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[PARIS] The global market for personal luxury goods is heading for its weakest year since 2009 as a combination of stock market turmoil, a strong dollar and a commodity-price rout curb demand.
Sales of items such as designer dresses and shoes will rise as little as 1 per cent to 253 billion euros (US$280 billion) in 2015, according to Bain & Co, which in May forecast growth of 2 per cent to 4 per cent. The projection, on a basis that excludes currency swings, would be the weakest gain since sales fell 11 per cent in the year after Lehman Brothers' collapse.
Luxury labels such as Louis Vuitton and Burberry are finding life tougher in China as a slowing economy exacerbates the effect of the government's anti-extravagance drive, hurting demand for handbags and coats. US growth, meanwhile, has softened as stock market volatility and a strong dollar curb purchases by locals and tourists. Luxury sales will fall for the second straight year in China, while the US won't grow, Bain said.
"It's getting harder to compete," Bain partner Claudia D'Arpizio, the study's lead author, said by phone. In a best- case scenario, the market will expand 2 per cent, assuming strong demand over the holiday period, she said.
At least a weaker euro is helping. Currency movements will boost the value of luxury sales by 26 billion euros this year, Bain estimates. And Chinese consumers are still shopping where weak currencies give them pricing power, particularly in Europe and Japan. The researcher expects Chinese shoppers to account for almost a third of global luxury spending, up from 28 per cent in 2014.
Russians, on the other hand, are conspicuous by their absence, cutting tax-free shopping in Europe by more than a third between January and August, the consultant said.
Bain expects jewelry to be 2015's best-performing category, rising 6 per cent, contrasting with a slump in watch sales caused by weakness in Asia. Items such as diamond necklaces are increasingly seen as a safe investment in an uncertain economic and financial environment, according to the consultant.
Ms D'Arpizio said she expects growth to strengthen from the second quarter of 2016. The "new normal" for the luxury market is growth of 3 per cent to 4 per cent, she said. That estimate excludes the wave of Chinese middle-class consumers who could boost consumption.
Total luxury spending will surpass 1 trillion euros in 2015, led by accelerating sales of luxury cars, hotels and fine art, Bain said in the study, which it publishes twice a year with Italian luxury lobby Altagamma.