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Luxury and Fashion Our global industry experts explore the key trends shaping consumer preferences that drive fashion and luxury, using timely insights to stay one step ahead of the latest innovations and business strategies.

The Evolving Luxury Landscape in Asia

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As they look to navigate weakening economic conditions, luxury players have adapted their Asian growth strategies over 2012 and 2013. Some of these alterations include prioritising new markets, slowing down outlet growth in China and increasing internet retail presence.

Traditional and new growth markets

In terms of luxury personal accessories, Asia Pacific has been the primary growth story of the past decade. In 2012, China and Japan individually accounted for significant proportions of the global sales of leading accessories brands such as Louis Vuitton, Gucci and Tiffany. As such, annual growth in either market affects the global performance of these brands.

However, 2012 saw a steep rise in the trend of Chinese luxury patrons looking to Europe and the US to make purchases, where the same products are cheaper by as much as 40%. As a result, 2012 saw several luxury manufacturers register single digit or low double-digit growth in China. This marked a substantial shift from review period growth rates, which were often in excess of 20% year-on-year. The shift in consumer spending has prompted Louis Vuitton and Gucci to reduce their outlet growth in China, looking to focus on exclusivity rather than brand reach.

As growth rates in China slow, luxury brands are likely to focus on smaller markets such as South Korea, Australia and Singapore over the forecast period. South Korea and Australia saw a rapidly increasing luxury retail presence over 2009-2012, a trend which is expected to continue over the forecast period. On the other hand, luxury sales in Singapore are driven largely by tourist demand. This provides the market with an opportunity to follow the Hong Kong growth model, where per capita consumption of luxury accessories is much higher than in Singapore.

Peak performers

Prada is one of the few luxury brands whose annual growth has not been hampered by the economic recession, with its rapidly expanding outlet network helping it to register global growth rates in excess of 25% in 2010, 2011 and 2012. Luxury watch brands such as Omega and Longines also experienced slowing annual growth rates in 2012, while mid-priced players within jewellery consistently outperformed luxury players over the review period. Chow Tai Fook in China and Titan Industries in India are prime examples of local jewellery players which enjoy immense brand recognition within their respective markets.

Growth of internet retail

All three leading luxury players – LVMH, Richemont and PPR – had internet retailing capabilities in 2012. Many LVMH brands operate their own internet retailing portals, while Richemont’s Net-A-Porter is solely an online retailer of luxury goods. In 2012, PPR started a collaboration with Italian internet retailer Yoox Group for its luxury brand portfolio. Although luxury companies are exploring internet retailing, the presence of several consumer-to-consumer retailers and the current dominance of mid-priced brands within the channel will be key challenges over the forecast period.

Note: Review period refers to 2007-2012, forecast period refers to 2012-2017. 

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