Luxury market steady despite global uncertainty

London - The latest report concerning the global luxury market by management consultant firm Bain & Company shows collective growth at 4 percent to an estimated 1.08 trillion euro sales in 2016.

The report states there is evidence that luxury consumers are changing their spending habits for more personal high-end experiences, such as luxury travel, food and wine, and even fine art. Meanwhile, the personal luxury goods industry managed to hold steady amid global geopolitical uncertainty.

Despite China's re-emergence after three years of stagnation, the U.S. decline prevailed as the stronger force, dragging down worldwide performance to 249 billion euros. These are the top-line findings from the 15th edition of the "Bain & Company Luxury Study" compiled in collaboration with Fondazione Altagamma, the Italian luxury goods manufacturers' industry foundation.

"The luxury market has reached a maturation point. Brands can no longer rely on low-hanging fruit. Instead, they really need to implement differentiating strategies to succeed going forward," said Claudia D’Arpizio, a Bain partner in Milan and lead author of the study. "We are already starting to see clear polarization when it comes to performance with winners and losers emerging across product categories and segments."

Brexit, the US election and currency changes all affect consumer spending

As the global luxury market settles into this new pattern, selected currency movements are affecting consumption in 2016. Brexit, the U.S. presidential election and European terrorism all impacted consumer confidence and touristic flows. Mainland China is increasingly outperforming the market as Chinese consumption at home increases.

Chinese consumption falls to 30 percent

For the first time in the report's history, Chinese consumers have decreased their contribution to the total luxury market from 31 percent in 2015 to 30 percent in 2016. Local factors such as price differentials, lower levels of service, and overall incomparable shopping experiences are driving down volumes and average ticket sales at home compared to Chinese consumers' purchases overseas.

Over the longer-term, Chinese luxury spending and the country's contribution to total personal luxury goods consumption are expected to trend upward, due in large part to a growing middle class with more disposable income to spend on luxury purchases.

While luxury spending among tourists contracted across Europe, local spending rebounded to rescue personal luxury goods performance across the continent.

E-commerce is luxury's growth channel

Around the world, retail, which continued to gain share as recently as last year, drastically slowed with the first footprints of rationalization in the market. E-commerce is the leading channel in terms of growth, reaching 7 percent penetration in 2016, which makes it the third largest luxury 'market' globally after the U.S. and Japan and a key driver in luxury's digital revolution.

"Luxury brands need to adjust their expectations and their strategies as we enter an era in which growth is no longer a given," she said. "We’re now on a level playing field. Brands that adapt their business and take an omni-channel, customer-centric approach will rise to the top. Those that lag behind are sure to lose market share

Photo credit: Louis Vuitton Cruise 17 campaign; source: Louisvuitton.com