Luxury market to shine on booming demand from consumers

The luxury sector is poised to shine brighter this year as a strong performance in the Asia-Pacific region — led by the Chinese mainland and neighboring markets where first- and second-quarter sales surged — promises to propel the sector's global growth to 5 percent to 12 percent, according to recent industry studies and company performance reports.

China's wealthiest continue to drive luxury's revival as two-thirds of the consumers surveyed by Vogue Business and Barclays Research reported spending over 15,000 yuan ($2,075) on luxury fashion products, including clothing, footwear and jewelry, in the second quarter.

This exceeded expectations cited in the previous edition of the joint report.

In late June, the 2023 Spring Luxury, a study published by consultancy Bain &Co and Altagamma, a foundation that promotes top-end Italian style and fashion businesses through collaborative research, showed the luxury goods market is expected to fare better this year with some, if not all, brands likely to reach the high sales levels seen in 2021.

Outside of the Chinese mainland, Hong Kong and Macao markets in China also saw luxury sales spike, besides funneling tourists to the mainland.

Southeast Asia continued on its high growth path, sustained by an influx of high-spending Russian tourists and Chinese consumers with a strong appetite for jewelry and watches, the Bain-Altagamma report stated.

The good show so far this year suggests the luxury market appears to be coasting on a successful 2022 that raked in sales worth 345 billion euros ($381 billion), the report stated.

The first quarter, in particular, notched up a year-on-year growth of 9 percent to 11 percent in different regions.

"The luxury industry is experiencing a new phase after its post-COVID growth, with renewed drivers of resilience establishing winners and losers," said Bruno Lannes, senior partner at Bain &Co based in Shanghai.

"Brands that want to succeed need to focus holistically on consumers, balance their exposure across geographies, offer a high-value proposition with elevated entry clienteling and experientiality at scale, and push on icons, and timeless and statement pieces."

Clienteling is a data-powered method used by salespersons to build long-term relationships with key customers, after analyzing the latter's purchasing behavior, preferences and spending patterns.

Chinese consumers' evolving tastes in personal luxury goods have spurred many brands, market observers said.

For instance, Burberry Group Plc has seen its Asia-Pacific business grow 36 percent year-on-year in the first quarter with sales in the Chinese mainland up 46 percent.

The British luxury brand launched a store at the SKP shopping mall in Chengdu, Sichuan province, in January and refurbished another store in the same city in March. The brand operates some 90 stores on the Chinese mainland.

"Globally, we saw good strength from the Chinese mainland customers that grew mid-teens against financial year 2022 and helped drive a strong performance in the South Asia-Pacific 39 percent and contributed to the 44 percent increase in Japan. South Korea remained robust with growth of 6 percent broadly in line with last year," said Jonathan Akeroyd, CEO of Burberry.

"We have made good progress in the (first) quarter delivering high teens comparable revenue growth led by the ongoing recovery on the Chinese mainland."

Industry watchers said the second quarter sustained the momentum gathered in the first quarter.

The Bain-Altagamma report, they said, shows the personal luxury goods market is projected to grow 5 percent to 12 percent this year, with sales expected to reach between 360 billion euros and 380 billion euros, up from 345 billion euros in 2022.

The Bain-Altagamma report stated that the personal luxury goods market is likely to grow further on the back of solid market fundamentals, to reach between 530 billion euros and 570 billion euros in sales by 2030 — around 2.5 times the size of the 2020 luxury market.