The luxury market is expected to reach low point in 2016

VERSAILLES (Reuters) – The global luxury market is expected to slow further in 2016, weighed down by a further slump in Hong Kong, a US market hit by the strong dollar and Europe shunned by tourists, according to forecasts by Bain & Co .

The consulting firm expects growth reduced between zero and 1% this year, at constant exchange rates, following growth of 1.5% in 2015, its lowest level since the 2008 crisis.

“I think the market should reach a low point this year,” he told Reuters Claudia Arpizio, a partner at consulting firm on the sidelines of a conference on the luxury Versailles organized by the New York Times.

Bain publish its forecasts for 2016 in a few weeks.

The year 2015 was tough for sales of accessories, watches, jewelry and luxury clothes.

Already weakened by the slowdown in the Chinese economy, the fall in Chinese tourist flows to Hong Kong, the collapse of Russian tourism and settlement of the US market, the sector has suffered another blow with the attacks in Paris and Brussels.

LVMH (AP: LVMH), Kering (AP: PRTP), Hermes, Burberry and Richemont have all slowed down, to varying degrees, and analysts expect a slow start during the forthcoming publication of their figures ‘first quarter business.

“The market remains very negative in Hong Kong, the performance in the United States are not good and tourism is declining in Europe,” observed Claudia Arpizio.

Sales are expected, according to Bain, remain very negative in Hong Kong – once the most profitable market in the world – after falling 15% in 2015, while the US market is expected to stabilize or even decline slightly.

BEST HELD IN CHINA

Hit by terrorism, Europe should suffer a decline in tourism flows expected to also suffer from the measures taken by the Chinese authorities making longer procedures for obtaining passports.

Purchases made in Europe by tourists decreased by 2% in February, with a 10% fall in France, partially offset by an increase of 10.5% in Italy, while spending Chinese buyers, who account for third of the global luxury market, limited their rise to 5%, the smallest increase since August 2014.

However, even in China, sales are expected to recover in 2016 due to reduced price differentials with Europe. This gap has been reduced today, according to Bain, 35% -40% after a 70% top, and it may fall to 20% or 25% this year.

The Chinese domestic market should also benefit taxes to limit parallel market “daigous” authentic products purchased overseas dealers.

The luxury goods market totals about 253 billion euros. Expanded to cars to hotels and the art market, it is estimated at 1.000 billion euros.

Beyond 2016, Bain & Co expects annual average growth of the sector up to 2% to 3% due to better performance of the US market and a continuation of the “repatriation” of purchases of Chinese customers in its territory.

Leave a Reply

Your email address will not be published. Required fields are marked *