New research suggests that while the luxury goods market is set to grow at up to 50% faster than global GDP, consumption of top-end watches is slowing.
The Luxury Goods Worldwide Market Study report from Bain & Co forecasts that the luxury goods market will grow by up to 5% in 2013 and will break the €250 billion (£2.15bn) barrier by 2015.
Despite an upbeat forecast for the market in general, Bain & Co painted a less optimistic picture for luxury watches. It said that watch consumption has “sharply declined” as retailers have de-stocked and Chinese luxury consumers have slowed their spending.
It also said that changing tourism will have a negative effect on retailers in Europe. As tourists flock to new hot spots such as Dubai, Southeast Asia and Australia, tourism is slowing in Europe.
The tourists who are still travelling to Europe are more careful with their spending. Tourist spend per visit in Europe has dropped and Bain & Co forecasts that retailers can only expect flat to 2% growth in tourism spend.
The report from Bain & Co, which is focused on global trends, is somewhat in contrast to the latest figures shared with WatchPro by GfK. Its data on the UK watch market in April shows that sales by value of watches priced at £1,000 or more were up 12.83%.
In terms of who will be spending on luxury goods in the next few years, Bain & Co identified the rise of the HENRYs (High Earnings, Not Rich Yet) as a key group, along with the booming middle classes in emerging economies as key targets.
It also said that the methods for winning over these consumers, who will support a luxury goods market that will be five times larger in 2025 than it was in 1995, would be significantly different to those used for previous generations of luxury shoppers.
Bain & Co said that the key to winning luxury sales over the next 10 to 15 years is “to get ready for Luxury 2.0”. It explained that this will be defined by a focus on three luxury goods management principles: superior customer experience, flawless retail management and people excellence.
Within these pillars Bain & Co said that there would be a shift towards less corporate and structured methods of communication that the watch industry has relied on in the past. For example, it said that communication will shift more towards word-of-mouth promotion than ever before, relying on consumers sharing positive experiences and details of products.
To fuel this consumer discussion Bain & Co said that luxury brands must keep a “persistent drumbeat” of marketing activity to keep consumers connected. It added that consumers now expect every communication to be “premium, differentiated and targeted to their tastes and preferences”.
Bain & Co added: “What the customer wants is now at the centre of what the brands do, rather than what the designer wants.”
The report said that this personalisation will transcend marketing and will begin to shape store experiences. Bain & Co said: “The era of the disengaged, formal shopping experience is ending. Shoppers now expect inviting and personalised service to welcome them into the store.”
It added that both physical and digital store fronts will become ever more crucial to catching the attention of shoppers, and that brands will be battling it out to create compelling shop fronts to impress customers.
Once inside the store, a well-trained staff is crucial to completing the luxury experience, and as such investing in training and people development is key to thriving in the luxury market.
Bain & Co expects luxury players to invest more heavily in top management going forward, including spending on finance, supply chain and back office staff.
“We are entering a new phase in the evolution of the luxury market,” said Bain & Co partner Claudia D’Arpizio. “We are seeing a more even distribution of global growth and in turn brands are refocusing from short-term reactive hot-spot thinking to long-term sustained growth strategies. More markets, more segments and more diversity of tastes all combine to create more variables to solve for when pursuing the right strategy for growth.”
