LUXURY GOODS WORLDWIDE

MARKET STUDY
FallWinter 2015
A time to act: How luxury brands
can rebuild to win
By Claudia DArpizio, Federica Levato,
Daniele Zito and Jolle de Montgoler

Claudia DArpizio and Federica Levato are Bain & Company partners, and Daniele Zito
is a manager. All three are based out of the rms Milan ofce. Jolle de Montgoler
is the practice area senior director for Retail, Luxury and Consumer Products in EMEA.
She is based out of the rms Paris ofce. All four are members of Bains Global Retail
and Luxury practices.

Copyright 2015 Bain & Company, Inc. All rights reserved.

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Table of contents
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 1
1.

Luxury spending trends in 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 5

2.

Regional highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 9

3.

Distribution trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 15

4.

Individual category performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 21

5.

Outlook for the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pg. 27

Page i

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Page ii

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Executive summary
Currency uctuations and globe-trotters boost the personal luxury goods market, but real
growth slows
The 14th edition of the Bain Luxury Study, published by Bain & Company for Fondazione Altagamma, the
trade association of Italian luxury-goods manufacturers, analyzed recent developments in the global luxurygoods industry.
The overall luxury industry tracked by Bain & Company comprises 10 segments, led by luxury cars,
luxury hospitality and personal luxury goods, which together account for 80% of the total market. The industry surpassed 1 trillion in retail sales value in 2015 and delivered healthy growth of 5% year over year (at
constant exchange rates), driven primarily by luxury cars (8%), luxury hospitality (7%) and ne arts (6%).
Aided by global currency uctuations and continued purchases by borderless consumers, the personal
luxury goods marketthe core of the core of luxury and the focus of the Bain Luxury Studyballooned to
more than 250 billion in 2015. That represents 13% growth over 2014 at current exchange rates, while
real growth (at constant exchange rates) has eased to only 1% to 2%. The slowdown conrms a shift to a
new normal of lower sales growth in the personal luxury goods market, which we highlighted in previous
analyses. The challenge for luxury brands in this environment is to successfully navigate market volatility
driven by currency swings and uctuating tourist ows.

Aided by global currency uctuations and continued purchases by borderless

consumers, the personal luxury goods marketthe core of the core of luxury and
the focus of the Bain Luxury Studyballooned to more than 250 billion in 2015.

Currency swings affect regional performance

Boosted by a strong US dollar, the Americas emerged as the biggest global region for personal luxury goods purchases. However, in real terms, the US market did not deliver. The super-dollar was too expensive for
many global tourists and, although local consumption grew, it was barely sufcient to offset the decline in
tourism revenue.
Europe posted sound growth, primarily fueled by Chinese and US tourists attracted by a weak euro. The old continent has become the worlds largest in-season outlet. Our analysis of European tax-free shopping data,
conducted in partnership with Global Blue, showed that Chinese tax-free purchases in Europe increased by
64% while tax-free purchases by American tourists in Europe grew by 67%, primarily in the high end
of the luxury spectrum. Meanwhile, Russian and Japanese travelers cut their tax-free spending in Europe
by 37% and 16%, respectively.

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Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Across Asia, performance varied widely:

Japan has proven to be a consistent champion in both real and nominal terms, as a sound base of local consumers
and the emergence of Chinese tourists looking to capitalize on currency uctuations are driving sales.

South Korea shined, with 11 billion in retail sales value, growing at 4% in constant exchange rates despite
the negative impact of the Middle East Respiratory Syndrome in the second half of the year.

Hong Kong and Macau faded, primarily due to government reforms against graft and the gray market
(respectively 7 billion and 1 billion in retail sales value, both declining at 25% in constant exchange rates).

Local spending in Mainland China continued to contract slightly.

Chinese consumers play a primary role in the growth of luxury spending worldwide. They account for the largest
portion of global purchases (31%), followed by Americans (24%) and Europeans (18%). Chinese shoppers continue to spend far more abroad than in Mainland China, which accounts for only 20% of their global purchases.
However, the depreciation of the euro boosted the country to the global luxury podium; it is now the third-biggest
market in the world, after the US and Japan. The most popular travel destinations for Chinese luxury shoppers
shifttypically to Europe, South Korea or Japanin response to currency uctuations, which create temporary
favorable price gaps.

