Despite persistent economic turbulence, mounting troubles in the Eurozone and political instability in several emerging markets, the global luxury goods market remains largely positive.
The pursuit of luxury has been sustained, with both absolute and affordable luxury rebounding strongly. With a new world order at stake, highlighted further by the BRIC growth story, luxury brands are using innovative ways to compete in this highly challenging industry.
After a significant decline in 2009, the global luxury goods market saw another solid performance in 2012, despite persistent economic turbulence, mounting troubles in the Eurozone and ongoing political instability in several emerging markets.
Driven mainly by strength in emerging economies, luxury goods sales exceeded US$302 billion worldwide. This represents a year-on-year real value gain of almost 5% on 2011.
Thanks to growing demand amongst the burgeoning middles classes of the BRIC countries, in 2012 luxury consumers the world over spent US$5.8 billion a week on luxury goods.
Since the global economic crisis hit, leading to a new era of austerity in the developed markets, a number of brands shifted upmarket to promote a more exclusive image, while others moved downmarket to cash in on trends in "affordable luxury".
Strong investment in secondary and diffusion brands was used as a means to drive demand in lacklustre consumption bases, specifically Western Europe, North America and Japan.
A shift upmarket was especially successful in the absolute or ultimate luxury segment in 2012.
For example, high-end fashion house Hermès International, which stands for the ultimate in luxury, had a particularly strong year, in contrast to the profit warnings issued by British luxury brands Burberry and Mulberry, and to the cooling sales reported by leading luxury goods players Gucci (PPR), Louis Vuitton (LVMH), Richemont and Tiffany & Co.
The US remains the world's largest luxury goods market, accounting for over a quarter of overall value sales of luxury goods in 2012.
Japan ranks second after the US, but sales of luxury goods declined by 11% in real terms over the five years to 2012. This equates to a massive US$3.7 billion reduction on 2007 levels.
The global luxury goods market is predicted to expand by a 5% compound annual growth rate (CAGR) in constant value terms between 2012 and 2017, reaching US$376 billion at constant 2012 prices.
For more information on the global luxury goods market, see the latest research: Global Luxury Goods Market
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