According to Bain & Company's 2015 "Luxury Goods Worldwide Market Study", the overall luxury industry surpassed €1 trillion in retail sales value in 2015. Meanwhile, aided by global currency fluctuations and continued jet-setting of "borderless consumers," the personal luxury goods market, including jewelry, ballooned to €253 billion. This represents 13% growth at current exchange rates, while real growth slowed significantly to 1-2%. Of the 10 segments Bain identifies, luxury cars, luxury hospitality and fine arts were the main drivers of growth, accounting for 80% of the total market. The dollar was too expensive for many global tourists, and while local consumption is growing, it was barely sufficient to offset the lost tourism revenue. Nevertheless, the U.S. is the confirmed largest luxury market in terms of global luxury value, reaching €79 billion; New York City alone outweighed all of Japan.
"The Great Mall of China"
According to Bain's research, Chinese consumers continue to make up the largest portion of luxury purchases (31%) globally, followed closely by Americans (24%) and Europeans (18%). They write that Chinese consumers are flocking to mature markets in droves, especially Europe, where an analysis of European tax-free shopping data shows Chinese tax-free purchases increased by 64%, thanks to a weak Euro. Americans also increased their tax-free spending in Europe by 67%, aimed largely at the high end of the luxury spectrum. E-commerce, airport retail and the off-price channel have all grown significantly.
Bain & Co. asserts that the number one challenge facing most luxury brands is establishing the right pricing model. The rise of e-commerce and global tourism growth create greater transparency around international price differentials. Claudia D'Arpizio, a Bain partner in Milan and lead author of the study, says that, "Relentless price increases over the last decade,aimed at creating a more exclusive position in the market and maximizing touristic flows are now starting to backfire on luxury brands. They face the long-term challenge of re-building credibility and trust among consumers, rather than simply making shortsighted, tactical pricing adjustments to benefit from market fluctuations."