Chinese consumers play a primary role in the growth of luxury spending worldwide. They account for the largest portion of global purchases (31%), followed
by Americans (24%) and Europeans (18%).

Wholesale still dominates, but company-owned retail and e-commerce are growing faster

Wholesale is still the dominant selling channel within the personal luxury goods market, capturing
66% of the total market. However, retail continues to gain share, driven by network expansion (600
new directly operated stores opened globally in 2015, a decline from the 750 opened in 2014) and
growth in same-store sales (13% at current exchange rates). The wholesale channels slower performance stems from three factors: the ongoing retailization of luxury (converting franchised locations
into company-owned stores or joint ventures); the lackluster performance of US department stores
across product categories (particularly in leather goods); and the decreasing sales of Asian watch
retailers, which are coping with excessive stock and a reduction in the overall store network.
E-commerce grew to a 7% market share in 2015, nearly doubling its penetration since 2012. Specialized e-commerce players are outperforming the market globally, with Chinese e-tailers progressively
extending their geographic reach and gaining share on a global basis. The e-commerce sites of European and American retailers (such as department stores) continue to grow, a response to customers
demands for an omnichannel experience. Luxury brands are losing share online overall, with highly

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Luxury Goods Worldwide Market Study | Bain & Company, Inc.

variable performance: The largest brands with established direct online and omnichannel platforms
are outperforming but the majority of brands still lag, especially European brands.
Luxury globe-trotters have also fueled the performance of airport retail, which posted a 29% growth rate in
current exchange rates (18% in constant exchange rates) and now accounts for 6% of the global luxury market.
With the growing middle class in markets such as China seeking good quality and good value, and consumers in mature markets looking for bargains, the off-price channel has more than doubled to nearly
26 billion. Markdowns are also increasing in prevalence across more than 35% of the luxury market.
Accessories remain the leading category

Among specic categories of personal luxury goods, accessories remained the leader, capturing 30% of the
market and growing by 3% in 2015 (at constant exchange rates). That was faster than the next two largest
categories, apparel (which grew 2% at constant exchange rates) and hard luxury (which contracted by 3%).
Within accessories, high-end shoes (4%) continued to grow faster than leather goods overall (2%). Jewelry was the star category within hard luxury, growing at 6% in constant exchange rates, while watches
were strongly hit by the channel overstocking in Asia and contracted by 6% in constant exchange rates.

Page 3

1.
Luxury spending
trends in 2015

The global luxury market tracked by Bain &

Company comprises 10 segments, including
personal luxury goods, cars, luxury hospitality,
luxury cruises, designer furniture, ne food, ne
wines and spirits, yachts, private jets and ne art.
The overall market exceeded 1 trillion in 2015.
Growth in the luxury car market was solid, up 8%
from 2014, driven by positive trends in both the
US and Europe. Luxury hotel sales, up 7%, beneted
from steadily growing demand, particularly in Europe.
Personal luxury goodsthe core of the core of
luxury and the focus of the Bain Luxury Study
ballooned to more than 250 billion in 2015, more
than tripling over the past 20 years. This represents
13% growth over 2014 at current exchange rates,
while real growth has slowed to only 1%2%.
The year was marked by a strong depreciation of
the euro vis--vis most global currencies, resulting
in a double-digit positive impact on the overall
market value.

