The luxury goods market will return to growth this year thanks to higher spending in China and Europe, according to a report released on Monday.
The latest Bain & Co. Luxury Study stated that while sales fell from €251 billion in 2015 to €249 billion last year, the total revenue for luxury sector would grow by 2 to 4 per cent this year.
The recovering tourist flows and rising consumer confidence in Europe are forecast to drive growth by 7 to 9 per cent, while strong demand for luxury goods in China is expected to push sales by 6 to 8 per cent.
“The Mainland China market is on a positive trend and we expect it to be maintained throughout this year, fuelled, among other factors, by the repatriation of local consumption,” Federica Levato, partner at Bain & Co. and co-author of the report told CNBC. “The relevance of Chinese consumers, locally as well as abroad, will still be high in the market and will continue to deeply shape the industry in the coming years.”
Meanwhile, the US is predicted to see a 2 per cent decline due to weak tourism and struggling department stores.
The report also forecasted that millennials would drive the market value to €290 billion by 2020 and constitute 45 per cent of the market by 2025. Bain advised brands to shift their strategy accordingly.
“The key success factor will be the clear and differentiating strategies that [brands] can put in place,” said Levato. “It’s the first generation with radically different behaviours and attitudes towards all consumption and lifestyle to the generation before.”