Luxury Retail Sector Update

Published: 6 November 2012

The luxury sector has been a consistent bright spot in the retail industry this year posting robust sales month after month.  In the past, luxury sales have been directly tied to the stock markets because their performance has affected perceptions of personal wealth.  But this time things are different.  Buoyed up by the new found wealth in the BRIC economies which has sparked an unprecedented desire for luxury items, aspirational brands are very much flourishing. Hence the luxury retail sector remains a thriving and rapidly expanding area to work in and demand for talent is rife.

The two territories that have seen significant expansion recently have been Asia and the Middle East.

China is clearly the leader in terms of growth in the luxury retail sector, averaging between 18% - 22%, but the country is now starting to show signs of caution.  However, even with a slowing Chinese economy it’s still growing four to five times faster than the US and Western Europe.

Some brands are faring better than others over there; well advertised brands such as Prada, Burberry, Chanel and Hermes have been strong.  Lesser known brands have not been so desirable.  , However as the luxury industry matures, Chinese consumers have been cultivating a new-found appetite for less high-profile, logo-centric brands such as PPR's Balenciaga and Yves Saint Laurent.

The luxury retail market in the Middle East has also been proving robust and has been growing at a rate of between 10% and 12% in recent years. Dubai acts a regional hub, possessing a local market of wealthy Emiratis and expatriates, and a regular churn of free-spending, deep pocketed tourists.  Dubai is now second only to London as the most attractive city for international retailers, according to property adviser CBRE.  The metropolis is home to over 25 shopping malls, including the world’s largest shopping centre in terms of total area and retail accounts for 30% of its GDP.

Back home in the UK, despite fears of eurozone instability, Asian tourists spending in the UK have been helping to keep sales figures up.  Asian tourists to London, prefer to buy products here, firstly as import tax is so high in Asia and secondly as it adds a certain amount of kudos to have brought the products in Europe.  Retailers have reacted to this trend and Sales Consultants who speak Mandarin are now highly desirable.

The most successful sector within the luxury retail market is without doubt luxury accessories; particularly handbags, watches and jewellery.  Figures at Richemont are showing a 20% - 40% increase in profit.

There have been a couple of blips recently with Burberry and Mulberry both reporting a slow down in sales and they will be monitoring the situation in China closely, but broadly speaking although there may be a slightly more cautious outlook, following such a “fantastic 2011” luxury retail is still bucking the trend and performing well.

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