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 1: The global luxury market exceeded 1 trillion in 2015, posting overall growth of 5%, driven by
cars, hospitality and ne arts
Worldwide luxury market, 2015E ( billions)
40

45

64

32

21

1,044

176
405

253

Personal
luxury goods
Growth,
201415E

13%

12%
Growth,
201415E
(at constant
exchange rates)

Luxury
cars
15%

Luxury
hospitality
17%

Fine wines
and spirits
10%

Fine
food
13%

Fine
art
19%

Designer
furniture
9%

Private
jets
14%

Yachts

Luxury
cruises

Total 2015E

2%

16%

14%

8%

7%

3%

4%

6%

4%

1%

1%

4%

5%

Note: Discrepancy in total is due to rounding

Source: Bain & Company

Figure 2: Currency uctuations inated the personal luxury goods market to more than 250 billion, while
real growth slowed down
Global personal luxury goods market, 19942015E ( billions)
Socioeconomic turbulence

SARS

Subprime and
financial crisis

September 11 Spike in
$/
exchange
rate

Chinese stock
market turmoil

253
Year-over-year growth at current exchange rates
212

Year-over-year growth at constant exchange rates

218

224

3%

3%

7%

3%

192

128

73

77

85

92

96

133

133

128

136

147

108

159

170

167

173
153
13%
12%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E
Source: Bain & Company

Page 6

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 3: Exchange rate uctuations resulted in a double-digit growth rate

Global personal luxury goods market at current and constant exchange rates, 20132015E ( billions)
253

26

Year-over-year growth at current exchange rates

3%

13%

Year-over-year growth at constant exchange rates

3%

12%

224
1

218

2013

Constant
growth

Currency
effect

2014

Constant
growth

Currency
effect

2015E

Source: Bain & Company

Figure 4: The general trend was a depreciation of the euro vis--vis most other global currencies
Evolution of key currencies against the euro
2014 vs. 2013
US

19%

0%

UK

5%

Switzerland
Russia

2015E vs. 2014

11%

1%

14%

17%

23%

Brazil

8%

Japan

8%

12%
4%

Mainland China
Hong Kong

1%
0%

South Korea
Singapore

18%
19%
4%

12%

1%

10%

United Arab Emirates

0%

19%

Saudi Arabia

0%

19%

Source: Bain & Company

Page 7

2.
Regional
highlights

Boosted by a strong dollar, the Americas emerged

as the biggest global region for personal luxury
goods purchases. The US alone accounted for 79
billion of the 85 billion regional market (or more
than 90%), and remains the largest global market
by far, bigger than the next four combined (Japan,
China, Italy and France). However, in constant
exchange rates, the US market did not deliver.
The depreciation of the euro also boosted Mainland
China to the No. 3 spot in terms of global luxury
value, overtaking Italy and France and trailing only
the US and Japan. However, local spending in
M a i n land China (which represents only 20% of
global Chinese shoppers purchases) continued to
contract slightly.
New York City, Paris and London are the largest luxury
cities globally, each representing a market in excess
of 10 billion. Luxury goods purchases in New York
City alone outweigh those across all of Japan.
Since 2009, the US market has contributed 1.7 times
as much growth in absolute value as the largest
growth contributors in Asia. Mature markets in
Europe also contributed meaningful growth over the
period, equivalent to 80% of the growth Asia
contributed. The UK and France contributed 20%
more growth in absolute value than China did over
the period.
Chinese consumers played a primary role in the
growth of luxury spending worldwide: they made up
the largest portion of global luxury purchases (31%),
followed by Americans (24%) and Europeans (18%).
In 2000, Japanese consumers represented more than
one-quarter of global luxury purchases; they now
account for only 10%.
Luxury consumers in mature markets, such as
Europe, the US and Japan, tend to purchase locally.
However, growth in these regions increasingly
depends on spending by tourists.

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 5: The Americas became the biggest global region in 2015, primarily because of the super dollar
Personal luxury goods market by region, 20072015E ( billions)
CAGR
CAGR
CAGR
(0709) (0915E) (1415E)

Rest of world

253
218

212

224

0%

11%

17%

Japan

9%

3%

13%

Asia

9%

14%

11%

Europe

5%

6%

9%

Americas

10%

11%

18%

192
170

173

167
153

2007

2008

2009

2010

2011

2012

2013

2014

2015E

Note: Growth rates in current exchange rates

Source: Bain & Company

Figure 6: The US remained the largest global market but did not deliver real growth; China joined the global
luxury podium
Personal luxury goods, top countries, 2015E ( billions)
78.6
72.1
China

