist spending expected to rise ahead of the Tokyo 2020 Olympics next summer.

The remaining Asian regions also have a positive outlook, Bain added—apart from Hong Kong and Macau, which continue to lose ground to mainland China—and is expected to