altagamma conference

Key facts from the Annual Altagamma Luxury Observatory

8 November 2016

The Annual Altagamma Luxury observatory Conference took place on October 20th in Milan. The status and future of the worldwide luxury market has been discussed by a qualified panel of experts from Bain&Company, Fondazione Altagamma and Global Blue (who presented key results from their reports), from UniCredit and Borsa Italiana (who gave an overview of the economic and financial context), from Technogym and Poltrona Frau (who went into the future perspectives for Design market), from Kering, Diane von Furstenberg and Brunello Cucinelli (who presented their opinions on the current status and development possibilities of Luxury market).

Luxury as an experience, Innovation, New Customers, Tourism and China has been recurring topic in all the speeches during the Altagamma Luxury observatory conference.

After two years of economic and financial recession, Altagamma Luxury observatory says a slow recovery is visible: global growth is about 2,7% and, despite the more sluggish recovery in Italy, we expect a growth in the near future. Political and financial issues can have a huge impact on markets and consumer confidence, especially strongly affected by market uncertainty can be the consumption of luxury goods.

Last year (2015) saw a boom in Tax-Free Tourist Shopping in Europe, followed by a negative performance in 2016 mainly due to the slowdown of Chinese economy, terrorist attacks, biometric requirements for Visas and unstable exchange rates. UK the only one registering a growth thanks to a good mix of macro drivers: favorable exchange rates and long term strategies supporting travelers (for example the extension of Chinese Visa Validity).

Despite the economic slowdown, Chinese still represent the majority of tax-free shoppers in Europe (36% of the European market and first nationality in APAC), followed by tourists from the Middle East (first nationality in UK).

Italy registered a decrease in Tax Free spending (-11% sales in store vs last year). In addition, here we can find the Chinese at first place but decreasing more than other nationalities.

According to Bain Luxury Market Monitor, currently the value of the global luxury market amounts to 1.081B € (+4% vs 2015) and in particular 438B € in Luxury Cars market (+8% vs last year) and 249B € for Personal Luxury Goods (-1% vs last year). Services and experiences linked to luxury tourism registered a good growth, despite the negative influence of events: Hotelier saw a +4% growth and luxury cruises a +5% vs 2015.

Status of personal luxury goods market in 2016 according to Bain:

  • focusing on Regions: Europe (covering 33% of the global market) is suffering the decline in tourist traffic (London currently the most attractive destination), USA (33%) is still living a period of stagnation, Japan (9%) is a depressed market suffering from JPY appreciation that keeps Chinese tourists away, China (7%) is recovering after a 3 years of stagnation, with a growth in local consumption and more sophisticated and conscious consumers
  • focusing on Consumers’ Nationalities: Chinese above all (30% of total) followed by American (23%), European (19%) and Japanese (11%)
  • focusing on Store Format: mono-brand stores still covering 30% of total market but registering a slowdown in new openings, Off-Price channels and Airport stores reaching very good performance and e-stores becoming the fastest growing channel globally
  • focusing on Products: Accessories covering the 30% of the market, followed by Apparel (23%) and Hard Luxury (22%), Beauty representing 21% of the market but registering the fastest growing (+4%) above all categories. Watches registering a decline of -8%.

Altagamma’s luxury market forecasts are optimistic: a moderate growth is expected across Product Categories (Fragrance & Cosmetics +4%, Apparel +3%, Leather, Shoes and Accessories +3%, Jewelry and Watches -1%) and Regions (Asia +4%, Europe, North America and LATAM +3%, Middle East +2%, Japan -1%).

Luxury market has reached a turning point and now focusing on clients has become vital for luxury brands.

Customers and consumption are no longer the same:

  • Luxury goes together with experience: clients are always giving more value to the purchasing experience. This is becoming more important than products themselves.
  • Sustainability matters, above all among Millennials. People choose brands in which they recognize values and ideas. Brands must speak about themselves and show their values to create connections with clients
  • Clients are demanding: people don’t want mass products, they look for style and exclusivity. Brands have to rethink their value proposition to satisfy demand
  • Digital transformation and new technologies are definitely changing communications, production and purchase process. E-commerce represents the 3rd biggest market, after USA and Japan
  • Innovation must become disruptive. Digital and mobile are essential, consumers can easily get tired of traditional approaches and only true innovation can bring benefit. The challenge is to be able to transform the business model.

Italy has a strong potential in the luxury market. Italian Luxury, above all the others, is synonymous of innovation, creativity, wellness and beauty. Italy as producer of wellness, should be seen and as an example of lifestyle.

“Made in Italy” can become our best ambassador in the world.

8 November 2016
Author Francesca Borgonovo Digital Analyst
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