France

Italy
20.1

17.9

17.3

17.1

15.6

11.9

Japan

Global rank
in 2014
Growth in euros
20142015E

US

Japan

China

Italy

20%

13%

17%

6%

10%

16%

9%

1%

6%

10%

5%

0%
Growth in local
currency, 20142015E

France
4

Source: Bain & Company

Page 10

UK
6

10.8

8.1

6.8

3.2

South
Korea

Middle
East

Hong
Kong

Russia

10

11

14%

16%

19%

11%

25%

14%

4%

0%

25%

2%

Germany
7

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 7: Local spending in mainland China continued to contract in real terms; mainland China accounts for
20% of global Chinese shoppers purchases
Personal luxury goods market in
mainland China, 20072015E ( billions)

Where shoppers from mainland China bought

luxury goods in 2015E, by region (%)

Year-over-year growth at current exchange rates

18

Rest of world
Japan

+17%

Americas

Year-over-year growth at constant exchange rates

15

15

15

13
0%
Europe
2%

10
CAGR 0713:
+23%

7
6

1%
Asia

Mainland China

2007

2008

2009

2010

2011

2012

2013

2014 2015E

Source: Bain & Company

Figure 8: New York City, Paris and London each account for more than 10 billion of luxury sales; luxury goods
purchases in New York City outweigh those across all of Japan
Personal luxury goods, top cities, 2015E ( billions)
27

20

13

13

New
Paris
Tokyo
Hong
Las
York
Kong
Vegas
City Japan
Beijing
London
Seoul
Source: Bain & Company

Honolulu
Los
Angeles

Milan

Shanghai

Page 11

Osaka

Taipei
Rome

Munich

Miami

Singapore

Moscow
Dubai

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 9: Since 2009, the US market alone contributed 1.7 times as much absolute value growth as Asia;
Europe contributed 80% of the growth of Asia
Personal luxury goods: growth contribution in absolute value, by region and top contributing market, 20092015E ( billions)
37.4

x1.7
21.6
Japan
US

~80%
18.3
Italy

Hong Kong

Germany

South Korea

France
China
UK

Americas

Russia
1.3
Europe

Asia

Source: Bain & Company

Figure 10: Chinese consumers now represent about one-third of the global market, up from only 1% in 2000;
Japanese consumers, who accounted for a quarter of the market in 2000, now make up 10% of global purchases
Global personal luxury goods market by consumer nationality, 20002015E ( billions)
Rest of world
Asian

Chinese

Japanese

American

European
2000

2010

2013

Source: Bain & Company

Page 12

2014

2015E

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 11: Europe is largely supported by tourists; consumers from mature markets buy primarily domestically
Personal luxury goods spending by consumer nationality
and location of purchases, 2015E ( billions)

Personal luxury goods spending by local

consumers vs. tourists by region, 2015E ( billions)
100%

83

Regional
tourists
85

20

18

100%

~45

Rest of
world

Rest of

~60
Europe

Americas
80

~25
Europe
Americas

Japan
Americas

80

Extraregional
tourists

~80 world

Asia
China

60

60

Americas
Europe

40

Asia

40
Japan

20

Local
consumers

20
Europe

Europe

Americas

Japan

Mainland
China

Source: Bain & Company

Page 13

European
consumers

American
consumers

Japanese
consumers

Chinese
consumers

3.
Distribution trends

Wholesale was still the dominant selling channel

within the personal luxury goods market, capturing
66% of market share. However, retail continued
to gain share. It is up 2 percentage points in 2015
and is growing twice as fast as the wholesale
channel at current exchange rates.
Retail and monobrand distribution continued to be
winning formats.
E-commerce grew to 7% market share in 2015, nearly
doubling its penetration since 2012. The channel
was particularly strong in the Americas, and is
skewed to the accessories and fashion categories.
Luxury globe-trotters have fueled the performance
of airport retail, which posted a 29% growth rate
in current exchange rates (18% in constant exchange
rates) and now accounts for 6% of the global
luxury market.
With the growing middle class in markets such as
China seeking quality and good value and consumers in mature markets looking for bargains, the
off-price channel has more than doubled in the
past three years, to nearly 26 billion.
Markdowns were also increasingly prevalent
across more than 35% of the luxury market, particularly in department stores, specialty stores and
e-commerce platforms.

