Luxury brands feel the pinch
Management consulting firm Bain & Company has released a report that suggests luxury brands are finding that growth in the emerging markets has started to slow since October 2008.
According to the firm, the luxury sector faces revenue declines of between 15% and 20% during the first two quarters in 2009, shrinking to €153 billion from its 2008 level of €170 billion. It predicts that the global luxury market will begin to stabilise in the second half of the year, resulting in a net decline of 10% for 2009 overall.
“This year's declines are hitting both the top and bottom lines of luxury goods companies,” said the study’s author Claudia D’Arpizio. “Luxury shoppers are spending less, travelling less and feeling less confident. Luxury goods producers are also feeling the additional squeeze of intense pricing pressure and markdowns from retailers and higher-end department stores.”
Bain estimates a 15% decline in the Americas and 10% declines in Europe and Japan. These major luxury markets account for over 80% of global sales. Smaller luxury markets show more promise, with projected growth of 7% in China and 2% in the Middle East, but these gains will provide only a small offset against steep declines in major markets.
The study predicts that the leathergoods, shoe and accessory sector will decline by 10% in 2009.
“One of the biggest changes we’ve seen in consumers is that ‘price’ and ‘luxury’ are no longer synonymous,” observes Ms D’Arpizio.
