The global luxury goods sector has witnessed slow growth in the past 12 months, something many retailers may find disappointing. However, experts say the Middle East offers plenty of opportunities.
According to Bain & Company, an international management consulting company, the global luxury industry, led by luxury cars, luxury hospitality and personal luxury items, grew by four per cent in 2016 to total approximately $1.1 trillion.
These goods tracked by Bain & Company accounted for about 80 per cent of the items in the total luxury market. Best-performing luxury items included fine wines, fine foods and the luxury beauty industry.
The core of the personal luxury goods which includes fine watches, jewellery, leather goods and apparel in 2016 was generally flat in consumption, globally totalling about $255 billion.
The report said that the consumer’s focus in 2016 was redirected away from luxury goods towards experiences rather than items.
Data from Deloitte shows that the world’s 100 largest luxury goods companies generated sales of $222 billion in financial year 2014, 3.6 per cent higher year-on-year. The average luxury goods annual sales for a Top 100 company were $2.2 billion in 2016.
The land of opportunity
Deloitte’s annual report, titled Global Powers of Luxury Goods 2016 Disciplined innovation, said that growth rate is slowing in important markets such as China and Russia, although some markets continue to perform well and there are pockets of opportunity across the globe. India and Mexico, for example, are growing quickly, and the Middle East offers further growth potential.
Herve Ballantyne, partner and consumer and industrial products leader at Deloitte in the Middle East, said: “The Middle East represents a big opportunity for luxury brands. Luxury malls in Abu Dhabi and Dubai have helped put these cities on the map for the industry, and the United Arab Emirates as a whole continues to enjoy strong growth.”
He added: “Well-established big-name brands perform well in the region, and tourism is a major driver of sales in Dubai. Although the region is likely to feel the impact of political unrest as well as global economic uncertainty, but further growth is expected overall.”
“As Saudi Arabia seeks to diversify its oil-based economy, retail is a sector that is likely to benefit given the expected growth in religious tourists over the next decade and ongoing private sector planned investments such as the recent announcement that the Majid Al Futtaim group will be adding approximately 112,000 sqm of retail space in Riyadh,” he continued.
Experts forecast lower but sustained growth in 2017. The importance of the luxury segment of retail, or the global insatiable appetite for all luxury items cannot be underestimated.
Save the date
Arab Luxury World, a leading conference on the business of luxury in the Middle East, is a unique summit built on the extraordinary growth the region has recorded the past decade in the luxury segment.
This year, the event will focus on the advent of the Fourth Industrial Revolution and the end of the era of overabundance – two factors that are transforming the Middle East luxury industry.
As innovation, adaptability and sustainability become the new norms, the industry’s stakeholders are faced with the necessity of adapting to single-digit growth in brick-and-mortar sales.
Meanwhile, the digital disruption has arrived and online platforms are vying for the lion’s share of the market and enjoying double-digit growth.
Can luxury businesses adapt to an environment of digital disruption? What does the future of retail look like in this new environment?
Attend Arab Luxury World 2017 on May 22 and 23, 2017 at Westin Mina Seyahi, Dubai to find out.