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 12: Wholesale still dominates among distribution channels, but company-owned retail
grows faster
Personal luxury goods market, by channel, 20072015E ( billions)

253
224

218

212

CAGR
(0715E)

192
170

173

167

66

153

3%

Retail

11%

68

69

71

Wholesale

72
79

73

78

75

21

23

25

27

28

2007

2008

2009

2010

2011

29

31

32

2012

2013

2014

34

2015E

Source: Bain & Company

Figure 13: Retail and monobrand distribution continue to be winning formats

Global personal luxury goods market, by channel and format, 2015E ( billions)
20142015E growth
trend in real terms

6%

253

253

7%
10%
23%
Wholesale
66%

Multibrand
47%

25%

Market
share
29%
Monobrand
53%
Retail 34%

Monobrand
stores

Department
stores

Specialty
stores

Off-price
stores

Source: Bain & Company

Page 16

Online

Airport

Global
luxury

Global
luxury

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 14: The online luxury market has grown tenfold since 2005, rising to 7% market share
Online personal luxury goods market, 20032015E ( billions)
7%

Year-over-year growth at constant exchange rates

16.8
5%
4%

12.0

9.8
3%
5.8

2%
4.5

Online market share 1%

1.3

2003

2004
37%

Year-over-year
growth

3.5

2.2

2.6

2.9

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015E

31%

29%

18%

12%

21%

29%

29%

33%

27%

22%

40%

1.7

1.0

7.7

22%

Source: Bain & Company

Figure 15: The online channel is particularly strong in the Americas and is skewed to the accessories
and fashion categories
Online personal luxury goods market, 2015E ( billions)
16.8

16.8

Other 5%
Rest of world 19%

Hard luxury 11%

Beauty 17%
Europe 25%

Apparel 27%

Americas 56%
Accessories 40%

By geography

By category

Source: Bain & Company

Page 17

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 16: Luxury globe-trotters have fueled the performance of airport retail
Airport personal luxury goods market, 20122015E ( billions)
Other 2%

Market share 6%
14.1

14.1

Rest of world 9%
Americas 16%

14.1
Hard luxury 10%
Apparel and
accessories 13%

CAGR
+18%

Market share 4%
8.7

Europe 31%

Beauty 75%
Asia and Japan
44%

2012
Growth since 2014
Growth since 2014 (at constant exchange rates)

2015E
29%

By geography

By category

18%

Source: Bain & Company

Figure 17: The off-price channel has more than doubled over the past three years
Off-price personal luxury goods market, 20122015E ( billions)
Market share 10%
25.9

Other 1%

25.9

25.9

Rest of
world 20%

Hard luxury 9%

Beauty 5%

Europe 21%
Market share 5%
12.6
Apparel and
accessories 85%

CAGR
+27%

2012

Americas 59%

2015E

Growth since 2014

35%

Growth since 2014 (at constant exchange rates)

23%

By geography (%)

Source: Bain & Company

Page 18

By category (%)

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 18: The share of markdown is quickly increasing across formats and reaches over one-third of the
total market
Global personal luxury goods market, share of markdown by format, 2015E ( billions)

