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Luxury Goods: Half Year Update 2019

August 2019

In this half-year (H1-19) update briefing, we investigate the latest developments in the global luxury goods industry, with a focus on the macro-economic and demographic changes and what these mean for our view of a likely outlook for luxury goods in the short to medium term. Whilst the luxury goods industry is not immune to global headwinds, our research for H1-19 shows that the industry overall is bucking the slowing global macroeconomic trend, albeit with some categories being impacted.

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Key Findings

Outlook for luxury remains stable

Despite looming threats of a trade war and increased global economic uncertainty, the forecasts for luxury goods spending in 2019 remain unchanged. However, dark clouds are gathering over the global economy, impacting consumer confidence, particularly in advanced economies.

Trade wars

The US-China trade dispute continues to escalate, with further tariffs imposed in May 2019. The effect of the US-China dispute has already had a significant negative impact on economic growth and sent shockwaves through the luxury industry, with investors remaining cautious.

Global wealth expansion

Global wealth expansion will continue to play a major role in the outlook for the luxury market. Indeed, thanks to their rising numbers and wealth accumulation, the world’s wealthiest 1% are expected to continue with, if not increase, their consumption of luxury goods, regardless of the global macroeconomic conditions.

Luxury travel to witnesses greater opportunities

Thanks to a combination of growing prosperity, coupled with changing consumer habits, the luxury travel industry is witnessing greater opportunities across a wider range of geographies. Many key luxury players, hotels and retailers will continue to benefit from wealthy tourists’ desire to travel and shop for luxury products.

Disappointing reporting for luxury cars in H1

The performance of sales of global luxury cars, which account for the lion’s share of the market, was disappointing in 2018, with the worst year-on-year performance since 2008. On the flip side, the personal luxury goods market is set to continue to perform well, with stable growth. In turn, this will hold up the overall industry.

Experience as a driver of luxury spending

High income earners are clearly driven by a desire to spend on experiences. With this, luxury is becoming more than just a price point, but a state of mind that luxury brands embody as consumers continue to seek truly authentic experiences.

Introduction

Scope
Key findings

Key Global Drivers Shaping Luxury Outlook

Global luxury market expands to almost USD1.1 billion
Health of global luxury and world economy are joined at the hip
Luxury industry faces challenges as global economy slows down
US-China trade war escalation unlikely to derail luxury growth …
… but raises the risks of an overall global downturn
Luxury consumption aided with over 10 million to join ranks of wealthy
The wealthiest 1% will remain the mainstay of global luxury consumption
Key luxury markets are where the wealthy concentrate
Chinese wealthy boast a high average wealth amongst key markets
Positive expectations for growth in tourist spending, driven by Chinese
Luxury travel s trengthened further as tourist flows set to rise

Category Overview

A tale of continuity and disruption for luxury goods landscape
Top 10 luxury companies continue to dominate the competitive landscape
Consolidation varies across luxury categories

Focus on Luxury Cars

Turbulent times ahead for luxury cars leads to downgrade in forecast
Luxury car market falters amidst a hostile trading environment
US luxury car market highly exposed to economic changes
Environmental regulations set to further impact the outlook for cars

Focus on Personal Luxury

Impressive results from leading players lead to upgrade in personal luxury
Personal luxury stable as key brands show unprecedented growth
China’s robust economy set to further increase personal luxury sales
Health of personal luxury highly reliant on the global Chinese shopper

Focus on Experiential Luxury

Experiential luxury set to outpace all other categories
Luxury hotel group Marriott competes in global luxury top 10
Transformational experiences drive the affluent consumer
Travel and global health prognosis paramount for luxury hospitality

Conclusion

Outlook for luxury goods overall remains unchanged
Mixed performances as we head towards half-year earnings
Slower growth in cars but experience and personal luxury holding up
Conclusion

Appendix

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