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Unique Buying Practices by the Chinese Is Boosting The Global Luxury Industry


The intensity of using personal luxury items in China empowered a worldwide recovery of the luxury market in 2017 according to a mutual yearly statement published by Bain & Company along with the Altagamma organization on October 25.

The worldwide market for personal luxury items is believed to rise at 6% at regular exchange rates after a rather inactive 2016. The market value is expected to reach a high point of €262 billion or $304 billion. This prediction is higher than the one made by Bain during the mid-year which had estimated a growth of 2-4% in the sector to reach a figure of 254- €259 billion by the end of 2017.

The higher revision of the growth came after Bain reflected a unique pattern of growth that is eventually appearing in the global market for luxury goods primarily because of it robust market in China and an increase in worldwide millennial consumers.

The report also points to a number of developing drifts in the market that needs to be understood by luxury brands to formulate a strategy when nearing the new generation which has unique shopping habits of luxury items that are exceptionally different from their predecessors.

The Increase In Online Luxury Item Sales Is Shifting The Role of Physical Stores

In 2017 it has been observed that the luxury sector is booming and is estimated to increase by 24% just in online sales. The report is predicting that the market share of online retailers will hit a figure of 25% by 2025 which indicates a 9% increase from 2017.

An analysis of online channels of luxury sales indicates that these retailers are exceeding the websites of brands and retailers to make a contribution of 39% to the growth of 2017. The report is attributing this phenomenon to the stable relationships built by online retailers with the brands as well as the intensity of their unique content and trade integrations.

The e-commerce websites on the usage of luxury brands have also caught up in 2017 with this channel contributing to about 31% of the total worldwide online sales. Over the last year, a number of luxury brands such as Hermes, Gucci, and Louis Vuitton have collectively stepped up their efforts to promote e-commerce.

The development mentioned above is indicating a shift in the attitude of luxury players that are showing a willingness to cater to the digital channel. This was not the case in the past, when these brands were reluctant to welcome digitalization because they believed it would do more harm than good to foster a sense of exclusivity among consumers. Therefore, Bain believes that off-line retail networks will continue shrinking over the next decade. Physical stores are required to play a new role in the era of unique retail and the brands are required to consider the stores as chapters of the narrative of the brand for impressing and reassuring the customers simultaneously.

It is also a requirement for luxury brands to combine sales channels of different types to build an online to off-line purchasing experience for their consumers. Bain has advised brands to utilize their online platform as a 360° channel of support for their network of physical retail outlets.

Price Increase Strategies Will Not Drive Growth Henceforth

The report also observes that the strategy of price inflation which was effective in driving the revenue from luxury goods since the 90s has become obsolete because the market growth is directed by higher volumes rather than price inflation.

The observation is similar to a study conducted by the investment bank BNP Paribas, which claimed that luxury goods consumers from China had played a major role in driving the bias. The report also explains that middle-class consumers from China have lower spending power than the wealthy and the initial adopters and goes on to state that the present demand which is being witnessed will never be conducive for inflating prices. The CFO at the French luxury conglomerate LVMH has also confirmed that the relevancy of price inflation had become obsolete. This luxury major has recorded a jump in revenue of 21% in Asia during the past quarter and the CFO is firm that the increase did not happen because of a price increase of their products.

China is home to a flourishing worldwide travel and tourism market and this has, in turn, blurred the line within the purchase of luxury goods locally versus abroad to demonstrate the increasing importance for brands to serve luxury consumers that are traveling.


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