253

Growth trend for markdown

in real terms

Apparel
Beauty
Accessories
Hard luxury

Markdown
~35%

Monobrand
stores

Department
stores

Specialty
stores

Off-price
stores

Source: Bain & Company

Page 19

Online

Airport

Global
luxury

4.
Individual category
performance

Accessories remained the leading personal luxury

goods category, capturing 30% of the global
market and growing by 3% in 2015 (at constant
exchange rates). Apparel was the second-largest
category (at 24% of the market, with 2% growth
at constant exchange rates), followed by hard
luxury (22% of the market, contracting by 3%).
The performance of the fashion and apparel
category was slightly soft, with both womens and
mens ready-to-wear segments (accounting for 30
billion and 29 billion in retail sales value,
respectively) growing at only 2% in constant
exchange rates.
Within hard luxury, jewelry (with 16 billion in
retail sales value) was the star category, growing
at 6% in constant exchange rates, while watches
(36 billion in retail sales value) suffered from
overstock in Asian channels and contracted by 6%
in constant exchange rates.
Within accessories, the growth of high-end shoes
(16 billion in retail sales value) continued,
surpassing that of leather goods (43 billion in
retail sales value) and growing at 4% vs. 2% at
constant exchange rates.
Wi t h i n t h e b e a u t y c a t e g o r y, f r a g r a n c e s
( 2 3 billion in retail sales value) and cosmetics
(27 billion) grew at moderate rates in constant
exchange rates (2% and 1%, respectively, at
constant exchange rates).

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 19: Accessories have been the biggest personal luxury goods category since 2011; they remain
the fastest growing
Personal luxury goods market, by category, 20072015E ( billions)
CAGR
CAGR
(0709) (0915E)

253

218

212

Other

10%

4%

Beauty

3%

5%

224

192
170

173

167
153

Hard luxury

7%

11%

Apparel

8%

7%

Accessories 1%

2008

2007

2009

2010

2011

2012

2013

2014

12%

2015E

Source: Bain & Company

Figure 20: Ready-to-wear posted soft positive growth, with different dynamics across menswear and
womenswear
Men's ready-to-wear
Luxury men's ready-to-wear market, 20132015E ( billions)
26

Casual wear posting low single-digit growth, while formal wear continues
to suffer
- Mixed performance within both segments, with Absolute brands
experiencing a very sound trend, offset by negative Aspirational and
lackluster Accessible brands

29

26
13%
1%

2013

2%

2014

Outerwear, denim and cashmere categories outperforming, in line with 2014

- Growing success of fur and shearling
- Denim maintaining momentum also driven by a new fashion twist and
the success of customization services

2015E

Women's ready-to-wear
Luxury women's ready-to-wear market, 20132015E ( billions)
30

26

26

14%
3%

2013
2014
Year-over-year growth at
current exchange rates

2%

2015E
Year-over-year growth at
constant exchange rates

Overall positive trend for women's ready-to-wear, with high resilience

across markets and categories
- Brisk growth of denim and outerwear across the board
- At the extremes of the spectrum, activewear and haute couture showing
strong dynamism
- Daywear positive trend driven both by Absolute brands and first lines
and Accessible segment
- Formal wear lagging behind in terms of growth due to the underperformance of Aspirational brands
Increasing brandization of patterns and creative motifs as new icons of
the category

Source: Bain & Company

Page 22

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 21: Within accessories, shoe sales continue to outpace leather goods
Leather goods
Luxury leather goods market, 20132015E ( billions)
43

38

36

- Surging success of the off-price channel and increasing promotional activity

by full-price stores

14%
5%

2013

Overall trend undermined by prices (excluding Accessible brands)

- Brands attempts at preserving the entry price range by offering a wider
selection of lower-priced items were effective from a volume standpoint only,
causing the price mix to decline

Ongoing polarization among segments

- Absolute brands outgrowing the overall category, while Aspirational brands
show mixed performance, with ongoing turnaround of key brands

2%

2015E

2014

- Highly volatile consumers affecting brands in the Accessible segment

Shoes

Luxury shoes market, 20132015E ( billions)

14

13

16
16%

6%
2013

4%
2015E

2014

Consistent positive performance of shoes, the status symbol at the price

sweet spot
- Outperformance of the Absolute segment
Men's segment continuing on its positive trajectory, women's showing
increased dynamism
- Ongoing sneaker phenomenon now influencing other segments
(e.g., formal shoes with thick rubber sole)
Lifestyle brands registering slightly brisker growth than shoe specialists

Year-over-year growth at
constant exchange rates

Year-over-year growth at
current exchange rates
Source: Bain & Company

Figure 22: Within hard luxury, jewelry continues growing, while watches remain affected by a negative
trend in Asia
Watches
Luxury watches market, 20132015E ( billions)

36

Luxury watches still impacted by Asian uncertainty

- Asian retailers overstocked with declining sales and shrinking store networks
38

36

The Absolute segment performs better; Europe is buoyed due to touristic

purchases in brands' own stores

+7%
+0%

2013

The impact of smartwatches remains limited to the premium segment (not

competing with high-end time pieces playing on different value dimensions)
- Luxury brands launch their own smartwatches and smart accessories for
watches, with limited volumes

6%

2014

Exposure to Swiss watchmakers impacted the overall category, with the Swiss
franc appreciating over the euro and consequent price adjustments

2015E
Jewelry

Luxury jewelry market, 20132015E ( billions)

Luxury branded jewelry continues to outperform the overall category

Strong performance of Absolute and high-ticket items
16

14

13

+18%
+8%
2013
Year-over-year growth at
current exchange rates

+6%
2014

2015E
Year-over-year growth at
constant exchange rates

Jewels remain among top preferred investments due to intrinsic value of

raw materials
The global demand for diamonds is still growing but at a more modest
pace, particularly in Asia as a consequence of the slowdown started last
year and the protests in Hong Kong
For new store openings, Asian retailers rebalance the product offer toward
more jewelry than watches

Source: Bain & Company

Page 23

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 23: Within the beauty category, fragrances are on a positive trajectory; skincares performance
is lackluster
Fragrances
Luxury fragrances market, 20132015E ( billions)

20

23

20
11%
2%

2%

Mature markets post mixed performances, with Chinese and Middle Eastern
demand continuing to rise
- The growth in mature markets is mainly driven by price increases despite
an increasing weight of promotions
The top end of the market, exclusive lines and essences, and artisanal niche
brands are outperforming
- Growing interest for customized products
- Brands refocus storytelling on scents, ingredients and nose
Travel sizes experience a sustained trend

2014

2013

2015E
Cosmetics

Luxury cosmetics market, 20132015E ( billions)

27

24

23

15%
2%

2013
Year-over-year growth at
current exchange rates

1%

2014

2015E

Makeup is the main growth engine in the category, offsetting the overall
performance of skin care
- Sound trend of makeup across subcategories
- Devices show strong dynamism within skin care, while other
subcategories suffer
Premium Korean brands are increasingly popular among Asian consumers
- Western players looking for potential acquisitions

Year-over-year growth at
constant exchange rates

Source: Bain & Company

Page 24

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Page 25

5.
Outlook for
the future

The main challenge facing most luxury brands is

establishing the right pricing model. The rise of
e-commerce and global tourism growth create
greater transparency around international price
differentials. In addition, price-conscious luxury
shoppers are struggling to reconcile the price of
luxury products with their real value. As a result,
luxury brands must assess how to mitigate volatility
and how best to deliver at local and global levels.
This includes managing inventory to accommodate
uctuations in tourist spending and coordinating
pricing and markdowns across markets and channels.
Luxury brands also face a host of tough issues such
as rethinking the size of their store footprint and
the role of brick-and-mortar shops in a world of
growing digitization, as well as guring out how
to delight local customers even as masses of tourists
ock to establishments in mature markets.

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 24: Strategic international pricing is becoming the main issue to be tackled in the industry
Until recently ...

Relentless price increases

over the past 510 years
- To gain more exclusive
positioning and sell to
emerging consumers
with high disposable
income
High price differentials
maintained across regions

... then ...

... now

Exogenous effects
exacerbating price
differentials globally
(currency fluctuations,
import
tariff cuts)

Increasingly priceconscious luxury

consumers look for
international bargains,
resulting in a change in
the market equilibrium

Internet allowing full price

transparency

Brands tactically adjust

international pricing,
sometimes with
shortsighted approaches

- To maximize touristic
flows and local
consumption (Japan)

Mature consumers are cut off from an industry they can't fully afford anymore and whose real value is strongly questioned,
while emerging consumers struggle in truly matching price and value of these products
Source: Bain & Company

Figure 25: The global personal luxury goods market: 10 key takeaways for 2015
A mature market strongly impacted by macroeconomic and sociopolitical events
Markets and consumers

Route to market

Value proposition

Still a Western market but

boosted by masses of
borderless consumers

Retail and monobrand are still

the favorite formats in which
to invest

Chinese consumers are the

top nationality, increasingly
traveling across regions

The current retail footprint

is under scrutiny in
some locations

Consumers shop across

categories and price points,
guided by an informed
point of view on players
strategies

Consumers from mature

markets become more
demanding
and detached

E-commerce is starting to
become disruptive, yet brands
are still struggling with it
Wholesale formats try to hold
ground while attempting
to modernize
Tactical channels such as
off-price and airport retail
become increasingly strategic

Source: Bain & Company

Page 28

Growing value awareness

and blurred pricing
strategies are questioning
the overall value proposition
of luxury

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

Figure 26: Key strategic questions for luxury players going forward
How to reduce brand performance volatility at global and local levels?
Markets and consumers

Route to market

How to manage globetrotting consumers?

How to rethink the size, role

and format of the retail
network?

How to remain strategically focused on local

customers?
How to reengage
disillusioned consumers
in mature markets?

How to maximize the

effectiveness of all distribution channels in an
omnichannel world?
How to strategically
manage full prices and
markdowns within and
across channels?

Value proposition

How to (re)build
aspiration, credibility
and trust for
luxury products?
How to broaden brand
territories and platforms
to bond with tomorrow's
consumers?

How to turn digital (besides

e-commerce) into a
competitive advantage?
Source: Bain & Company

Figure 27: Key strategic themes for luxury CEOs

Markets and consumers

Route to market

Value proposition

Design a locally global pricing strategy and execution

Personalize customer
experiences in store

Locally tailor value

propositions: assortment,
buying, marketing

Refocus distribution strategy

and footprint with a
forward-looking perspective
Master brand content
and storytelling
Evolve toward a value-driven
fast luxury model

Foster consumer engagement across all touchpoints

Develop, grow and retain best-in-class talents

Source: Bain & Company

Page 29

Luxury Goods Worldwide Market Study | Bain & Company, Inc.

App endix: Bains global luxury goods market study methodology

Revenues tracked at retail sales value
Revenues at retail sales value represent total sales valued at retail price (final price paid by consumers at point of purchase)
Each players consolidated sales are brought back to retail sales value through the following methodology
Application of estimated markups
by geography and category

Retail

Retail

Wholesale

Wholesale at retail value

Licenses

Licenses at retail value

Player consolidated sales

Player sales at retail value

Application of estimated royalty

rates and markups by geography
and product category

Bottom-up and top-down estimates

Bottom-up

Top-down cross-check
Category-specific data in the main geographic markets
Comparison between market breakdown and turnover
breakdown of key players
Expert interviews (top management of brands, distributors,
department stores)

Player 1

Player 2

Player 3

Consistency check and fine-tuning

Player 4... Player 290 Total

Source: Bain & Company

Page 30

Key contacts in Bains Luxury Goods practice

Europe,
Middle East
and Africa

Claudia DArpizio in Milan (claudia.darpizio@bain.com)

Federica Levato in Milan (federica.levato@bain.com)
Daniele Zito in Milan (daniele.zito@bain.com)
Marc-Andr Kamel in Paris (marc-andre.kamel@bain.com)
Jolle de Montgoler in Paris (joelle.demontgoler@bain.com)
Serge Hoffmann in Munich (serge.hoffmann@bain.com)
Oliver Merkel in Johannesburg (oliver.merkel@bain.com)

Americas

Darrell Rigby in Boston (darrell.rigby@bain.com)

Asia-Pacic

Bruno Lannes in Shanghai (bruno.lannes@bain.com)

About the Bain Luxury Goods Worldwide Market Study

Bain & Company analyzes for Fondazione Altagamma the market and nancial performance of more than 290
leading luxury-goods companies and brands. This database, known as the Luxury Goods Worldwide Market
Observatory, has become a leading and much-studied source in the international luxury-goods industry. Bain
has published its annual ndings in the Luxury Goods Worldwide Market Study since 2000. The studys lead
author is Claudia DArpizio, a Bain partner in Milan. Fondazione Altagamma is led by Andrea Illy, who was
named chairman in 2013.

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